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- Should America Rebuild Its Manufacturing Base?
Should America Rebuild Its Manufacturing Base?
The Macro Institute's Weekly Economic Primer
The Macro Institute
January 12, 2026
In partnership with
Don’t have time to watch the whole video? Here’s 5 Key Takeaways:
🔹 The Early 2000s Were The Perfect Storm: The combination of China entering the WTO in 2001, cheap money across the globe following deep U.S. interest rate cuts, and China’s booming working-age population created the perfect environment for companies to start offshoring their manufacturing to China.
🔹 America’s Manufacturing Losses Were Technology Gains: While the U.S. began to fall behind in areas such as auto manufacturing, offshoring these capabilities freed up the energy, time, and capital required to build out America’s enormous technology industry. Would you trade GM for Silicon Valley?
🔹 This Dynamic Changed Once Covid-19 Hit: This tradeoff was working well… until it wasn’t. Supply chain disruptions caused by the Covid-19 pandemic had many companies reconsidering their manufacturing relationships for the first time. Should they re-shore? Diversify? “Near-shore”?
🔹 Common Arguments For Reshoring Are Weak: Arguments that manufacturing is good for jobs or drives productivity are not strong. The manufacturing sector is too small for marginal increases to have a huge impact on the labor market (plus, automation likely further dulls the impact), and the U.S. has outperformed every other economy during the same period in which its manufacturing sector cratered.
🔹 Developing A Framework To Answer This Question: When considering whether or not America should pursue manufacturing capabilities in a certain area we should consider the monopolization risk of that area, the flexibility of that manufacturing capacity, whether or not that capacity is critical for future technologies, and the opportunity cost of developing that capacity.
This video was heavily inspired by Chris Miller’s Does Manufacturing Matter?
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The Macro Week Ahead
📆 Last Week’s Data Key Takeaways
🔹 ISM Manufacturing PMI Stayed in Contraction: The ISM Manufacturing Index fell to 47.9 in December (from 48.2), marking 10 straight months of contraction. New Orders stayed weak at 47.7.
🔹 ISM Services PMI Reaccelerated: The ISM Services Index jumped to 54.4 in December (from 52.6), while New Orders surged to 57.9 and Employment moved back into expansion at 52.
🔹 Trade Deficit Narrowed Sharply: The goods & services trade deficit shrank to $29.4B in October 2025 (down $18.8B). Exports rose to $302.0B (+$7.8B) while imports fell to $331.4B (-$11B).
🔹 Inflation Expectations Ticked Up: In the NY Fed’s Survey of Consumer Expectations, 1-year-ahead inflation expectations rose to 3.4% (up from 3.2%), while 3-year and 5-year expectations both held steady at 3%
🔹 Michigan Sentiment Improved: Consumer sentiment in the preliminary Michigan Sentiment report for January rose to 54.0 (from 52.9). Year-ahead inflation expectations held at 4.2%, and long-run expectations ticked up to 3.4%.
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