The Rise of Friendshoring What It Means for Cross-Border Investors

“Synopsis”

In 2025, global investors are navigating a new trade reality: friendshoring. As companies and governments prioritize economic ties with politically aligned nations, cross-border investment flows are being redirected toward “friendly” jurisdictions. This shift is redefining how capital moves, where supply chains are built, and which markets are considered safe bets. This guide breaks down what friendshoring means, why it’s gaining traction, and how investors can adapt.

What Is Friendshoring?

Friendshoring refers to the practice of relocating supply chains, production, and investment to countries that are considered political and economic allies. Unlike offshoring, which focuses on cost efficiency, friendshoring emphasizes trust, shared values, and long-term stability.

It’s part of a broader movement away from globalization-as-usual, driven by:

• Geopolitical tensions
• Supply chain disruptions
• National security concerns
• Ethical sourcing and ESG priorities

Why Friendshoring Is Gaining Momentum

Recent global shocks have exposed vulnerabilities in traditional supply chains. From the COVID-19 pandemic to the Russia–Ukraine conflict, companies realized that relying on adversarial or unstable regions can be risky.

Friendshoring offers:

• Supply chain resilience
• Reduced exposure to sanctions and trade restrictions
• Alignment with ESG and compliance standards
• Access to government incentives and trade agreements

Countries like India, Mexico, Vietnam, and Poland are emerging as friendshoring hubs due to their political alignment and manufacturing capabilities

Implications for Cross-Border Investors

1. Shift in Foreign Direct Investment (FDI)

FDI flows are increasingly concentrated within geopolitical blocs. Western firms are redirecting capital toward allied nations, while pulling back from regions deemed high-risk.

Investor takeaway: Expect increased demand for real estate, infrastructure, and logistics in friendshoring-friendly markets.

2. Sectoral Realignment

Industries most affected include:

• Semiconductors: U.S., EU, and Japan are investing in domestic and allied chip production
• Renewable Energy: Supply chains are shifting toward countries with aligned climate goals
• Pharmaceuticals: Production is being localized or friendshored for strategic control

Investor takeaway: Target sectors tied to national priorities and supply chain security.

3. Rise of Regional Trade Blocs

Friendshoring is accelerating the formation of regional alliances like:

• IPEF (Indo-Pacific Economic Framework)
• Quad (U.S., Japan, India, Australia)
• EU–U.S. Trade and Technology Council

Investor takeaway: Cross-border deals within these blocs may enjoy smoother regulatory pathways and lower risk.

4. ESG and Compliance Alignment

Friendshoring often involves countries with similar labor, environmental, and governance standards. This reduces reputational risk and simplifies compliance.

Investor takeaway: Investments in aligned jurisdictions may qualify for ESG-linked financing and incentives.

Challenges and Risks

• Higher costs: Friendshoring may involve pricier labor and production
• Limited supplier options: Smaller pool of “friendly” countries
• Overdependence: Concentrating investment in a few allies can backfire
• Fragmentation: Global trade may become more siloed and less efficient

Conclusion

Friendshoring is more than a buzzword—it’s a strategic shift in how companies and investors manage global risk. In a world of rising geopolitical tension, cross-border investors must prioritize resilience, alignment, and adaptability.

Whether you’re investing in infrastructure, supply chain assets, or emerging markets, understanding the dynamics of friendshoring will be key to navigating the next decade of global trade.