CHICAGO, IL—Manufactured exports—a bright spot of the U.S. economy in recent years—are set to surge. Combined with jobs created as a result of reshoring, higher U.S. exports could add 2.5 million to 5 million jobs by the end of the decade, as manufacturers shift production from leading European countries and Japan to take advantage of substantially lower costs in the U.S., according to new research by The Boston Consulting Group (BCG).

BCG projects that by around 2015, the United States will have an export cost advantage of 5 to 25% over Germany, Italy, France, the United Kingdom, and Japan in a range of industries. Among the biggest drivers of this advantage will be the costs of labor, natural gas, and electricity. As a result, the United States could capture 2 to 4% of exports from the four European countries and 3 to 7% from Japan by the end of the current decade. This would translate into as much as $90 billion in additional U.S. exports per year, according to BCG’s analysis.

When the increase in U.S. exports to the rest of the world is included, annual gains could reach $130 billion. BCG forecasts that the biggest U.S. export gains will be in machinery, transportation equipment, electrical equipment and appliances, and chemicals.

“The export manufacturing sector has been the unsung hero of the U.S. economy for the past few years. But this is only the beginning,” says Harold L. Sirkin, a BCG senior partner and coauthor of the research. “The U.S. is becoming one of the lowest-cost producers of the developed world, and companies in Europe and Japan are taking notice.”

The analysis is part of BCG’s ongoing “Made in America, Again” series on the changing global economics that are starting to favor manufacturing in the United States. Previous reports in this series have focused on production and jobs that are likely to be brought back to the United States as China’s once-formidable cost advantage erodes, but the new research delves more deeply into the competitive position of the United.States, relative to other developed economies. Together, the developed economies account for about 60% of global manufactured exports.

The new analysis raises BCG’s previous estimate of U.S. job gains. Earlier this year, a BCG report titled U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much? predicted that the U.S. would gain 2 to 3 million jobs from higher exports and production work shifting from China to the United States.

Although the reshoring trend—also referred to as “insourcing” and “onshoring”—is still in its early stages, several large foreign manufacturers have already announced plans to use the United States as an export base for other markets. Toyota, for example, has announced that it will export Camry sedans assembled in Kentucky and Sienna minivans made in Indiana to South Korea, while Honda and Nissan both say that they expect to boost exports of vehicles made in their U.S. plants to the rest of the world. Siemens is building gas turbines in North Carolina to ship to Saudi Arabia for construction of a 4-gigawatt power plant. Rolls-Royce recently opened a new aircraft engine parts manufacturing facility in Virginia citing lower labor costs, productivity and dollarization (doing business in U.S. dollars to mitigate local currency risk).

“Over the coming years, as European and Japanese companies decide where to locate new capacity, we can expect many more announcements like these,” said coauthor Michael Zinser, a BCG partner who leads the firm’s manufacturing work in the Americas. “Producing in the U.S. offers increasingly compelling cost advantages—to supply not only North America but also some of the most important overseas markets.”

BCG estimates that average manufacturing costs in 2015 will be 8% lower in the United States than in the United Kingdom, 15% lower than in both Germany and France, 21 percent lower than in Japan, and 23 percent lower than in Italy. Average manufacturing costs in China will still be 7 percent lower than those of the U.S. in 2015. But those costs do not include transportation, duties, and other expenses. And it is less than half of the advantage that China enjoyed a decade ago. As explained in a previous BCG report, when the many risks and hidden costs of managing extended global supply chains are taken into account, it will be just as economical to manufacture many products in the U.S. if those goods are sold in the United States.

Labor and energy costs will be especially important sources of U.S. competitive advantage in manufacturing. Adjusted for differences in worker productivity, which is considerably higher in the United States, average labor costs of the other large developed economies will be 20 to 45% higher than those of the United States. Only a decade ago, the same U.S. worker cost only 12% less than the average factory worker in Europe.

Inexpensive natural gas will also boost U.S. competitiveness. For the foreseeable future, thanks to the recovery of vast U.S. underground gas deposits of shale, natural gas is likely to remain 50 to 70% cheaper in the United States than in Europe and Japan, BCG predicts. “That will translate into significantly lower costs for electricity generation, for fuel used to power industrial plants, and for feedstock used across many industrial processes,” said Justin Rose, a BCG principal and coauthor.

Although some of the U.S. gains will come from making products that otherwise would have been imported from Europe and Japan, other gains will come from higher U.S. export shares in key international trade lanes. For example, in many industries, the United States will be significantly more cost competitive than Europe as an export base for Asia. In addition to lower labor and energy prices, it is 59% cheaper on average to ship goods from the United States to Japan than it is to ship from Europe to Japan. That’s because the United States is closer to Japan, and rates are much lower for containers departing U.S. ports, where there is significant overcapacity. Similarly, the United States will be more attractive than Japan as a base for supplying many goods to Europe.