It’s been a long-held dream for some: the storied return to an onshore goods-producing economy filled with the factories of yore and lore. Economists say a rise in domestic manufacturing is one of two potential consequences of the new administration’s tariff proposals (the other being an increase in consumer prices to absorb the tariffs levied on still-imported goods).

But before popping bottles in celebration of the good ol' USA, we have to acknowledge that the implications of escalating tariffs are more complicated than a hurdle-free path to additional “made in America” tags. Reshoring is ripe with opportunities and rife with challenges, particularly to a private equity (PE) community now prioritizing cost control given demonstrated limits on multiple arbitrage.

1. Sustain status quo supply chains.

The easiest path—to continue with current offshore manufacturing and importing as is—will also be the costliest. President-elect Donald Trump made tariffs a cornerstone of his campaign. He has since doubled down, promising a 25% tariff on goods from Canada and Mexico , and a 10% raise (perhaps above the previously pledged 60%) on imports from China .

For portfolio companies with manufacturing facilities in, or importing networks with, any of America’s top three trading partners , sustaining the status quo will likely be prohibitively expensive, erasing any of the EBITDA enhancement required for near-term profitability growth or longer-term exit valuation.

2. Tweak traditional territories.

Perhaps you are a CFO/COO of a portfolio company eyeing a near-term exit. You may not feel that you have the requisite runway to overhaul your logistics operations, but you also recognize that with Trump’s proposed 60 +10%, tariffs, doing business in China will be too costly. You may want to consider tweaking your Asia-based sourcing/manufacturing strategy to take advantage of alternative Asian locations with similar cost/production attributes (like Vietnam or Malaysia).

That said, you will likely be subject to still-significant tariffs that compromise profitability. Investing in alternative Asian outposts does little to address the stability issues that have plagued the efficacy of Asian-based sourcing since COVID-19.

Finally, for buyers looking at “future value” as a critical determinant to bid price, a target company’s failure to significantly overhaul logistics away from Asia in response to Trump's proposed tariffs might dampen exit multiples by creating too many “first-mile” buyer burdens.

3. Note nearshoring nuances.

Moving manufacturing or imported goods locations from China to nearshore outposts could also have some benefits, including ones that address the recent supply chain instabilities of securing goods from Asia. For companies looking to limit costs, Mexico still generally remains a lower-cost region, relative to the States.

However, Trump has still promised to levy tariffs on both of America’s neighbors; though not as steep as those that will be imposed on China, they’ll likely nullify any benefits from labor arbitrage. Moreover, as the southern border remains a hotbed for political controversy, it might be wise for companies to seek regional alternatives that promise more stability.

4. Revert to reshoring.

After two-and-a-half decades of overseas outsourcing, the Trump tariff policies represent an opportunity to swing the pendulum back to reshoring. Reshoring could serve as both value protection (against the cost of goods), and in an age of diminishing multiples, as a source of value creation.

More specifically, while domestic manufacturing/sourcing will have cost implications, the lead time will also be substantially shortened (by as much as 5×, in my company's work with our clients), allowing for a significant inventory reduction and a related increase in liquidity. Shortened lead time will also increase speed to market, a particularly critical element for new product launches.

Additionally, the need to onshore may also serve as a forcing function for operational/process reengineering (e.g., simplifying a product that has, to date, required the importation of China-specific parts). Finally, by bringing back domestic operations, onshoring can also bolster brand reputation in some markets.

It seems like a win-win-win, except for the fact that companies will need to mitigate against some very real reshoring challenges, not only related to cost but to the availability of capacity, technical skills and quality assurance. Capacity here is a critical element and may prove the ultimate differentiator.

After 25 years of offshore outsourcing , America has a more limited manufacturing footprint, both in terms of facilities and expertise. In the immediate wake of proposed tariffs, demand for these facilities will likely outpace supply, making first-mover advantage a very real benefit.

In addition, many of the goods produced overseas have been manufactured there for years. Replicating a process that took time to perfect to onshore production will take time, investment, patience and training.

5. Reshore, retain and reengineer.

• Reshore as much as possible, where possible, locking up facilities and expertise now while capacity still exists.

• Retain (or invest) in some overseas operations, looking away from China and Mexico to alternative Asian locations. By varying sourcing and manufacturing, companies can better hedge against capacity issues and make themselves less vulnerable to strikes or other unforeseeable obstacles that may disproportionately impact a single region.

• Reengineer manufacturing processes. Tariffs provide an opportunity to take a renewed look at manufacturing programs, supply chains and other operational processes, exploring where companies can cut costs, simplify production or find additional efficiencies.

The three Rs—reshore, retain and reengineer—offer a practical framework for PE-backed CFOs and COOs seeking to navigate the challenges of, and seize opportunities from, potential tariff policies.

However, the key to success will be speed. These companies cannot afford a wait-and-see approach ... literally. Smart CFOs/COOs will do more than scenario plan now; they’ll make immediate moves to ensure their ability to rapidly respond when/if tariff proposals become tariff realities.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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