Reshoring of U.S. Manufacturing a Major 2026 Investment Theme

The Trump administration has stated that its economic agenda is designed to address the debt crisis by focusing on pro-growth policies that it expects will generate enough revenue to reduce the debt burden.

The “One Big Beautiful Bill” is the cornerstone of the plan and involves significant tax cuts, which the administration argues will unleash rapid economic growth. The belief is that this accelerated growth will generate a larger tax base, ultimately leading to greater tax revenues that will help pay down the debt.

Critics, including the Congressional Budget Office (CBO) and other non-partisan analysts, have estimated that the net effect of the tax plan, when fully accounted for, will likely add several trillion dollars to the national debt over the next decade due to lost revenue.

The administration’s trade strategy, which includes imposing new tariffs on imported goods, claims these duties will generate “trillions of dollars” for the federal government, providing a new source of revenue to offset the deficit. However, based on recent estimates from non-partisan economic think tanks, the new tariffs are generally projected to generate revenue in the range of $200 billion to $240 billion in 2026.

The final, official figure for the Fiscal Year 2025 federal budget deficit is estimated to be approximately $1.8 trillion based on the final estimates and reporting from the Congressional Budget Office and the U.S. Treasury Department. For the first time, net interest payments on the national debt surpassed $1 trillion due to both high debt levels and higher interest rates.

Spending on major entitlement programs like Social Security, Medicare and Medicaid continued to rise significantly, growing by about 8% collectively. While revenues increased overall due to individual income and payroll taxes, this was partially offset by a decline in corporate tax receipts, potentially due to new tax deductions.

What could be a genuine game changer in attacking the $38 trillion federal debt is the speed and magnitude of the reshoring of foreign manufacturing to U.S. states. When looking at potential future revenue streams, aside from raising taxes to offset deficit spending, generating hundreds of thousands of new manufacturing jobs that work in tandem with AI is a viable option that carries large tax revenue implications.

There are no specific estimates of future tax revenue from the reshoring of manufacturing. Reshoring generates tax revenue through two primary mechanisms, the largest being increased payroll and income taxes, and corporate and investment taxes. It is touted by reshoring proponents that when a manufacturing facility moves back to the United States or expands, it creates domestic jobs that generate significant tax revenue.

The second primary source of tax receipts is revenue from the profits of the new or expanded U.S.-based manufacturing companies, as well as revenue from taxes on capital investment, new construction and local property taxes for the new facilities. But reshoring is heavily incentivized by federal acts (like the CHIPS Act, Inflation Reduction Act, etc.) and state programs. These incentives often include refundable tax credits, 100% bonus depreciation and exemptions that reduce the immediate taxable income, lowering the initial tax revenue. Hence, specific revenue estimates are elusive.

But the potential numbers look promising. According to the National Association of Manufacturers, for every $1.00 spent in manufacturing, there is a total impact of $2.65 to the overall U.S. economy. In addition, for every one worker in manufacturing, 4.8 workers are added to the overall U.S. economy. This figure represents one of the largest sectoral multipliers in the economy. In 2024, manufacturing workers in the United States earned $106,691 on average, including pay and benefits. For all categories of manufacturing workers, average hourly earnings were $35.50, up 3.9% year over year.

Over the next decade, because of organic growth and reshoring efforts, 3.8 million manufacturing jobs will likely be needed, and 1.9 million are expected to be unfilled if more people do not pursue modern manufacturing careers. Deloitte and the Manufacturing Institute found that of open jobs, 2.8 million will come from retirement and 760,000 from industry growth, and an estimated 230,000 jobs will be created from recent legislative and regulatory actions.

America leads the world in innovation, and manufacturers in the United States perform 52.9% of all private-sector R&D in the nation, driving more innovation than any other sector. R&D in the manufacturing sector has risen from $132.5 billion in 2000 to a record $404.8 billion in 2023. In the most recent data, pharmaceuticals accounted for 36.1% of all manufacturing R&D, spending $146.1 billion in 2023. Semiconductor and other electronic components (13.7%), other computer and electronic manufacturing (13.6%) and motor vehicles and parts (9.6%) also contributed significantly to R&D spending in 2023, with each hitting new all-time high levels of R&D for the year. (Source: Bureau of Economic Analysis)

At a time when there is growing concern about AI-related job destruction in several service sectors of the economy, the ramping up of reshoring and expansion of domestic manufacturing is timely. With retirements rising and digital fluency growing, manufacturers are capturing institutional knowledge, redesigning roles for human-machine collaboration and upskilling at scale. Based on what we now know about the fragility of global supply chains during the pandemic, it is in our national and economic interest to “Build Baby Build” factories as far as the eye can see.