Friend-shoring

Friend-shoring (also written friendshoring) is the practice of concentrating supply chains among trusted allies and partner countries rather than potential adversaries. Popularized by US Treasury Secretary Janet Yellen in 2022, it aims to make trade more secure and resilient, reducing dependence on rivals like China while keeping production with politically aligned partners such as Korea and Japan.

What is friend-shoring?

The term builds on onshoring (bringing production home) and nearshoring (moving it to nearby countries), but swaps the test of distance for a test of trust. Yellen set out the logic in her April 2022 “Way Forward for the Global Economy” address:

Favoring the friend-shoring of supply chains to a large number of trusted countries, so we can continue to securely extend market access, will lower the risks to our economy as well as to our trusted trade partners.

— Janet Yellen, U.S. Treasury Secretary, U.S. Department of the Treasury

The aim, in her words, was “free but secure trade” with countries the United States knows it can count on (U.S. Treasury). The driver was the pandemic and the war in Ukraine, which exposed how brittle single-source, adversary-dependent supply chains had become.

In practice, friend-shoring is the policy logic behind reshoring incentives like the US Inflation Reduction Act and the CHIPS Act, both of which favor production in the United States and allied countries. The trade data already shows the pattern. In 2025 the United States set record imports from 46 countries, led by Mexico at $534.9 billion, Taiwan at $201.4 billion, and Vietnam at $193.8 billion, with China conspicuously absent from the top of that list as importers rerouted sourcing toward trusted partners (U.S. Census Bureau).

It is not without critics. The Center for Strategic and International Studies has argued that trade often just gets rerouted through third countries and that allied production can still rely on Chinese inputs, limiting how cleanly supply chains can decouple (CSIS). A Taiwanese factory that finishes goods from Chinese components still moves the import statistic without moving the dependence.

Where does the term come from?

The word splices “friend” onto offshoring, and it had a direct precursor. Through 2020 and 2021, Elaine Dezenski and John C. Austin pushed the idea under the name “ally-shoring,” which they defined in a June 2021 Brookings Institution article as “deliberately sourcing essential materials, goods, and services with countries who share our democratic values and commitment to an open, transparent, rules-based international economic and trade regime” (Brookings). Yellen’s April 13, 2022 speech at the Atlantic Council carried the same idea into official U.S. policy under the friend-shoring label, and that is the version that stuck in the policy debate and the trade-economics literature.

What does the research say friend-shoring costs?

Rerouting supply chains by trust is not free, and the multilateral institutions have tried to bound the bill. IMF staff estimate that trade fragmentation alone could cost between 0.2% and 7% of global GDP depending on how deep the split runs, and that adding technological decoupling could push the loss to 8 to 12% of GDP in some countries (IMF Staff Discussion Note SDN/2023/001). WTO economists Carlos Góes and Eddy Bekkers modeled a full decoupling of the world into two geopolitical blocs and projected welfare losses “as large as 12% in some regions,” concentrated in lower-income economies cut off from technology spillovers (WTO Working Paper ERSD-2022-09). Friend-shoring advocates answer that the right comparison is not frictionless free trade but a world of recurring shocks, which is why Yellen framed it as diversification across “a large number of trusted countries” rather than a retreat into blocs.

Why does friend-shoring matter for investors?

It reshapes where industrial demand lands. When the goal is to source outside China but inside the alliance, manufacturers in trusted partner countries capture orders they might not have won on price alone. That is the structural tailwind behind the Korea Manufacturing Core Alliance theme, where Korean leaders in AI memory, batteries, ships, defense, and grid equipment are positioned as preferred allied suppliers.

Related terms & concepts

• Korea Manufacturing Core Alliance parent

FAQ

Sources & references

1. Yellen says the U.S. and its allies should use 'friend-shoring' to give supply chains a boost · CNBC, 2022-07-19
2. The Limits of 'Friend-Shoring' · Center for Strategic and International Studies, 2023-01-01
3. Remarks by Secretary of the Treasury Janet L. Yellen on Way Forward for the Global Economy · U.S. Department of the Treasury, 2022-04-13
4. U.S. International Trade in Goods and Services, Annual 2025 (Press Highlights) · U.S. Census Bureau, 2026-02-19
5. Rebuilding America's economy and foreign policy with 'ally-shoring' · Dezenski & Austin · Brookings Institution, 2021-06-08
6. Geoeconomic Fragmentation and the Future of Multilateralism (Staff Discussion Note SDN/2023/001) · Aiyar et al. · International Monetary Fund, 2023-01-15
7. The Impact of Geopolitical Conflicts on Trade, Growth, and Innovation (Working Paper ERSD-2022-09) · Góes & Bekkers · World Trade Organization, 2022-06-01