Welcome to Thoughts on the Market. I’m Chris Snyder, Morgan Stanley’s US Multi-Industry Analyst. Today I’ll discuss the far-reaching implications of shifting industrial production back to the United States.
It’s Friday, October 25th, at 10am in New York.
Global manufacturing is undergoing a seismic shift, and the United States is at the epicenter of this transformation. After decades of offshoring and relying on international supply chains, the pendulum is swinging back toward domestic production. This movement – known as reshoring – is not just a fleeting trend but a strategic realignment of manufacturing capabilities that is indicative of the “multipolar” theme playing out globally.
In fact, we believe the US is entering the early innings of re-Industrialization – a multi-decade opportunity that we size at $10 trillion and think has the potential to restore growth to the US industrial economy following more than 20 years of stagnation.
The reshoring of manufacturing to the US is fueled by a combination of factors that are making domestic production both viable and lucrative. While the initial sparks were ignited by policy changes, including tariffs and trade agreements, the COVID-19 pandemic laid bare the risks of elongated supply chains and over-dependence on foreign manufacturing.
Meanwhile, the diffusion of cutting-edge technologies, such as automation, artificial intelligence, and advanced robotics, has diminished the cost advantages of low-wage countries. The US -- with its robust tech sector and innovation ecosystem -- is uniquely positioned to leverage technology to revitalize its manufacturing base.
Who are the direct beneficiaries? High-tech sectors, such as semiconductors, pharmaceuticals, and advanced manufacturing systems, are likely to be the biggest winners. Traditional industrial sectors, such as automotive and aerospace, are also seeing a resurgence. Finally, companies that invest in more sustainable manufacturing processes stand to gain from both policy-driven incentives and a growing market demand. All told, these businesses should see shorter supply chains, reduced legal and tariff costs, and a more resilient operational structure.
As for the broader US economy? We think the implications are pretty profound. In altering the US industrial landscape, reshoring promises not only to boost GDP growth, but it could also stabilize and potentially reverse the trade deficits that have plagued the US economy for years.
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