Money pours into US manufacturing from overseas companies

{"text":[[{"start":7.72,"text":"Sebastian Montalvo was on a walk with his father when he decided to leave his job as a consultant and start a manufacturing company instead."}],[{"start":15.68,"text":"Montalvo’s father had initially planned to spend his retirement repairing CNC machines — automated manufacturing tools operated by computers. But the two soon realised that with public and private money pouring into the American defence industry, “we wanted to do more”."}],[{"start":33.36,"text":"Three years later, business is booming at the company they founded in 2023, M3 Aerospace in El Paso, Texas, which makes components for aerospace and defence contractors."}],[{"start":44.48,"text":"Defence is not the only US manufacturing sector that has benefited from a surge in investment under the Joe Biden and Donald Trump administrations as Washington seeks to “reshore” manufacturing and cut US dependence on China."}],[{"start":58.44,"text":"Asian tech giants are building advanced manufacturing facilities from Georgia to Indiana and Arizona, while European carmakers are pumping more money into their US production facilities. Meanwhile, hundreds of billions of dollars in AI-related capital expenditure is feeding a once-in-a-generation spending boom."}],[{"start":null,"text":""}],[{"start":77.52,"text":"“We are seeing the greatest reshoring of American manufacturing in our nation’s history,” President Trump declared in a proclamation marking National Manufacturing Day last month, referring to the practice of moving industries back to a company’s home country."}],[{"start":92.96,"text":"According to a monthly survey of US manufacturing companies released by the supply chain association Institute for Supply Management last week, production has expanded for 12 straight months — suggesting US manufacturing should be in rude health."}],[{"start":107.2,"text":"Official data, however, raise concerns. Manufacturing employment has grown by just 0.06 per cent since Trump’s second inauguration in January 2025."}],[{"start":118.701,"text":"US stocks rallied on Wednesday last week after the Democrats’ sweeping victories in midterm elections, amid investor hopes that gridlock in Washington between a Democrat-controlled Congress and a Republican president would limit the wild policy shifts that have characterised Trump’s second term."}],[{"start":null,"text":""}],[{"start":134.6,"text":"But 24 hours later they shed more than $3tn in a day of chaotic trading on fears that the Democratic victory would cool the AI spending boom that has driven Wall Street to record highs this year."}],[{"start":146.252,"text":"US manufacturers are expressing similar concerns to those of the voters who handed the Democrats such a resounding victory, with inflation triggered by the Iran war and tariffs top of their list of grievances."}],[{"start":158.16,"text":"“Economic policies coming out of Washington continue to weigh on business conditions,” a respondent from the fabricated metals sector said in the most recent ISM survey. “Customers are unwilling to make commitments to anything other than the shortest term due to vast uncertainty.”"}],[{"start":174.36,"text":"Susan Spence, ISM chair, noted two-thirds of the responses to the survey expressed negative sentiments, despite the rise in output. “We are in expansion, you don’t dismiss that, but folks are very, very worried,” she says. “Even the positive comments have negativity to them.”"}],[{"start":191.64,"text":"One respondent said: “We keep wondering when the madness will stop. In spite of these challenges, our demand remains strong and the supply chain is getting by, albeit with a lot of work.”"}],[{"start":202.8,"text":"Freddie Sarhan, chief executive of Sapphire Technologies in southern California, has benefited from the surge in demand, specifically from the AI data centre build-out."}],[{"start":null,"text":""}],[{"start":213.08,"text":"Sapphire was founded in 2021 as a clean energy business building turboexpander systems that generate zero-carbon electricity from natural gas pipelines. But after Trump’s return to office, the company adapted its products into compressors to help meet urgent data centre demands for refrigeration."}],[{"start":231.28,"text":"“We are building compressors at scale and we’re planning on doing it all here in the US,” says Sarhan. “We’ve accepted significant orders . . . and are in the process of building a very high-volume production line.”"}],[{"start":243.12,"text":"However, he noted the stress he is under in trying to meet this surge in demand: “The execution piece of that is a miserable existence.”"}],[{"start":null,"text":""}],[{"start":252.48,"text":"Trump has repeatedly attributed domestic manufacturing investments to his aggressive tariff policy. But Sarhan says the volatile application of US tariffs has meant that they were not a sound basis for long-term decisions. “We’ve seen how tariffs have been flip-flopping for months. I’m not making a lot of decisions based on current tariffs.”"}],[{"start":271.16,"text":"Patrick Van den Bossche, a partner at consultancy Kearney and lead author of its annual reshoring index, says tariffs are only one of several reasons why companies have chosen to invest in US production in the years since the Covid-19 pandemic."}],[{"start":284.92,"text":"Factors include rising freight costs, the need to reduce reliance on China, a desire to customise products for American consumers and the imperative of avoiding the kinds of catastrophic supply-chain disruptions experienced during the pandemic."}],[{"start":300.6,"text":"He adds that while domestic production has increased due to the growing US economy, imports have outstripped domestic output as companies continue to rely principally on foreign intermediate goods for their manufacturing operations. “In our definition, that basically means we’re not seeing reshoring at all.”"}],[{"start":319.24,"text":"That does not mean, however, that the US may not see a more broad-based manufacturing lift-off in the years to come. Van den Bossche stresses that many companies are still laying the foundations for a big increase in production, but have either not finished installing the necessary equipment or are waiting for economic and political conditions to improve."}],[{"start":339.56,"text":"“The first step of rebuilding manufacturing is investing in equipment and construction and that has started to happen,” he says. “So now it’s a matter of how and when do we turn that on?”"}],[{"start":351.12,"text":"But to Spence, the ISM chair, the immediate barrier to increasing output is the Iran war: “I can only wonder if we had the [Iran] war over, or super close to resolution, then I feel like the floodgates would open.”"}],[{"start":363.96,"text":"Miles Arnone, chief executive of Re:Build Manufacturing, a Massachusetts-based company that operates facilities across the US, says the “hard work” of rebuilding the foundations of the country’s industrial base is a long and arduous process."}],[{"start":378.36,"text":"For manufacturing in the US to be not only viable but also competitive, he says, companies need to rethink the entire process: from design to prototyping, reconfiguring underutilised industrial assets to introducing AI-powered systems and revamping subcomponent supply chains."}],[{"start":396.36,"text":"“That work won’t flow into the metrics for some years because in the US we’re not used to having a 10-year plan,” says Arnone. “But it’s happening . . . it’s the quiet before the storm.”"}],[{"start":410.68,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794464546_6331.mp3"}