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US manufacturing has seen a surge in private investment

Let’s talk about US manufacturing. This is a massive topic right now. It has been significantly influenced by the US-China trade war and Covid-19. In short, the US is undergoing a huge transition in manufacturing.

The new US manufacturing boom

Since 2020, the year of Covid, there has been a tremendous surge in private manufacturing investment in the United States. Look at the chart below!

Reshoring (manufacturing in the US) and nearshoring (manufacturing close to the US, i.e., Mexico) are not new concepts. Economists have been talking about this trend for decade. But now we are witnessing these theories rapidly unfold.

US companies are doing both to circumvent geopolitical risks, reduce supply chain disruptions and reduce dependence on overseas manufacturing, particularly from China. The pandemic has highlighted just how vulnerable US supply chains were, prompting companies to seek more localised and resilient production capabilities nearer to home.

Technological advancements in automation, robotics and AI are a major impetus for this shift; these technologies have increased the efficiency of US manufacturing, making it more cost-effective and reducing the historical dependence on low-cost overseas labour.

Moreover, there is growing consumer demand for products made locally with lower carbon footprints and a recognition of the hidden costs associated with long and complex global supply chains, which include quality issues, delivery delays and intellectual property risks.

Manufacturing close to home allows for faster delivery, better communication, improved supply chain control and the ability to quickly respond to market changes.

This has profound implications for the US economy. Reshoring operations could add a substantial number of jobs in the US and also have a spillover effect into other parts of the economy, increasing investment in technology and renewable energy.

This is a trend that is getting significant support from the US government as well. For instance in the 2022, the Inflation Reduction Act was launched which aims to accelerate onshoring manufacturing and building resilient supply chains in the United States.

This renaissance in US manufacturing offers both economic benefits and greater stability in the face of global uncertainties.

Coming up:

• France’s nuclear comeback has led a energy-market recovery in Europe

• US cattle herds shrink to their lowest since 1951

• Home prices continued to rise across most US counties in 2023

• Money market rates have diverged from deposit rates

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