What it would take to rebuild U.S. manufacturing might

The U.S. imports $3 trillion in manufactured goods each year, but only about a quarter are classified as “Achilles’ heels” due to national security importance, highly concentrated supply chains, and sourcing from geopolitical rivals. A ramp-up index estimates how much new industrial capacity the U.S. would need to fully replace overseas imports for dozens of goods. Capacity is insufficient for textiles and apparel, while fossil fuels and transportation equipment are closer to replacement. Foreign direct investment is increasing, supported by the 2022 CHIPS and Science Act and other measures, and reindustrialization has been prioritized. Despite this progress, the U.S. remains vulnerable to trade disruptions, including further breakdowns with China. Investment in AI-related domains has scaled in some pockets, but overall capital expenditure has not risen dramatically.

"The U.S. imports $3 trillion in manufactured goods each year. But only about a quarter of that is what the researchers classify as "Achilles' heels" because those goods are essential to national security, involve highly concentrated supply chains, and/or are imported from geopolitical rivals."

"For dozens of goods, McKinsey calculated a "ramp-up" index for each, meaning how much new industrial capacity the U.S. would need to fully replace overseas importing. The numbers range widely. America is nowhere near having enough capacity to replace its imports of textiles and apparel, for example, but is in much better shape on fossil fuels and transportation equipment."

"Foreign direct investment into the U.S. has been surging, the 2022 CHIPS and Science Act and other measures have fueled expansion of domestic industrial capacity in key industries, and the Trump administration has made reindustrialization a front-burner priority. The McKinsey data shows that the U.S. still has a way to go to be insulated in the event of, say, a further breakdown of trade flows with China or other major partners."

""There have been pockets, including anything related to AI, especially with the big tech firms, where there has been a pretty dramatic scaling up of capital expenditures in those domains," Shubham Singhal, an author of the study, tells Axios. "But more broadly, if you look at the overall capital expenditure statistics, there hasn't been a dramatic tick up," says Singhal, who chairs the McKinsey Global Institute in-house think tank."

Read at Axios