Whether we realize it or not, “Made in America” is a long-standing phenomenon in U.S. history, during which it has been used in turn as public policy, a political slogan, or a marketing strategy.
It is therefore somewhat natural that this ambition is resurfacing today within the two major American parties, which would like to repatriate—at least partially—industrial production to the United States. In reality, the movement is clearly underway and visible, and it may even accelerate in the coming years.
Although it seems a bit too optimistic to imagine that the United States will manage to regain its status as a “major industrial power,” here are three areas where Capital Group’s investment professionals are observing significant developments:
- The “carrot-and-stick approach” appears to be working
The Trump administration—just like the Biden administration before it—is using a combination of incentives (tax breaks) and penalties (tariffs) to encourage some of the world’s largest companies to build new factories on U.S. soil. “ “The reindustrialization of the United States is a realistic goal in certain specific sectors related to homeland security. But it will take time and concerted effort to achieve it,” adds Tom Cooney, an international policy advisor at Capital Group and former diplomat at the U.S. Department of State. “Industries such as semiconductors, AI data centers, and shipbuilding could thus benefit from strong political support, or even subsidies.”
“It could be more complicated for other sectors, such as the automotive and electronics industries. However, I believe the U.S. government will do everything it can to bring back activities related to major security issues.”
- The rise of AI is boosting U.S. growth
Of all the sectors in which companies have committed to bringing their production facilities back to the United States, AI will have by far the greatest impact. The enthusiasm for this technology is already translating into the construction of numerous data centers across the country.
“The proliferation of data centers is creating a divide among industrial sectors,” explains Nate Burggraf, an equity investment analyst at Capital Group who tracks companies in the industrial sector. “On one hand, there are construction companies, which are benefiting from the AI boom, and on the other, all other industrial sectors, which are being sidelined, such as commercial services, logistics, and transportation. To date, the reindustrialization of the United States is therefore primarily linked to the rise of AI.”
- The production of vital medicines is returning to U.S. soil
In several sectors, the relocation of production is a complex process, and the pharmaceutical industry is no exception, particularly for certain specialized medical needs. This reality came to light with the disruption of supply chains during the Covid-19 crisis, when the United States faced significant difficulties in securing supplies of medicines and medical equipment.
The pharmaceutical sector was initially more hesitant about the idea of moving its factories to the United States, as they are currently located primarily in low-cost countries such as China and India. But some industry giants are now rethinking their strategy, drawn both by the generous tax incentives offered by the United States and by the prospect of avoiding rising tariffs.
“Increasing pharmaceutical production capacity within the United States is necessary, and we’re seeing things start to move in the right direction,” confirms Charles Ellwein, equity portfolio manager at Capital Group.
So, is “Made in America” making a comeback?
It remains to be seen to what extent the United States will succeed in reindustrializing. Only time will tell, but it’s important to keep in mind that only a limited number of industries could be supported by the modern version of the “Made in America” concept.
“Let’s be realistic: it’s unlikely that the United States will become an industrial powerhouse again. That hasn’t been possible for a long time,” concludes Steve Watson, equity portfolio manager at Capital Group. “I do believe, however, that the U.S. economy can become more self-sufficient, particularly for essential goods such as microprocessors and pharmaceuticals.”
He concludes: “It is true that the forcefulness of the measures announced by the United States is unsettling the markets. But their objective is unequivocal: to reshape global trade, not to end it.”
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Other articles by Capital Group are available here.
