Business
America's Manufacturing Boom Is Accelerating as Reshoring Fuels Industrial Growth
Industrial Renaissance
By Rhea Lobo
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US manufacturing is firing on every cylinder. Tariffs, national security spending, and the global race to reshore supply chains have unleashed four to five overlapping investment booms, putting industrial companies at the center of one of the strongest manufacturing expansions in years.
Normally, factories expand when demand surges and production hits capacity limits. This cycle breaks that pattern.
Morgan Stanley's US multi-industry analyst Chris Snyder argues companies are adding capacity not because consumers are buying more, but because tariffs have changed the cost math on imports. The US runs a $1.2T trade deficit, which means there is enormous domestic production to replace.
Producer price data backs this up. North American factories saw producer prices rise in 2025 while every other major region saw them fall.
Higher prices mean better returns, and better returns attract new factory investment. Snyder's team expects the US industrial economy to hit decade-high growth in the second half of 2026 and into 2027.
Factory construction spending more than doubled from 2021 to 2024, peaking at $235.6B annually. US manufacturing value added hit a record $2.91T in 2024. The ISM Manufacturing Purchasing Managers Index — a monthly survey measuring whether factory activity is expanding or contracting — reached 54 in May 2026, its strongest reading since 2022. Anything above 50 signals expansion.
Foreign companies have committed $2.42T to US manufacturing, making it the single largest sector for inbound foreign investment. Japan alone accounts for over $819B of that total.
Morgan Stanley estimates an incremental $10T in US manufacturing spending over the next two decades. Snyder says that translates from near-zero growth to 3%-plus annual growth for the industrial economy, a backdrop that could push stock valuations roughly 30% higher.
The boom extends well beyond data centers. Novartis started construction this year on a 700,000 square foot manufacturing hub in North Carolina. South Korea's Hanwha Group is spending $5B to expand the former Philadelphia Naval Shipyard.
The US launched a $12B public-private partnership to ease China's stranglehold on rare earths needed for cars, weapons, and industrial equipment.
"If national security means rebuilding physical capacity, copper is one of the first bottlenecks you run into."
Benjamin Bahr, First Eagle Investments
Equipment rental companies are a leading indicator of construction activity. United Rentals recently reported strength in orders tied to industrial, power, mining, and minerals projects. WillScot Holdings posted 8% order growth for modular units in the first quarter, beating its own internal targets.
Rockwell Automation is Morgan Stanley's top pick among automation companies. It is likely to benefit early since companies retool existing plants before breaking new ground.
Its Chinese rivals are also less likely to compete for the same US contracts given national security considerations. The stock trades at 32 times earnings, in line with where it traded during prior strong-order periods in 2018 and 2021.
The industrial ETF benchmark, the State Street Industrial Select Sector SPDR, has gained roughly 15% year-to-date.
Industrials are now trading at a mid- to high-single-digit premium to the S&P 500, compared to their historical tendency to trade in line with it.
For broader exposure, the Tema US Manufacturing and Reshoring ETF is up 28% year to date and skews toward mid-cap names.
The Global X US Infrastructure Development ETF holds $13.9B in assets and is among the ETFs seeing the most inflows.
The iShares US Infrastructure ETF carries $4.5B and offers a similar broad-infrastructure tilt.
Among individual names, Constellium carries an expected earnings growth rate of 74% for 2026, Moog is projected to grow earnings 22% this year. Both serve aerospace, defense, and industrial markets a.k.a. sectors directly exposed to the reshoring and defense spending driving this cycle.
The workforce is the one constraint that capital cannot immediately fix. The industry will need 3.8M additional workers by 2033, and roughly 1.9M of those jobs could go unfilled without action. And although enrollment at high-vocational community colleges is up nearly 20% since 2020, the pipeline needs to move faster than it currently is.
