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From steel and pickup trucks to semiconductors and medical equipment, it seems that every day there is another announcement of manufacturing coming back to or expanding in the U.S. In fact, capital investment in U.S. manufacturing has tripled since the COVID-19 pandemic, reaching over $11 trillion invested since 2020.
But where has all this capital investment gone? As noted in the 2026 Reshoring Index, from Kearney, a leading management consulting firm with 100 years of impact across industries, manufacturing capacity increased by only 1.5% during the same period. This metric is part of the larger findings from this year’s report, which explores how manufacturing imports actively increased over the last year, despite tariffs and trade policy uncertainty.
In fact, according to the Reshoring Index, overall U.S. imports of manufactured goods increased by $133 billion between 2024 and 2025. Why is this happening when there has been so much domestic investment in manufacturing? And, why hasn’t capacity kept pace with that level of investment? When we look into the details behind the numbers, it reveals a more nuanced picture of the state of U.S. manufacturing today:
Imports grow despite capital investments
The Kearney Reshoring Index showed year-over-year improvement, with the latest data moving from -115 to -86. This remains negative, however, with imports from 14 Asian low-cost countries and regions (LCCR) increasing by $60 billion in 2025. This may seem surprising given the levying of tariffs starting in Q2 of 2025, but the data shows that while imports from Mainland China fell from Q2 through Q4, those from 13 other LCCRs, including Thailand, Cambodia, and Vietnam, increased during the same period.
The Reshoring Index also found that manufacturing gross output (MGO) in the U.S. remained flat (-0.4%). MGO destined for export increased slightly, while the amount for domestic use declined, suggesting that Americans are buying fewer goods made in America. These data points are at odds with both the trade policy goals and the level of manufacturing construction we’ve seen over the last year.
Manufacturing capital spending rose to nearly $224 million per month in 2025, yet capacity only increased by 1.5%. Why are we seeing this disconnect between investments in factories and facilities and actual production?
“It’s a combination of factors,” says Patrick Van den Bossche, Partner and former board member with Kearney. “Only about 50% of the investments were to add capacity, whereas the other half were intended to modernize and/or replace existing capacity,” he explains.
Challenges to capacity expansion
As Van den Bossche notes, the enormous investments in manufacturing construction weren’t all dedicated to new capacity. According to the European Investment Bank (EIB), 48% of capital investment in recent years went to capacity replacement, not expansion.
The emphasis on replacement is understandable given that the average age of industrial fixed assets in the U.S. is nearly 25 years — the oldest average for industrial equipment in decades. But, this means that many producers are modernizing their equipment just to remain competitive and may not be adding net-new capacity.
Investment in such net-new capacity takes time to ramp up, of course, so new production facilities are often still being brought online, long after announcements are made. This is especially true for precision industries like semiconductors and pharmaceuticals. For many other industries, timelines for new capacity lengthened unexpectedly due to material and labor shortages, permitting delays, and other challenges.
“There have been several cases where new equipment was installed, but business conditions didn’t warrant turning it on because, for example, finding labor proved harder than expected,” Van den Bossche says.
These on-the-ground realities demonstrate that while reshoring is a priority for many manufacturers, it isn’t a change that happens overnight.
What the investment data reveals
What will it take for MGO to match, or at least come close to, the recent investments in capacity? Several short- and long-term factors will influence how reshoring efforts develop:
- Economic and policy stability: The latest Reshoring Index notes that industries such as Food, Beverage & Tobacco, Chemicals, and Electrical Equipment, Appliances & Components have relatively low barriers to reshoring. These and several other categories do, in fact, show signs of reshoring. Similarly, most U.S. manufacturing operations depend on materials and components from abroad, particularly Asian LCCRs. For all of these manufacturers to feel comfortable turning on new equipment and increasing their capacity, they need clarity and stability in economic and trade policies.
The Reshoring Index notes, “In an environment of uncertainty and with affordability pressures top of mind, companies favored reversible moves.” These have included building inventory and modernizing equipment; with greater predictability, they may be empowered to make the leap to expansion.
- Addressing persistent labor challenges: The National Association of Manufacturers (NAM) has repeatedly listed labor availability, particularly of skilled labor, as one of the biggest structural hurdles to long-term growth and competitiveness. For years, manufacturers have looked to automation as the way to address worker shortages, but this only goes so far.
“Automation helps insofar as there is enough skilled labor to run automated operations,” Van den Bossche says. “That has been a pinch point as well, so, paradoxically, automation can worsen the labor shortage.”
Investments in the workforce, from training and collaboration with educational institutions to offering competitive pay and benefits, will remain critical levers for developing the talent needed to operate at current capacity and support any future expansions.
Resolving these challenges will be vital to turning the impressive investments in domestic manufacturing into net-new capacity and overall growth.
The road ahead for manufacturing capacity
While the disconnect between capital investment and manufacturing capacity is concerning, it could also bode well for reshoring overall, as latent capacity could translate into greater manufacturing growth over the next few years. More certainty in trade policies will be critical, along with reskilling and labor market improvements.
“The Institute for Supply Management has been reporting eight consecutive months of expansion in its Manufacturing PMI since the start of 2026, which indicates that active capacity is running hot,” Van den Bossche says. “Provided that companies find sufficient labor, it’s likely that at least part of the investments that have reached the final stages of completion will be turned into new capacity. The extent to which we see more clarity and stability will still be a major factor in how fast it happens,” he says.
The pieces are in place for greater reshoring and growth in U.S. manufacturing, as the Reshoring Index makes clear. With 2027 just around the corner, we’ll determine whether this potential becomes reality.
To learn more, read Kearney’s 2026 Reshoring Index or contact the team at Kearney.
