Original Release Date October 25, 2024: After decades of
offshoring, the pendulum for US manufacturing is swinging back
toward domestic production. Our US Multi-Industry Analyst Chris
Snyder looks at what’s behind this trend.
----- Transcript -----
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Chris Snyder: 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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