Episode #3: Economic Detox - Resurgence of U.S. Manufacturing Amidst New Tariffs and Investment Shifts
In this episode of U.S. Manufacturing Today, hosted by Matt Horine and sponsored by Veryable, several major investments and economic shifts in the U.S. manufacturing sector are discussed. Key topics include the potential onshoring of Rolls Royce and a $20 billion investment from Hyundai. Treasury Secretary Scott Bessent has described the current economic shift as a necessary 'economic detox' that favors American manufacturing. The episode also covers the impact of newly announced auto tariffs intended to boost domestic production, a shift from government spending to private market investment, and the pivotal role of mid-size manufacturers and raw material production in creating a sustainable industrial base. Finally, listeners are directed to Veryable’s website for resources and strategies to navigate these significant changes.
Links
Timestamps
- 00:00 Introduction and Episode overview
- 00:16 Major Investments in U.S. Manufacturing
- 01:27 Economic Detox Explained
- 03:42 Impact of New Auto Tariffs
- 05:18 Reshoring Movement and Mid-Size Manufacturers
- 06:14 Transition From Government Spending to Private Investment
- 07:14 Conclusion and Final Thoughts
Episode Transcript
Matt Horine: Hey everyone. Welcome back to U.S. Manufacturing Today, sponsored by Veryable. I'm your host, Matt Horine. Thank you for listening over the past couple of weeks as we're excited to bring up-to-date information and be your go-to hub for US manufacturing and distribution industry news.
Today's episode couldn't be more timely. Just this week, there were several major investments and explorations of investment announced with the potential to onshore names like Rolls Royce and $20 billion worth of investment from Hyundai, including the value chain of that production with a $5 billion steel plant based in Louisiana.
There are a lot of people pointing out that it doesn't happen until it actually does, and hopefully there's a level of accountability that it actually will happen. But not taking these types of commitments seriously at this point, especially from large public companies, is pessimistic hedging at best.
To zoom out on the daily headlines, there's one striking comment that has been made that helps clarify what is going on in the big picture. Treasury Secretary Scott Bessant made headlines by describing the current economic shift as a detox, and a necessary rebalancing.
Here's what we're diving into today, why this economic detox is actually great news for American manufacturing and the middle class, the newly announced auto tariffs, and how they have the potential to supercharge domestic manufacturing.
And the shift from government spending to private market investment fueled by pent up demand, and most importantly, why mid-size manufacturers and domestic raw material production are the cornerstones of a lasting reindustrialization.
Let's start with Scott Besant's recent comments, if you missed it. The newly appointed treasury secretary coined the phrase economic detox this week by describing the current shift as just that. And he's absolutely right, but here's what he meant.
For decades, the U.S. economy has been running on debt and large federal deficits, government spending and offshoring. We've seen it in jobs numbers. We've seen it in a number of reports that just didn't feel right. This artificially propped up growth, but it also created massive imbalances. Wages, stagnated. Actual wages have remained stagnant for decades.
Going back to the eighties and nineties, manufacturing jobs have vanished since the late 1990s. Almost 5 million manufacturing jobs have disappeared, which essentially left once vibrant middle class communities barren.
Government debt has grown to unserviceable levels, usually reserved for national emergencies and wartime level production, domestic production as a product of that has withered. And overall, the middle class, the core of the manufacturing sector was hollowed out by financial speculation and labor realignment.
Now the quote, detox is here. Yes, there are probably some painful elements to it. Upending traditional consumer habits, but truly something that is generational in that the country seems ready to take on short-term pain for long-term gain, higher interest rates, which are flushing out speculative money and forcing companies to focus on real productivity. And government spending is starting to pull back, making way for private market investment to take the lead.
But here's what paves the road. Despite the headlines, there's a huge amount of pent-up demand beneath the surface. What I'm hearing from businesses across the board and in my interactions over the past couple weeks are overregulation has stagnated growth, uncertainty from tax policy to trade, volatility has paused movement and growth initiatives.We're coming off our worst year ever. Everything is upside down and it's the perfect storm of chaos, but we are cautiously optimistic. It will shift back and we've had to scrap everything as part of a cost saving measure, panic, or we had to make cuts.
After years of underinvestment in domestic industry, businesses are eager to expand, invest and scale. And here's the good news. This combination of economic detox plus pent-up demand is creating a perfect storm for a manufacturing resurgence. It's going to reward companies that invest in real production and strengthen the middle class core of manufacturing with better paying sustainable work.
Now let's talk about the big news from this week, the U.S. just announced new tariffs on imported vehicles, particularly targeting heavily subsidized foreign auto manufacturers. Here's why this is a game changer for domestic production. If you look at the brands most impacted by these tariffs, there are a few surprises. You'll see U.S. based producers like Ford and GM scramble to maybe onshore more of their production that has recently been nearshored or offshored into Mexico or other countries. Ford has 77% of its production based in the U.S. while GM has 52%. Those were pretty surprising numbers for me. I didn't know that much of it had been nearshored or offshored, but the companies that will probably see the biggest impact are European automakers, including Mercedes-Benz that has 50% based U.S. production, and other names like Audi and Volvo that are at 0%.
What are the results of this? The U.S. auto plants have shut down over the past few decades, and even U.S. based automakers have moved near or offshore, likely chasing lower labor costs and taking advantage of quote, free trade. Classic auto production. Union jobs were lost, and America's share of vehicle production continues to shrink. It's not really a dynamic around EVs or the types of models, et cetera. It's about returning domestic production and possibly establishing production in the U.S. of some European automakers. These new tariffs could level the playing field. Imported vehicles will now face higher costs. Certainly with price hikes passed along to consumers making domestic production more competitive and more attractive. Automakers like Ford, GM, and Stellantis are already ramping up domestic production plans, investing in new plants, new technologies, and more U.S. based manufacturing jobs.
Now let's zoom out and talk about the bigger reshoring movement that's happening right now. In the last few months alone, we've seen a wave of companies bringing production back to the U.S. with big announcements from companies like Apple. They know it's good business and the right thing to do. But here's the part I want to emphasize. While the headlines often focus on the big corporations, the real story is happening with mid-size manufacturers. These companies are the true backbone of U.S. industry. They make the raw materials, components, and specialty products that drive larger supply chains. And here's why it's going to matter. Reshoring raw material production like steel and aluminum is the key to building a sustainable industrial base. And without it, you're just rearranging deck chairs. Still dependent on foreign sources for the building blocks of industry, but with reshoring raw material production, you create stability and self-reliance. You reduce foreign dependency, and you create more work in the middle class that can't be outsourced. So we've seen a lot of companies that are hedging by diversifying their supply chains. The real answer probably lies in U.S.-based production.
Let's talk about the transition from government spending to private market investment because that is the real detox and the point of today's show.
For years, the economy has been propped up by massive government stimulus pandemic era spending, designed to falsely prop up CPI and use printed liquidity for short-term consumer-centric economic indicators instead of real foundational health. There's been a number of infrastructure bills, which ideally these can be transformed into U.S.-based production stimulation with better oversight and real deliverables, rather than just being large stimulus packages and a constant flow of federal money into industries.
But Secretary Bessent is signaling a pivot and it's a necessary one. As government spending pulls back, private market investment has to step in. The bet on what's driving the private investment is pent up demand on the heels of deflation, which has been happening fairly steadily with prices reducing.
Here's why it matters. After years of supply chain disruptions, companies are finally expanding and investing, and this is going to supercharge, reshoring and drive real long-term economic growth.
So here's the bottom line. The economic detox is real, but it is exactly what we need. Tariffs and reshoring are creating the conditions for a real manufacturing resurgence, but they aren't the only things that are gonna be needed pent-up demand, like many businesses I work with are seeing is the fuel that will accelerate that resurgence.
Mid-size manufacturers, especially those in raw material production, are going to be the cornerstone of the new industrial base.
The shift from government spending to private market investment will build a more resilient, sustainable economy to stay ahead of the curve and to help plan your strategy in this detox.
Please check out our website at www.Veryableops.com and under the resources section titled Trump 2.0, where you can see the framework around upcoming policies and how it will impact you. Our message to you is congratulations. You've survived an era of chaos and atrophy. Keep building. Thank you again for joining us as we navigate this generational change in learning more about how you can make your way.