U.S. Manufacturing Makes a Comeback: What's Really Happening

Recent data backs up the manufacturing optimism. According to the Institute for Supply Management (ISM), the Manufacturing Purchasing Managers' Index (PMI) rose to 50.9 in January 2025, which means the industry is growing again after months of slowdown.1

The government is putting money behind this growth too, with the U.S. Department of Energy recently announcing a $428 million investment in 14 projects for clean energy manufacturing projects in former coal towns.2 These projects are expected to stimulate local economies and enhance America’s position in sustainable manufacturing.

On February 1, 2025, President Donald Trump said he would place a 25% tariff on all goods coming from Mexico and Canada, plus a 10% tariff on Canadian oil and energy exports.3 These tariffs aim to bring manufacturing back to the U.S., but they’re a double-edge sword:

Good news: They might encourage more companies to make products here

Bad news: They’re making raw materials more expensive and could trigger trade fights

Treasury Secretary Scott Bessent stated that these tariffs are designed to "revitalize U.S. manufacturing," particularly in sectors such as medical supplies and shipbuilding.4

The manufacturing sector shows mixed reactions to these policy changes. While ISM's January report showed optimism, ISM Chair Timothy Fiore warned that the new tariffs could hamper recovery by increasing raw material costs and disrupting supply chains.5

Car manufacturers feel these effects differently. Volkswagen has warned that the 25% tariff on Mexican imports could price their U.S.-bound vehicles out of the market, potentially forcing them to scale back their American presence. Meanwhile, Ford’s strong domestic manufacturing base (80% of its U.S. sales come from American-made vehicles) gives them a clear advantage in this new landscape.6 7  

This split reaction shows how the same policies create both opportunities and challenges across manufacturing. Companies that already make products in America stand to benefit, while those relying heavily on parts or assembly from Mexico and Canada face tough decisions about whether to absorb the costs, raise prices, or relocate production.

1. Supply Chain Vulnerabilities

Despite policy efforts aimed at promoting domestic production, U.S. manufacturers continue to experience significant procurement challenges for essential components, particularly semiconductors and rare earth metals. These materials constitute fundamental inputs for advanced manufacturing processes, yet domestic supply remains insufficient to meet production demands.

According to a study by the National Association of Manufacturers, there is a projected workforce gap of 2.1 million skilled manufacturing workers by 2030 if current demographic and training trends persist.10 Addressing this workforce deficit requires enhanced STEM education, vocational training programs, and worker reskilling initiatives across multiple education levels from secondary education through adult learning programs.

The Biden administration’s $1.2 trillion infrastructure bill, signed in 2023, represents a significant policy response to these manufacturing productivity and distribution constraints:

This legislation targets critical manufacturing infrastructure requirements including:

• Transportation network modernization for material and product distribution

• Electrical grid enhancement to support advanced manufacturing energy requirements

• Digital connectivity expansion to enable smart manufacturing technologies and supply chain integration