Localization has become a critical strategy in global manufacturing, significantly altering the dynamics of international collaboration. As supply chain disruptions, trade policies, and regional economic disparities drive localized production, understanding the interplay of these factors is essential for building resilient and sustainable manufacturing networks. This study employs a system dynamic modelling approach to examine how localization impacts global manufacturing collaboration by simulating relationships among key variables, including production efficiency, supply chain resilience, cost structures, and market responsiveness. The model shows that localized strategies can improve supply chain resilience by up to 38%, reduce lead times by 25%, and lower production costs by 30% in the long term. However, these benefits come at the cost of reduced global collaboration, which declines by over 40% as firms shift toward regional autonomy. The model also incorporates technological innovation, policy incentives, and labor market dynamics, revealing critical trade-offs between regional flexibility and global efficiency. Strategies such as adopting digital manufacturing, enhancing cross-regional collaboration, and optimizing supply chain designs are evaluated to balance localization benefits with global synergies. The findings offer a practical roadmap for policymakers and industry leaders to navigate localization while maintaining competitive global partnerships.