The valid reasons for reshoring are from a mix of powerful economic drivers and national security.
Many of the world’s products are physically produced. Many are not simple, and even simple items at scale require engineering degrees to make automated manufacturing machines that are economically viable to produce themselves. Those engineering degrees are educationally challenging to attain and work experience, in-house corporate knowledge, and industry wisdom take years to build up not just individually but as an ecosystem. Talent thrives better when many people are not only competing and learning together but sharing that wisdom. It’s why ShenZhen has been coined the Silicon Valley of hardware. Ideas and knowledge flow porously from the lack of restrictions on secret sharing, similar to Silicon Valley.
Those physically produced products can be high value. Because of President Biden’s CHIPs act, the solar manufacturing industry in the U.S. has rebounded. The solar industry is a perfect example of high value product’ manufacturing being revitalized in the U.S.; it proves the viability of manufacturing in the U.S. So long as the talent base in quantity and skill is available and the products produced are of high value enough to be competitive locally and globally, it can be done. Re-shored manufacturing doesn’t have to be screwing iPhones in an assembly line; no process of such low-skill could economically be viable in America. Rather, high-value manufacturing processes should be reshored. As I discussed before, nations in our global trade system must compete competitively; if they can’t, their purchasing power will stagnate globally, and they’ll be unable to purchase products outside their nation: that means locking them out of advanced healthcare or even basic products like TVs and air conditioners which are simply produced outside their countries. The solar and chips industries in the U.S. proves that manufacturing is viable in the U.S. This means we can discover more high-value industires where manufacturing can happen in the U.S. After all, from sheer scale of most products and advanced knowledge needed to produce them, there is an open market for U.S. companies to compete in that we aren’t today that require automation which means we don’t need cheap labor to produce.
More engineers will be able to invent more efficient solar panels and manufacturing methods of solar panels. Talent in manufacturing is also not restricted to just the design but also the manual, skilled labor which oftentime correct ludicrous engineering proposals purely from experience. Talent bases take time to build up. Hypothetically, even if physical product/manufacturing companies spring up in droves from huge capital injections, labor takes time to migrate to these companies and learn. Industries and talent take time to mature and develop methods to avoid past mistakes. Manufacturing in the U.S. isn’t a nascent industry, though, certainly the talent base has been hollowed out since the 1980s Rust Belt and 1990s reshoring. The experience of past mistakes and matured methods across industries have been lost in the U.S., and it’ll take re-learning those mistakes for the industry to mature and then share that knowledge to the next generation. There is no current generation to pass down these experiences, today.
A great example of talent bases slowly developing into a manufacturing powerhouse is China. They used to be the butt of American jokes summarily waving off Chinese products due to their poor quality. Today, they lead in most manufacturing industries, not only in capacity but also technologically. Their companies produce some of the most advanced products, even more than U.S. and European companies. Of course, one must admit they did steal patents, U.S. firms offshoring highly advanced techniques to China helped Chinese engineers learn quicker than the original companies learning these techniques themselves (and then laying off U.S. engineers, hollowing our U.S. engineering expertise), and the mix of private market and government cash infusion and backing has led to this fast development. But, to me, the culture of America and China are extremely similar: each country’s policies are about developing profitable companies on top of an extremely hard-working population that wants to rise up in their society and avoid destitution. Anti-competitive policies found in Europe has led most of Europe impoverished and unable to compete in the world. Because of the culture of European populations, not just policy, they will not be able to return to any form of economic glory besides their financial institutions. The other great example of talent bases growing with more and more industry techniques is the U.S. itself: I’d say the landmark looms of the 19th century and the screws of the 20th century purchased by Henry Ford shows our beginnings as a nation building low-skill products.
To summarize, the U.S. should manufacture for economic reasons:
- We’ve already reshored certain manufacturing industries of high value such as solar and semiconductors. If it’s high value enough, it’s possible to manufacture. In fact, pharmaceuticals and chemicals are one of the largest manufacturing sectors in the U.S. and thus the world out of sheer scale and advancements. There are high value industries that are economically viable for the U.S. to compete in profitably, meaning the U.S. talent and firms have missed out on competing and earning money in manufacturing industries.
- The engineering and skilled laborers in the manufacturing world may have retired. It will take years if not at least a decade of slow manufacturing revitalization and then another decade of talent proliferation before the U.S. has a stable base of manufacturing talent that can compete with China. Because of that, it will take time to reshore so long as there are policies that incentivize the creation of manufacturing companies in the U.S. in high value industries. However, once that talent develops, the U.S. can continue competing with China.
- The U.S. culture values company building in order to compete in the world stage. As U.S. companies compete and catch up with advanced Chinese firms, wages in these sectors will improve in manufacturing. Today, engineers do not make that much money, leading many to becoming software engineers. Those who remain are in a U.S. market that lacks the need for engineers. Once manufacturing companies in the U.S. start tackling high value industries, wages will increase. Skilled labor in manufacturing also means the broader U.S. population can join manufacturers without college degrees, increasing the national wage as well. Though I’m not a fan of trickle-down theory, I do believe manufacturing can lead to higher wages for many with and without college degrees which leads to more buyers with more spending power. We see this today as the middle class in the U.S. declines and the top 10% of Americans’ wages increase; the market has shifted from targeting the broader middle class to just the top 10% of Americans as they’re the only ones with increasing purchasing power. With higher wages, the broader consumer market will come back to the middle class.
High-value manufacturing usually means developing products that require high skill. Plenty of parts can come from China; what matters is the profitable portions of manufacturing are re-shored. This means the engineering and design of components and products that are difficult to invent and make; nuts and bolts require low-skill and can be imported because of their low cost. Though most of those low-cost components may come from China, it does mean other nations will eventually start competing and make a competitive, low-profit environment. It’s not worthwhile for U.S. engineers of high wages to compete in that regard unless there are structural reasons such as domestic low-cost steel production; today, those don’t exist in the U.S.
To prove this point, look no farther than China itself. As their talent base and companies gain more advanced knowledge, even from the sheer scale of their nation, one would assume somewhere in China, someone is willing to produce narrow-margin products. But that isn’t the case; from a historical perspective, wages nationwide always go up as a nation continues improving their living conditions through nation-wide policies and domestic demands. Economically, minimum wages are inefficient, but nations enact them due to market powers of high leverage; same goes for anti-monopolistic laws preventing firms with huge financial leverage to start anti-competitive behaviors. In China’s case, wages are increasing; the Chinese middle class has ballooned. In order to even afford food, because of the shrinking population, increasingly educated population, etc. China has evolved out of its low-cost manufacturing. In the CCP’s 2024 inaugural address, XiJingPing announced that China must continue advancing their manufacturing sector but also never lose their low-cost one. The massive asterisk is that they also acknowledge that they know it’s not possible. In Breakneck by Dan Wang, he goes to a town known for producing the world’s guitars. It is located in the poorest province in China, but Wang and many news outlets observed China’s children don’t want to produce those low-cost goods. It’s backbreaking work and low-wage. They’d rather sit at home waiting for a good job with a good wage to come. Until it’s cheap to produce all those decent habitats of good living conditions, wages must keep pace to afford them. As a society, it’s inevitable for an entire population to want demand it once they see more and more peers attaining it.
Sounds familiar? It’s because American new graduates are like this too. And you can’t blame them. Humans innately want more money not only for better living conditions but because they have materialistic desires: bigger houses, better technology, splurging on games, fashion, accessories. In the U.S., it’s particularly difficult for shrimpers to find good laborers. No American, old or young, can shrimp at a profitable rate. Thus, low-skilled immigrants are introduced to fill in that work to fulfill the demands of the market.
China’s low-cost manufacturing processes have migrated to Southeast Asian and South Asian countries. It shows that, China had been stifling global competition in low-cost manufacturing through great subsidies and structural advantages such as being on the Pacific Ocean and having an amazingly complex and huge supply chain. Now, the global market has filled in the shoes of China, and many countries are now competing. This shows America can and will never compete in those low-cost manufacturing sectors; instead, utilizing the highly knowledgable talent base, companies should focus on the parts that are hard to produce. The harder the part to produce, the more profitable and high cost it becomes out of sheer talent and capital expendentiture cost. Just as a quick example, the American northern states were known as mercantiles while the south was known for farming. The north was far wealthier and also didn’t need slaves; then, the American Civil War happened with the divide being slavery and extreme economic differences.
National Security
The other reason to reshore is national security.
National security doesn’t simply mean the ability to build military weaponry or develop a talent base within the military or military industrial complex like hackers, engineers, and generals. National security can also mean funding foreign governments to provide stability in order to prevent terrorism from forming. It also secures alliances around the world to further protect America from potential threats. Humans love simplifying results down to a specific cause or reason, especially in politics. In reality, events happen from myriads of reasons to different degrees of effectiveness. Today, I want to only focus on a specific slice of national security related to manufacturing as a portion of national security insurance. I won’t claim the effectiveness, but I am stating the necessity from a manufacturing industry perspective.
Building up a cohesive talent base that trades ideas, through labor/talent and corporate competitiveness, ensures a nation can quickly switch to wartime manufacturing and develop advanced technologies to outproduce and outcompete on the battlefield from the technological factor. The industrial base itself also has to be powerful; wars are won not just from strategy but also the quantity and quality of its forces, from manpower to technology. The manufacturing capacity must be sufficient for a given war in order for a nation to compete. Wars are expensive and have bankrupted nations over and over again throughout written history from British forces trying to invade France to ancient Chinese warlords constantly attempting small skirmishes killing millions of people. However, the U.S. during WWII and the Great Depression shows that, if the manufacturing base already exists and can satisfy the needs of a war, then wars can not only not bankrupt a country but in fact make populations extremely wealthy (big asterisk is that the U.S. had almost zero civilian bombings and mainland attacks). Though they haven’t entered a large war in their current manufacturing capacity, China’s military spending and size are enormous and far from bankrupting the nation. Their manufacturing capacity and national debt (which is also insulated from foreign investors, far less than the U.S. and comparable to Japan) ratio is low. With their talented and large manufacturing base, they would likely win in a war against the U.S., though I highly doubt it’s in either nation’s interest to be in open invasions or even trade salvos. They’d likely only show hard power or compete outside either nation’s territories, but that’s besides the point.
Having an existing, large manufacturing capacity and large manufacturing talent base can prevent a nation from bankrupting itself in wartime and better prepare a nation to pivot to wartime manufacturing. Having the talent base in manufacturing can help a nation win a war, though of course it’s not guaranteed due to wartime strategy (e.g. the Soviet Union using pure manpower to defeat the Germans, in addition to their winters and American bombing of German factories and supplying parts to the Soviets).
How would reshoring in the U.S. work?
I believe talent moves where opportunity arises. It’s just how markets work, filling in gaps. So I will defer talent questions in this blog post and solely focus on the corporate and policy strategies.
I cannot possibly identify every industry, and even within an industry which part of the manufacturing process, is of high value. Generically, the design of the product and the design of the robots that automate manufacturing are high value. But the industries themselves are vast. As I said before, chemicals and pharmaceuticals are large manufacturing incumbents in the U.S. Semiconductors, chips, and renewable energy are high value where the products can continue improving through science, thus increasing in value and viability of profitability. From an economic perspective, it’s supposed to be unanswerable by economists and only answerable by entrepreneurs.
China has guaranteed their own success by developing their domestic talent to advance technologies in all manufacturable industries. This means allowing the private market to develop the talent base through profit, and using public funds from the national and provincial governments and banks to fund unprofitable ventures in the pursuit of advancing technologies for the sole purpose of developing industry talent, experience, and wisdom. It’s had some mixed results; good results include developing their own Boeing competitor and battery companies; some poor results include most if not all public-funded car companies. BYD succeeded through developing their own battery technology, but Chinese car companies never succeeded in gas car companies as engine design was just too difficult to rival Western car companies. It seems the Trump administration has pursued the same idea as China with public investments and questionable/controversial private mergers (through the Trump organization) in Intel, Quantum Computing, and fusion companies. Again, it’s totally unclear for the merger with a fusion company if it’s actually to help develop a talent base or to solely make profit. It also goes against many American intellectuals’ comfort zones as they worry about the politics of the government controlling parts of a market, but if it’s the only way to compete globally, then it’s the right move in order to not fall behind in wages and technical know-how.
The other problem is the viability of even starting a manufacturing startup in the U.S. The supply chain in the U.S. is almost completely hollowed out with the only remaining complex supply chains being in Michigan and Ohio. Though the east coast, Los Angeles, and Houston have decent supply chains, their complexity lack compared to Michigan and Ohio. Supply chain complexity matters. Complexity is akin to waiting for bread dough’s glutin to develop. The glutin development ensures the dough doesn’t break apart; for manufacturing, a complex supply chain means parts and supplies are plentiful in order for a new firm with completely different products can biggy back off an existing supply chain and prototype and develop new products cheaply; otherwise, without that supply chain, the costs for importing new parts that don’t exist in a supply chain prevent entrepreneurs from even starting.
This isn’t exactly a chicken-and-egg problem or a cold start problem. It is plain and simple an investment problem. Today, the private market loves investing in high-margin software businesses. Due to regulation, banks cannot fund risky ventures in markets. These regulations have left a huge entrepreneurship hole that fails new companies before they even start. Of course, it’s to protect consumers and policies are enacted, sometimes too broadly and rashly, due to historical issues. But it has raised the barrier of entry for American startups — many of which actually move to ShenZhen to prototype as the iteration cycle for prototyping have to be fast.
For a supply chain to develop, there simply needs to be enough well funded companies to kickstart the supply chain in the first place. This is true trickle-down theory in a way: well funded companies can invest in U.S. firms that eventually manufacture components for that startup and can then expand and manufacture components for more and more startups. This does not mean those companies need to be producing low cost items, as a reminder. There are plenty of advanced components in products that can be developed further and further such as battery technology. Additionally, manufacturing is of course partly material cost but also machinery. Machinery for automating the production of items can be made more efficient.
The one time I’ll mention AI is now: I don’t believe AI in manufacturing will be in the form of humanoids. Even installing AI analytics is probably too high of effort for most manufacturers. Rather, I hope one day, AI will help engineers design machines that efficiently automate production or assembly of products, similar to how the advent of Claude Code for software engineers. When I talk with manufacturers, they say engineers are costly. They can’t just produce any item they want; besides materials needing to be purchased in bulk and thus needing marketing to determine the most profitable items, the high volume production itself require costly engineers. Software engineers have already been automated; I think AI can help mechanical and industrial design engineers quicken the pace in designing robots. At the scale of the global population, we’re at a point in human civilization that many produced items require some form of automation in manufacturing for almost all products.
Final Remarks for Other Nations and Why America must Invest
The U.S. is a huge nation by population, land, and talent. It is a nation happy with its superpower economic and political status, and is home of the largest immigrant population as a nation born of immigrants. Its culture is one of risk, hard work, tolerance, and, most importantly, ambition. Its political system caters to that combination and has made America, since its founding, an extremely successful nation.
The U.S. and China are predominantly service-based economies at around 80-90%; services tend to be of the highest value. I believe many economists, particularly amateur economists and politicians believe all nations aspire to be service based economies, and populations should lean heavy into it for their entire population. Besides making populations completely dependent on raising service-based children such as the UK, Italy, France, Singapore, and Hong Kong. In high school macroeconomics, there’s only one theory of global trade that’s taught called comparative advantage. But humans and the physical world are complex; not everyone wants to work in the services economy, and many people would like to participate in other forms of high value economics such as manufacturing. For a huge and diverse nation like the U.S. with huge financial institutions and structural advantages, it’s possible to build up almost every industry imaginable. My argument for the U.S. is to enter all the possibly high value industries and insure its own national security endeavors such as propping up domestic farms for food and manufacturing.
But for small nations, land and population wise (broadly and strategically speaking, so I may exclude factors like geographic strategic positioning; i.e. if your Iceland, can you really be a manufacturing-first nation?), a service based economy is not what makes a nation developed; what makes a nation a first-world country is with high standards of living for its citizens, and the only way to do that is through globally competitive companies which can provide high salaries/high-purchasing-power wages. Singapore is an island nation in a strategically advantageous geographic position: the South China Sea. Through strategic policies from Lee Kwan Yew (partly my favorite is his conscription idea and giving everyone a home; though, I’m opposed to mandatory conscription, his idea is brilliant. Conscription is sad, especially when welded for the wrong reasons; the renaming of the Department of Defense to the Department of War should speak enough of my ideals about war). They are a service-based economy that is involved in the highest value portions of manufacturing and trade. Their population is small, their geography is small, yet through good policies, they are one of the top 5 wealthiest nations per capita. The sheer population scale of China and America shows that it’s not possible due to macro and microeconomics that you can shoehorn 1/7 of the global population into one industry; because of Singapore’s relatively small population, they can. China, even with censorship, knows how valuable social media is to people. Information and news is innate to people’s needs. For the scale of the U.S. and China, to ensure their citizens are not left behind, they must invest in everything and diversify. Humans have different interests, and at large population scales (from a relative perspective of global population, not sheer populace numbers), governments must let people enter whatever industry they choose and excel on their own. To let them excel and increase government revenue, you have to give them the opportunity and structural advantages to enter.
Unless strategically advantageous and with narrow focus from a small population, most countries shouldn’t go into manufacturing, particularly advanced manufacturing. It’s a good idea if a governments needs to get a cash infusion to make future investments by entering low-skill manufacturing like textiles (the U.S., China, Bangladesh, Vietnam, etc. all did this playbook). But besides that, for smaller nations or even larger nations where policies aren’t ambition aligned, they shouldn’t.
Today, America’s wages are stagnating. My dad is in the auto union as a mechanical engineer. His wage hadn’t increased in 14 years. The nationwide wage stagnation is from globalization. But globalization wasn’t the root cause; other countries may have enacted tariffs to develop their own national talent base and manufacturing industries, including Europe. The fault lies in American policymakers and corporate executives looking for a self-interested profit. Had U.S. firms kept their talent base and made increasingly better products, the U.S. would still have the talent base. The wages would still be increasing through higher and higher value product development. I believe some bankrupted companies had reached the limit of potential technological innovation in the U.S. for their product, and could not be saved. However, I do believe there were plenty of products that could have remained in the U.S. manufacturing sphere; instead, from a tale as old as time, many executives sought to offshore all development and production to reduce labor costs instead of doubling down on innovation. To this day, we still do this; private equity might be a household term, but executives are to blame for the most part, including the auto industry executives in power today in 2026. The long term effect meant companies shutting down through global competition and wages stagnating from the loss of employers. Today, the U.S. could use tariffs to protect nascent, high-value industries instead of adding tariffs on low-value components. But the real way to win is if U.S. companies simply competed technologically, making better value products at cheaper price points through advanced manufacturing techniques or developing more complex supply chains and using tariffs on just the right high value products to protect industries.