Apr 25, 2026
Conflict, volatile prices for key materials and all-around economic uncertainty are the kind of conditions that would normally make companies tighten their purse strings and be cautious about expanding across borders. Not this time.
According to JPMorgan, many are still doing deals abroad. They're just being more selective about where they do it (1).
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The banking giant says a growing number of firms are turning to "friendshoring," focusing their investments and supply chains on countries they see as politically stable and reliable partners.
That shift is contributing to a 45% year-over-year rise in cross-border deal activity, its latest report on global dealmaking trends shows.
What is friendshoring — and why is it gaining traction?
Friendshoring essentially means doing business with countries you trust.
For decades, companies focused on keeping costs as low as possible. That often meant building supply chains across the globe, choosing locations based on cheap labor or lower production costs.
While this approach helped fatten profits and keep prices down for consumers, it also created hidden risks. When something went wrong, such as a pandemic, war or trade dispute, operating in certain countries quickly became complicated and costly.
The World Economic Forum defines friendshoring as shifting supply chains toward countries perceived as "politically and economically safe or low-risk" with the objective being "to avoid disruption to the flow of business" (2).
In other words, instead of relying on suppliers in countries that could be affected by conflict, trade disputes or sudden policy changes, it involves moving operations to nations that are political and economic allies.
From the COVID-19 pandemic to trade tensions and armed conflicts, the past few years have been unusually unpredictable and shown how quickly global business can be disrupted.
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As a result, companies are putting more weight on reliability and predictability rather than just cost when deciding where to invest. And according to JPMorgan, that mindset is now shaping major business decisions.
Companies are still looking to expand, the bank says, only this time they are being more selective and specifically looking for opportunities in places less likely to be disrupted by global shocks.
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A strategy with trade-offs
While friendshoring can make companies less vulnerable to disruptions, it's not without downsides.
Some economists warn that if this trend continues, it could split the global economy into separate blocs. Over time, that could undo some of the benefits of globalization, such as lower prices, rising incomes in developing countries and faster economic growth (3).
Higher costs are one likely result. If companies choose stability over savings, those extra expenses are often passed on to consumers through higher prices.
It could also reduce profits for businesses, which may affect the labor market, stock prices and, in turn, investment returns for retirement funds.
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Economists warn that all of this could hurt the global economy, though estimates vary. Research from Harvard Growth Lab posits that widespread friendshoring could reduce global gross domestic product by as much as 4.6% (4).
The positives
Despite those risks, advocates argue that the trade-off may be worth it.
They say friendshoring can protect consumers and the wider economy by improving access to critical materials and components. COVID-19 is often cited as an example. During the pandemic, shortages of semiconductors and other essential parts, caused primarily by shutdowns in China, disrupted production and pushed up prices.
From this perspective, highly diversified global supply chains can sometimes increase exposure to disruption rather than reduce it.
Among the most prominent friendshoring supporters is Janet Yellen. The former Fed chair has argued that working more closely with trusted countries can make economies more secure, "provides stability for consumers" and helps reduce disruptions that can drive up prices (5).
"Working with allies and partners through friend-shoring is an important element of strengthening economic resilience," she said. "We cannot allow countries… to use their market position in key raw materials, technologies or products to disrupt our economy or exercise unwanted geopolitical leverage" Yellen said (6).
For many companies, the decision comes down to a simple question: is it better to save money now, or avoid potentially bigger problems later? As global tensions continue, more appear to be deciding that stability is worth the extra price.
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
JPMorgan (1); World Economic Forum (2); The Wall Street Journal (3); Harvard Growth Lab (4); U.S. Department of the Treasury (5),(6)
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Daniel Liberto is a financial journalist with over 10 years of experience covering markets, investing, and the economy. He writes for global publications and specializes in making complex financial topics clear and accessible to all readers.
