How Smart Policy Attracts Manufacturing Investment

Policymakers can use two basic strategies to attract manufacturing investments. These involve attractive incentives — the carrot — which include subsidies, grants and tax credits, or negative incentives — the stick — which include tariffs and threats.

Using credible data that tells a compelling story, I will explain why the carrot has been and will continue to be much more effective than the stick in attracting manufacturing investment.

The data

The St. Louis Federal Reserve publishes US Census Bureau data on actual investments in new or expanded manufacturing facilities, titled “Total Construction Spending: Manufacturing in the United States.” It is seasonally adjusted and reported monthly on an annualized basis.

During the Biden administration, manufacturing construction spending tripled from $76.5 billion in January 2021 to $230.9 billion in January 2025. This represented one of the largest industrial construction booms in US history, driven primarily by large semiconductor, battery and advanced manufacturing projects.

Due to normal megaproject investment cycles, these projects are front-loaded with capital-intensive spending on site preparation, foundation work and structural construction, using massive volumes of concrete and steel. Consequently, manufacturing construction spending peaked in June 2024 at $240.1 billion and slowed in later phases due to less capital-intensive spending on machinery, equipment and installation, much of which is recorded outside of the St. Louis Fed’s manufacturing construction spending data.

The carrot

Using subsidies, grants, loans, tax credits and state incentives, the CHIPS and Science Act signed by President Joe Biden in August 2022 attracted large amounts of capital into semiconductor manufacturing, spurring new fabrication plants and related infrastructure. It also created an entire ecosystem of suppliers, workers and innovation improving American competitiveness, and is primarily responsible for the manufacturing construction boom reflected in the St. Louis Federal Reserve data.

Stated by the Semiconductor Industry Association, enactment of the CHIPS and Science Act was a pivotal moment in recent American history, uniting government leaders from across the political spectrum to reinvigorate US semiconductor production and reinforce America’s economic strength, national security and technological competitiveness.

The carrot or positive incentives offered by the CHIPS and Science Act, combined with the Infrastructure Investment and Jobs Act, signed in November 2021, and the Inflation Reduction Act, signed in August 2022, boosted broader industrial and clean-energy facility investment. The message was clear: America is open for business, and we’re willing to invest in your success. This approach made investing in the US manufacturing sector very attractive.

The stick

Beginning with President Donald Trump’s second term through October 2025 (the latest available data), construction spending in manufacturing declined to $214.1 billion. Some of this is attributed to less capital-intensive spending in later phases, as explained above. However, the primary factor likely is trade uncertainty caused by President Trump’s on-again, off-again tariffs, delays, reversals and threats — the stick.

According to Anirban Basu, chief economist for the Associated Builders and Contractors, “With CHIPS Act-enabled megaprojects winding down and the stiff headwind of trade policy, manufacturing construction spending has fallen by nearly 10% over the past 12 months.”

There are many examples of stiff headwinds caused by erratic policies. Take South Korea, for example. On April 2, 2025, Liberation Day, President Trump announced tariffs of up to 25% on South Korea. Critics argued this was inconsistent with the United States–Korea Free Trade Agreement (KORUS FTA), which has been in force since March 15, 2012. Three months later, on July 30, 2025, the two countries announced and later finalized the Korea Strategic Trade and Investment Deal, which reduced tariffs to 15% and included the understanding that South Korea would invest $350 billion in the United States.

Two months later, on September 4, 2025, US Immigration and Customs Enforcement (ICE) raided the construction site of the South Korean-owned Hyundai Motor Group/LG Energy Solution battery plant in Ellabell, Georgia. ICE detained several hundred South Korean nationals, many of whom were engineers and technicians training American workers and installing specialized machinery. According to immigration attorney Charles Kuck, his South Korean clients were legally in the US under B-1 visitor visas or the Visa Waiver Program (ESTA).

Even though the Trump administration offered to allow the South Korean workers to remain in the United States to complete their work, most decided to leave due to the unpleasant experience of being shackled, treated like criminals and unsure if they could trust the visa process. In response, South Korean President Lee Jae Myung said, “Under the current circumstances, Korean companies will be very hesitant to make direct investments in the United States.”

The problems did not end here. In January 2026, President Trump announced that because the South Korean National Assembly had not yet passed implementing legislation for the 2025 deal, he would increase tariffs on Korean imports back up to 25%.

Uncertainty and the pause button

The chaotic tariffs and threats have caused economic uncertainty to skyrocket, costs to escalate and investors to be unable to predict what’s ahead. As a result of this and the Georgia immigration action, firms have become more cautious about committing to long-term capital projects in the United States and have hit the pause button.

Stated by Andrew Yeo, a senior fellow at the Brookings Institution, “Allies are receiving mixed signals. The South Korea case has made countries like Japan and even EU nations nervous.”

According to the American Institute of Architects’ January 2026 Consensus Construction Forecast, “Producers and investors typically have not had much clarity as to what countries, what products, or what tariff levels might be in place over the longer term. This makes decision-making difficult and often encourages inaction in supply chain sourcing and investment decisions.”

Not surprisingly, industry forecasts predict a continued decline in manufacturing construction spending.

A better approach

If the goal is to strengthen American manufacturing, US policy needs to focus more on carrots and less on sticks. The CHIPS Act demonstrates that positive incentives work. Expanding similar programs to attract capital to critical industries — advanced materials, batteries, clean energy and biotechnology — would help boost US competitiveness.

This approach is especially urgent given China’s relentless investment strategy and potential US-China hostility. The US cannot afford to cede its competitive advantages through policy uncertainty.

Importantly, strengthening relationships and working more closely with our allies to achieve our manufacturing goals would be an essential step in the right direction. America’s advanced semiconductor manufacturing depends on global supply chains. Alienating these partners through unpredictable tariffs and immigration raids undermines our own competitiveness.

The choice is clear: we can invest in our future through strategic incentives and stable partnerships or watch manufacturing investment go to more predictable shores. This may be a tall order today, but it will be necessary tomorrow.

[Kaitlyn Diana edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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Has Trump’s tariff policy backfired, leading to a contraction in U.S. manufacturing?

The manufacturing boom promised by Trump has failed to materialize. Months after the implementation of his hallmark tariff policies, manufacturing jobs continue to decline, and industry activity has remained in prolonged contraction.

Trump once promised a ‘golden age’ for American manufacturing, but this prosperity is now receding. After years of economic intervention under both the Trump and Biden administrations, the number of manufacturing jobs in the United States has dropped to its lowest point since the end of the pandemic.

Federal data shows that in the eight months following Trump’s announcement of the ‘Liberation Day’ tariff, manufacturing jobs declined month by month, continuing a contraction trend that has seen over 200,000 jobs disappear since 2023. The index of factory activity tracked by the Institute for Supply Management remained in contraction territory for 26 consecutive months through December of last year, although a surprise rebound in new orders and production indexes in January caught analysts off guard. Manufacturing construction spending, which had surged under Biden-era funding for chips and renewable energy, fell month by month during Trump’s first nine months in office, according to estimates from the U.S. Census Bureau.

This gradual slowdown is, to some extent, a continuation of decades-long trends that shifted factory jobs overseas and accelerated the decline of Midwestern cities. In an industry where capital planning and construction cycles often span several years, reversing these trends will not happen overnight.

In November last year, the Federal Reserve significantly revised downward its estimates of total U.S. output since the pandemic when it conducted its annual revision of industrial production indicators.

“We never fully recovered from the pandemic,” said Josh Lehner, a U.S. economist at SGH Macro Advisors. Although automakers and chip manufacturers cut tens of thousands of jobs over the past year, the steady pace of layoffs across the industry suggests that job losses have been gradual.

Lehner and other economists also pointed out signs that output has stabilized and even grown slightly, though increased efficiency may limit the number of new jobs created. A White House spokesperson highlighted a modest rise in manufacturing productivity in recent quarters and noted that wage growth for workers exceeded inflation over the past year.

U.S. manufacturing jobs

U.S. manufacturing job additions

In the long run, tariffs may achieve their intended effect of enhancing the competitiveness of some manufacturers relative to overseas producers. Economists believe that lowering interest rates and deregulation could also provide support. However, in the short term, tariffs have raised costs for many companies importing raw materials and components, forcing businesses reliant on foreign parts to raise product prices or hurriedly seek alternative supplies.

The intermittent policymaking from the White House—Trump threatened new tariffs on Europe, Canada, and South Korea in recent weeks—has also led many business executives to view the past year as a ‘lost year for investment.’ The possibility that the Supreme Court might overturn some import taxes has added further uncertainty.

Meanwhile, despite the tariffs, some countries continue to expand their exports, driving down prices in the global market and making it difficult for U.S. manufacturers to compete.

“In our product portfolio, there are hardly any products that have benefited from tariffs,” said the CEO of Insteel Industries, headquartered in North Carolina.$Insteel Industries (IIIN.US)$H.O. Woltz III. With foreign steel tariffs doubling to 50% this year, Insteel has found it increasingly difficult to obtain steel from its U.S. suppliers for producing concrete infrastructure reinforcements, such as those required for the upcoming Gordie Howe Bridge connecting Detroit and Canada.$TRADELINK (00536.HK)$On the contrary, when domestic supply in the U.S. is insufficient, Insteel sometimes has no choice but to turn to importing tariffed steel from places like Algeria and India.

“Our growth today could be undermined by a lack of available (domestic) raw materials,” Woltz said.

In the trucking industry, a multi-year slump following the pandemic hit metal component manufacturers such as NN. The company, headquartered in Charlotte, North Carolina, and operating 23 plants across six countries, has cut its U.S. workforce in recent years to compete with low-cost factories overseas while addressing slowing demand for electric vehicles. CEO Harold Bevis believes tariffs will ultimately benefit NN by curbing competition from rivals in precision components like steering systems and audiovisual controls. However, import duties have driven up costs for steel and aluminum, while surging market prices for gold and silver—used in some of NN’s products—have added further pressure.

This squeezes the company’s ability to invest in new potentially profitable areas such as data centers and electrical equipment. “So you get hit,” Bevis said. NN is attempting to offset the costs by raising prices in subsequent orders. Bevis noted that NN’s business has accelerated amid Ford and General Motors’ push for localized sourcing, following multibillion-dollar asset write-downs on their EV businesses. However, when evaluating locations for expanding production for the auto sector, Bevis cautioned that places like Michigan and Massachusetts remain less attractive compared to Mexico, where many products can still enter the U.S. duty-free under trade agreements.

Trump has also taken other measures to try to revitalize manufacturing. He pressured trading partners like Japan and South Korea into agreements promising to invest tens of billions of dollars in the U.S.$Apple (AAPL.US)$ 、$Taiwan Semiconductor (TSM.US)$and$AstraZeneca (AZN.US)$Companies have announced large-scale projects that could create thousands of manufacturing jobs. Government officials stated that the long-term vision is achieving industrial self-sufficiency. However, these investments often span several years, leaving the short-term outlook for manufacturing uncertain. “I don’t know when all this money will start to pay off,” Trump told The Wall Street Journal in December last year.

Analysts pointed out that new investments might focus on areas that fascinate Wall Street, such as robotic tools and artificial intelligence components, meaning the likelihood of a surge in permanent factory jobs is low. After years of inflation and high borrowing costs, some sectors of the economy remain lagging, impacting certain types of manufacturing.$Qualcomm (QCOM.US)$After experiencing years of inflation and high borrowing costs, certain segments of the economy continue to lag behind, affecting specific types of manufacturing.

“If people aren’t buying homes, they won’t buy furniture,” said Meganne Wecker, CEO of Skyline Furniture Manufacturing, a family-owned business founded in 1946 located outside Chicago. Skyline ventured early into e-commerce and began sourcing metal materials domestically in 2018. However, tariffs have impacted hardwood imports from Vietnam and textiles from India and China, leading to price increases.

Wecker is more concerned about the impact of tariffs not directly on Skyline but on suppliers and retailers. “The entire industry feels somewhat fragile,” she said of the furniture sector, adding that tariff uncertainties have dampened prospects for new domestic capacity investment. “I don’t know anyone who feels confident enough to make an investment that might only last a few years.”

Some investors believe that interest rate cuts and stimulative fiscal policies should help accelerate economic growth this year. “The biggest overall factor determining how well manufacturing performs is how well our economy performs. There’s no escaping that,” said Scott Paul, president of the Alliance for American Manufacturing, which supports tariffs on steel and many products. “It’s too early to tell what the new normal will be because we’ve just come out of that roller-coaster period.”

Editor/Doris

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A Trade Policy to Boost U.S. Manufacturing

The new tariffs imposed last year have thrown a wrench in the gears of U.S. manufacturing (as discussed in Parts 1, 2, 3, and 4). More than half of all imported goods are raw materials, parts and components, and capital equipment used by U.S. manufacturers to produce “Made in America” goods, so it’s no surprise these new taxes have hurt U.S. manufacturers—including in the following ways:

• Higher Costs for Business: Goldman Sachs estimates that manufacturers and other businesses were “eating” 64% of tariff costs in June, but the share being passed on to consumers has now risen to more than 50%. In any event, these new costs mean reduced resources for manufacturers to raise wages or invest in new equipment and R&D.
• Reduced Competitiveness for Exporters: The burden of tariffs means that U.S. manufacturers—whose exports topped $1.6 trillion last year—will find their higher cost structure makes it harder for their products to compete in foreign markets.
• Negative Productivity Shock: Minneapolis Fed economists write that tariffs and trade wars act like an interest rate hike, lowering demand for capital investment. This bodes ill because, in the long term, productivity is the key to industrial competitiveness.
• Small Businesses Suffer: In an October Wall Street Journal/Vistage survey, 51% of small businesses (including many manufacturers) reported that tariffs are decreasing their profitability while just 5% say tariffs benefit them.

It’s plain that tariffs have not been helping most U.S. manufacturers, and 2025 saw declining manufacturing construction, which bodes ill for near-term expansion of the sector. The administration’s laudable pro-manufacturing tax and regulatory reforms will be undermined by ongoing tariffs that make inputs more expensive, exports less competitive, and productivity more elusive.

To correct course, the Chamber has urged the administration to grant exclusions for small businesses, for products not readily available from domestic sources, and in instances where tariffs threaten American jobs. Additional common-sense steps the administration could pursue include:

• Restore the country exceptions and tariff-rate quotas for imports of steel and aluminum such as those established for Canada and Mexico in 2019;

• Restore the product exemptions for steel and aluminum established in the Trump administration’s first term—and create an improved process for firms to seek new ones;

• End the flawed “inclusion” process, where new products become subject to high tariffs with little visibility or effort to assess the potential harm to U.S. industry or consumers;

• Terminate the novel tariffs imposed on Canada, Mexico, and other U.S. free-trade agreement partners;
• Pursue new market-opening trade agreements—on the basis of zero-for-zero tariff reciprocity—so that U.S. manufacturers can sell their products more readily around the globe.

The U.S. Chamber of Commerce has long fought to make the United States the best place in the world to invest, build, hire, innovate, grow, and manufacture. The right trade policies will help American manufacturers and make the United States more prosperous—let’s get to work.

DIG DEEPER: More on tariffs

PART 1: How Tariffs Risk Hollowing Out American Manufacturing

PART 2: How Tariffs Risk Hollowing Out American Manufacturing

PART 3: How Tariffs Risk Hollowing Out American Manufacturing

PART 4: How Tariffs Risk Hollowing Out American Manufacturing

About the author

John G. Murphy

John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.

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Trump meets Intel CEO, hails US-Made Sub-2 Nanometer Chip, links manufacturing push to tariff policy

ANI |
Updated: Jan 09, 2026 08:39 IST

Washington DC [US], January 9 (ANI): US President Donald Trump has hailed chipmaker Intel for launching an advanced semiconductor product manufactured entirely in the United States, calling it a major achievement for American industry and a validation of his administration’s aggressive trade and manufacturing policies.
In a social media post, President Trump said he had a “great meeting” with Intel CEO Lip-Bu Tan, praising the company’s technological progress and its commitment to domestic manufacturing.
Trump stated that Intel has launched the first sub-2 nanometer CPU processor that has been designed, built, and packaged in the USA.
“I just finished a great meeting with the very successful Intel CEO, Lip-Bu Tan. Intel just launched the first SUB 2 NANOMETER CPU PROCESSOR designed, built, and packaged right here in the U.S.A.,” Trump wrote in the post.
The US President also highlighted the financial gains made by the US government through its ownership position in Intel. According to Trump, the United States government is a shareholder in the company and has already earned tens of billions of dollars for the American people in just four months through this stake.
“The United States Government is proud to be a Shareholder of Intel, and has already made, through its U.S.A. ownership position, Tens of Billions of Dollars for the American People – IN JUST FOUR MONTHS. We made a GREAT Deal, and so did Intel,” Trump said.
Trump further asserted that his administration is determined to bring leading-edge chip manufacturing back to America, adding that the progress made by Intel demonstrates that this objective is being achieved.
“Our Country is determined to bring leading edge Chip Manufacturing back to America, and that is exactly what is happening!!!” the President added.
Echoing Trump‘s comments, Intel CEO Lip-Bu Tan also shared a social media post expressing appreciation for the support received from the US leadership.
“Honored and delighted to have the full support and encouragement of @POTUS @realDonaldTrump and @CommerceGovSecretary @howardlutnick as we bring leading edge chip manufacturing back to America,” Tan said in his post.

He added that Intel is now shipping its latest Core Ultra Series 3 CPU processors, which are designed, manufactured, and packaged in the USA using the most advanced semiconductor technology.
“@intel is now shipping the latest Core Ultra Series 3 CPU processors – designed, manufactured and packaged with the most advanced semiconductor technology, right here in the USA,” the Intel CEO stated.
President Trump has repeatedly linked such developments to his administration’s trade policies. Since beginning his second term as President, Trump has pursued aggressive trade measures, including the imposition of tariffs, with the stated objective of boosting domestic manufacturing in the United States.
Trump has imposed tariffs on countries that were major exporters to the US, including India and China.
On India, Trump has already imposed 50 per cent tariffs on goods entering the United States since August 2025.
In another social media post, Trump cited recent economic data to argue that tariffs have strengthened the US economy and improved national security.
He claimed that the United States has recorded its lowest trade deficit since 2009 and that the figure is continuing to decline.
“Numbers released today show that the United States of America has the lowest Trade Deficit since 2009, and going even lower,” Trump said.
He further stated that the nation’s gross domestic product is predicted to come in at over 5 per cent, even after what he described as a 1.5 per cent loss due to a Democrat “Shutdown.”
Trump attributed these outcomes directly to his tariff policies, saying they have “rescued” the US economy and national security. He also urged the Supreme Court to take note of what he described as historic achievements before issuing what he called its most important decision ever.
“These incredible numbers, and the unprecedented SUCCESS of our Country, are a direct result of TARIFFS, which have rescued our Economy and National Security. I hope the Supreme Court is aware of these Historic, Country saving achievements prior to the issuance of their most important (ever!) Decision. Thank you for your attention to this matter! PRESIDENT DONALD J. TRUMP.” (ANI)

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