From Global to Regional: How Firms Restructure Supply Chains in Response to USMCA

工商管理學系暨商學研究所

撰文者／Anoop Remanan Syamala

The first session of Fall 2025’s Operations Management seminar I, hosted by Prof. Chia-Wei Guo, occurred on September 19th. The session opened with a presentation by Assistant Professor Jonathan Hsu from the School of Political Science and Economics at National Taiwan University, whose research focuses on the interface between operations management and international trade policy. Prof. Hsu examined how changes in trade agreements, tariffs, and global trade disputes disrupt supply chains and how firms strategically respond through nearshoring and capital investments. Drawing on empirical evidence from the U.S. automotive industry, he illustrated how companies adjusted their sourcing strategies after implementing stricter regional value content (RVC) requirements under the USMCA, gradually nearshoring production to Mexico and Canada to remain compliant.

Prof. Hsu emphasized that international trade policy is an increasingly important driver of supply chain strategy, as governments worldwide are moving towards regionalization and localization. He explained that the USMCA introduced higher RVC thresholds for cars, light trucks, and automotive parts, which created strong compliance incentives. Firms that fail to meet these requirements face tariffs of 2.5 percent on passenger vehicles and 25 percent on light trucks, a significant cost given that light trucks account for nearly 80 percent of U.S. vehicle sales. This regulatory environment pushes automotive firms to adjust their sourcing patterns and build stronger regional supply bases, particularly in Canada and Mexico, to qualify for tariff-free trade.

The presentation highlighted that firms respond strategically rather than reactively. Instead of fully reshoring complex and costly core components, companies start by nearshoring complementary parts that are easier and cheaper to relocate. This gradual approach allows firms to meet compliance requirements while minimizing disruptions and capital expenditures. Prof. Hsu’s empirical results showed significant increases in the share of imports sourced from Mexico and Canada for complementary components. At the same time, there was little to no change for core and principal parts, indicating a phased nearshoring strategy.

While nearshoring improved inventory performance, reducing inventory levels and increasing turnover, it also resulted in higher fixed costs and lower gross margins, suggesting compliance comes at the expense of profitability. Prof. Hsu noted that this trade-off is critical for managers to understand. While nearshoring may enhance supply chain resilience and secure market access, it may also pressure firms’ financial performance in the short term. Firms with higher investments in property, plant, and equipment (PPE) and higher leverage ratios were found to be more active in nearshoring, which underscores the capital-intensive nature of these adjustments.

The seminar offered valuable takeaways for both researchers and practitioners. For scholars, it demonstrated the power of granular trade datasets in revealing firm-level behavioral responses to policy shocks, opening avenues for further study of supply chain resilience under regulatory pressure. For managers, it reinforced the importance of proactively aligning sourcing strategies with evolving trade agreements and considering the operational and financial implications of nearshoring decisions. For policymakers, Prof. Hsu’s work highlighted a potential unintended outcome: firms may satisfy RVC requirements by nearshoring less critical, low-cost components rather than investing in the regional production of core parts, which may partially limit the policy’s intended impact on deepening regional supply chain integration.

Prof. Hsu’s presentation provided a nuanced and data-driven view of how trade policies shape supply chain decisions. His talk successfully connected international trade dynamics with operations management research, showing that firms are neither passive recipients of regulation nor purely cost-driven optimizers. Instead, they act strategically, making incremental moves to balance compliance, cost, and competitiveness. The session offered an excellent start to the Fall 2025 seminar series, setting the stage for deeper discussions on how operations management can adapt to the challenges of an increasingly fragmented global trade environment.