A Valuable Commodity: Manufacturers Look to Benefit from Foreign Interest

Over the past few years, the U.S. government has taken multiple steps to bring the national manufacturing industry back to life. 

These efforts have been a direct response to the dwindling numbers seen in the sector over the course of the early 21st century. 

To the relief of the domestic manufacturing community, we have finally begun to see the benefits of such actions begin to take form across the nation. (More on this topic HERE…) 

Perhaps an unforeseen advantage to reshoring this once thought lost industry, however, is the sizable investments in the industry that have been coming in from our foreign competitor markets. 

Join us today as we dive deeper into these latest findings and what this could mean for the future of U.S. manufacturing. 

The Report

Recently released data from the U.S. Bureau of Economic Analysis (BEA) has shown a massive uptick in foreign investment into the U.S. manufacturing sector. Specifically, funds coming from Europe and Canada. 

The funds are coming into the sector via greenfield investment expenditures, a resource used to establish new U.S. businesses and/or expand existing foreign-owned U.S. businesses. 

Per the report (seen here) U.S. industry overall successfully collected a whopping $177.5 billion in 2022, with expenditures decreasing by $185.1 billion (51%) from $362.6 billion in 2021, coming in below the annual average of $298.8 billion for 2014-2021. 

Of the total $177.5 billion reported, the manufacturing sector saw the largest expenditures for new direct investment, at $55.2 billion, which accounts for 31.1% of the total sum. 

As reported, most overall industry expenditures were from acquisitions of existing businesses, as in previous years, totaling $169.4 billion in 2022. The remaining $8.2 billion or so was divided into expanding existing foreign-owned businesses ($4.4 billion) and establishing new U.S. businesses ($3.8 billion). 

What Does This Mean?

For the U.S. manufacturing community, an increase in foreign investments on top of the funds being relocated into the sector from government entities is certainly not going to hurt the efforts in place to stimulate the industry. 

That being said, some concerns have been raised across the pond that too many enticing incentives out of D.C. will entice European firms to try to relocate their investments to the U.S., stifling the European economy and resulting in a potential U.S. – E.U. trade dispute. 

Such a divide between two allied continents could naturally be bad for both economies and have the potential of developing into a full on “subsidies arms race” per E.U. representatives. 

To help combat these fears, European officials are taking the necessary steps to make sure they too can offer competitive advantages to industries wanting to stay within E.U. borders. 

Despite such European efforts, however, currently, the U.S. is dominating when it comes to offers of incentives for companies looking to relocate or return their business to the United States, which has definitely added some steam to the once struggling U.S. manufacturing industry. 

A Reflection

Much like the basis of capitalism itself, a potential race for business between the U.S. and Europe, though uncertain, has the potential to result in a better and more fruitful economic environment for all involved. 

You see, it’s this type of good old-fashioned competitiveness that leads towards development and growth. And with two of the globe’s largest players finding themselves in a potential self-proclaimed “subsidies arms race” working to entice companies within their borders, the ones who are going to benefit are certainly the companies themselves. 

By taking advantage of the many incentives laid at our doorsteps in the coming months and years, companies, not just in the manufacturing sector, but across the board, certainly have the potential to see expansion and profit opportunities continue to present themselves on a regular basis. 

… And when it comes to the manufacturing industry, we have already seen promising incentives such as tax credits, depreciation benefits put into place for those willing to set up their home base in the United States, with more expected to come. 

In the end, only time will tell whether these efforts will continue to prove fruitful for, not just the manufacturing sector, but the national economic health, in general. 

The Wrap Up

The only thing certain in life is that nothing is certain. That’s the way of the world. 

While we can certainly use our skills and experiences to make educated guesses on certain subjects, they are still just that… guesses. 

One thing we can be sure of, however, is that valuable industries such as the manufacturing sector have definitely taken center stage over the past few years and don’t appear to be giving up the spotlight anytime soon. 

With all eyes on these sectors of the global economy, and all efforts working towards enticing them one way or the other, there are certainly good things on the horizon for highly sought after industries such as the manufacturing sector. 

… And while, as Americans (specifically American manufacturers), many of us do have a bias towards the end results of this good-natured competition, in the spirit of competitiveness, all we can say is, may the best team win! 

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