US manufacturing is booming in spite of tariffs

 Financial Times UK 29 Aug 2026 Tej Parikh tej.parikh@ft.com 

US man u fac tur ing is show ing signs of a revival. After six months of expan sion, fact ory activ ity surged to its strongest in more than four years in July. So far this year, pro duc tion has edged higher, around 30,000 new jobs have been cre ated, and just this month indus trial titans Siemens, Amazon and SK Hynix unveiled hefty invest ment plans. For the Maga move ment this is evid ence that Pres id ent Don ald Trump’s pro tec tion ism-powered “renais sance” of Amer ican man u fac tur ing is tak ing shape. Speak ing at a Gen eral Motors plant in Michigan in July, Trump said that his “his toric tar iffs” were reviv ing the nation’s indus trial heart lands. But this claim is a rather disin genu ous read ing of the data. Amer ican man u fac tur ing is resur gent des pite the pres id ent’s pro tec tion ist meas ures, not because of them. Nor does the boom look much like the one he prom ised. For starters, since Trump’s second term began, uniquely strong demand con di tions in two sec tors have under pinned the expan sion of indus trial out put, rather than a surge in tar iff-related onshor ing. The first is com puter and elec tronic products, which includes the chips and serv ers feed ing the ongo ing AI frenzy. Next is aerospace, where air craft back logs — most not ably at Boe ing — are being filled and global con flict is swell ing defence order books. Demand for other com pon ents used to build data centres, such as trans formers, cool ing equip ment and cement, has helped to prop up broader US indus trial out put. Cru cially, AI and aerospace inputs have benefited from sig ni fic ant car ve outs from the admin is tra tion’s vari ous tar iff schemes. By con trast, sec tors facing some of the highest duties — includ ing tex tiles, fur niture and wood — have con trib uted little to out put, or have shrunk, accord ing to data com piled by Scott Lincicome, vice-pres id ent at the Cato Insti tute. Indeed, since Trump’s second inaug ur a tion, man u fac tur 

ers’ earn ings reports have repeatedly cited the squeeze of duties on their profit mar gins, both dir ectly and via their domestic sup ply chains. There is another incon veni ent data point for tar iff back ers. If tar iffs were driv ing a broad reshor ing boom, one would expect domestic pro duc tion to dis place imports. Instead, the man u fac tur ing revival has dove tailed with a not able pick-up in pur chases from abroad. The strength in US cap ital goods imports since Janu ary last year has been driven by demand for com pon ents linked to AI. The tim ing of this year’s surge in man u fac tur ing is per haps most damning for the pro tec tion ists’ cause. The jump in pro duc tion since Janu ary has coin cided with a drop in the effect ive duty rate and the eas ing of trade uncer tainty fol low ing the Supreme Court’s decision in Feb ru ary to strike down the bulk of Trump’s “lib er a tion day” tar iffs. That’s not to say tar iffs have delivered none of Trump’s vaunted bene fits. The small gain in jobs this year may be linked to insu la tion from for eign com pet i tion in a few sec tors. Tar iffs have also com pelled some com pan ies to make com mit ments to build US factor ies. That said, eye c atch ing invest ment pledges often have a patchy record of pan ning out, and annual private expendit ure on new fact ory con struc tion has con tin ued to fall since Trump’s return to the White House. “The AI build-out, air craft back orders, tax deduc tions for cap ital expendit ure in the One Big Beau ti ful Bill Act and even the Iran war are driv ing the recent US man u fac tur ing surge,” says Lincicome. “Tar iffs have mostly been a head wind.” Get ting the nar rat ive straight mat ters. Reports on Thursday sug ges ted that the admin is tra tion was mulling new duties on semi con duct ors. Doing so would only impede a sec tor that is help ing to drive US man u fac tur ing out put. Still, it is no sur prise that the White House is using the topline data to pro mote its per form ance ahead of the midterms. The irony is that the man u fac tur ing resur gence the admin is tra tion is tout ing isn’t the one it advert ised. Even with this year’s bounce, man u fac tur ing employ ment is 82,000 below its level when Trump’s second term began. It has not brought back the labour-intens ive pro duc tion lines that the pres id ent’s team prom ised. Instead, it has been high-tech out put, pro duced largely by machines draw ing on for eign parts in indus tries that require skilled work ers. In other words, Trump’s tar iffs are prov ing a blunt tool for reviv ing his nos tal gic vis ion of man u fac tur ing. Amer ica’s indus trial strengths are prov ing resi li ent in spite of them — and would have been stronger still without them.