Putting US Manufacturing on High Gear: Are Moldmakers Caught in the Middle?

Efforts by the Trump Administration to revitalize

US manufacturing—through increased domestic investment and import substitution—have drawn no shortage of critiques. These range from academic and theoretical explanations of how the US lost manufacturing competitiveness over time to more practical concerns that the country lacks the necessary labor to support a higher level of manufacturing activity. This article explains the requisites for expanding the domestic manufacturing footprint and what moldmakers must consider in response to the evolving landscape.

Manufacturing’s Relevance in the US Economy

There are different ways of measuring the significance of manufacturing in the economy. One can look at the value added of manufacturing as a share of gross domestic product (GDP). This is the value of a producer’s output minus the value of intermediate goods and services consumed in production in relation to GDP.

Table 1 shows that 69.6% of the US imports of manufactured goods in 2023 originated from 10 countries. As shown in the table, the imports increased from 2000 to 2023. The imports of manufactured goods from Vietnam saw the largest increase of 29.3% compounded annual growth rate—the highest growth. While Japan continued to be an exporter to the US of manufactured goods, its share of US imports has not changed since 2000.

One can assume that these countries export manufactured goods significantly to the US because they are manufacturing-oriented countries, which means their manufacturing value-added as a share of their GDP are higher than the U.S. Table 2 shows that these countries’ manufacturing value added as a share of GDP were higher than the US Also, US manufacturing value added has declined from 15.1% in 2000 to 10.2% in 2023.

 

The extent of manufacturing in the economy can also be analyzed from the share of employment relative to the total labor market. In the US, in 2000-Q1, the total number of employees in the manufacturing sector was 51.9 million. In 2024-Q1, it was 38.3 million. Total non-farm employees grew from 131.6 million in 2000-Q1 to 159.3 million in 2024-Q1. This tells us that the share of manufacturing employment in the US economy shrank from 13.2% in 2000-Q1 to 8.1% in 2024. This is an indication that manufacturing's share in the US economy has decreased, all things equal.

Taking the impact of technology on manufacturing shows that despite the reduction in labor as a component in manufacturing, US manufacturing activity has managed to remain stable in recent years, except during periods of recession. Manufacturing in the US has been producing with a lower labor component than in prior years. Also, using the Plastics Industry Association’s estimates on mold production and employment shows that moldmaking has been supported by a smaller number of workers, and at a downward trend, compared to recent years.

Charts 1 and 2 underscore that US manufacturing today is different from 25 years ago. It has more mechanization, automation, robotics, and, most recently, building AI tools to mine production and machine run-time data, as part of their daily operational strategy to maintain productivity targets and efficiency.

It has been repeatedly stated that the US faces a labor shortage in manufacturing. Indeed, as shown in the charts above, the total number of manufacturing employees has declined.

However, according to US workforce data from the Bureau of Labor Statistics, the number of individuals working part-time for economic reasons was 4.5 million in June this year, down from 6.4 million 10 years prior. This decrease could be partly attributed to demographic factors, such as aging, retirement and a portion of workers transitioning to full-time employment.

In addition, over the past three years, an average of 5.5 million people per month wanted a job but had stopped looking for work. In June, the unemployed—defined as workers who are available and seeking employment but have not found a job—totaled 7.0 million. Collectively, these figures indicate a US workforce of approximately 17.5 million potential workers in June. The challenge lies in engaging these individuals in today’s manufacturing sector, which differs significantly from the manufacturing landscape of 20 years ago.

Fiscal policy through tax incentives and direct investments across supply chains can boost tooling and moldmaking capacity, especially for small and medium-sized businesses.

Supportive Policies for Manufacturing

Even before President Trump’s second term in office, prominent institutions such as the International Monetary Fund (IMF) and Harvard University analyzed the resurgence of industrial policy in the US. These government actions are designed to shape economic structures and enhance the competitiveness of specific sectors.

In June 2024, Harvard’s Institute for Business and Global Society examined whether the US was experiencing a revival of industrial policy. The discussion highlighted the CHIPS and Science Act as a pivotal milestone, representing the most significant re-emergence of industrial policy in the US since World War II. This legislation underscores robust government support for strategic sectors to advance national priorities.

According to a report from IMF economists, industrial policy has experienced a global resurgence, with over 2,500 interventions recorded worldwide in 2023. The data reveals that major economies, particularly China, the European Union and the US, accounted for nearly half of these initiatives. The analysis further indicates that advanced economies have been more proactive in implementing industrial policies compared to emerging markets and developing nations.

Trade Policy

A US industrial policy is unlikely to achieve its reshoring objectives solely through broad-based high tariffs. Over the years, the US liberalized its international trade regime, opening its markets more extensively than many of its trading partners. While the US embraced free trade, many of its trading partners maintained protectionist policies, creating persistent imbalances. Even so, trade remedies should be used when products are dumped into the US market. Many of the equipment and components used in manufacturing are no longer produced domestically and rebuilding that capacity will take time.

So, a combination of short-term and long-term strategies is needed to strengthen manufacturing’s value-added contribution to US GDP. Trade deals (precursors to trade agreements), which include investment commitments in US production like the U.S.-Japan trade deal, are an important part of this effort. However, such investments must offer higher returns to remain attractive in a high-interest rate environment.

Monetary Policy

The ongoing high interest rate in the US, against the backdrop of moderating demand, does not support the goal of higher US manufacturing. Investment spending must increase to boost domestic production. And this is less likely to happen at high, rather than low, interest rates.

Considering that monetary policy is not a tool geared toward specific industries, but rather macroeconomic in nature in terms of its goals—full employment and stable prices—the Federal Reserve is unlikely to change interest rates with the manufacturing sector solely in mind. So, the growth in manufacturing tends to be procyclical (it expands when the economy is expanding), notably supported by lower interest rates. Currently, all eyes are on the Federal Reserve to see whether it will cut the Fed funds rate this year. Two rate cuts are still projected this year.

Fiscal Policy

The One Big Beautiful Bill Act (OBBBA), which includes significant tax, spending and policy changes, could positively impact US manufacturing. Notably, it makes permanent the 100% first-year bonus depreciation for qualified property acquired and placed in service before January 1, 2029, and restores businesses’ ability to immediately deduct domestic research and experimental (R&E) expenditures paid or incurred after December 31, 2024. Small businesses (defined as those with $31 million or less in annual revenue) can apply for this R&E deduction retroactively to expenditures paid or incurred after December 31, 2021.

Are Moldmakers Caught in the Middle?

US mold builders have steadily lost market share to imports over the past decade from low-cost producers abroad. While higher tariffs on imported molds could help level the playing field and support US companies, the broader tariff regime presents a paradox. Moldmakers use materials and components like specialized steel and precision components that are also subject to tariffs. This raises product costs for US firms and undercuts the very competitiveness that tariffs are intended to protect.

This dynamic raises a broader question: How can the U.S. achieve its goals of strengthening domestic mold manufacturing when trade policy introduces internal contradictions? Moldmakers’ quoting activity likely increased recently, as the latest GBI molds data shows the Future Business Index averaging 62.5% over three months — well above the 50-point expansion mark.

With the details of the current US trade policy continuing to evolve, additional work is required to distinguish between protecting finished products and penalizing essential inputs. Target tariff relief or exemptions for key inputs could ease cost pressures for moldmakers without abandoning the goal of reshoring production. Fiscal policy through tax incentives and direct investments across supply chains can boost tooling and moldmaking capacity, especially for small and medium-sized businesses.

While monetary policy has more limited sector-specific impact, it plays an important role in maintaining supportive financing conditions for manufacturing capital investment. This results in new projects that drive demand for moldmaking equipment and technology upgrades.