The United States may need to fundamentally transform its industrial base and invest nearly $2 trillion if it wants to reduce dependence on foreign manufacturing and rebuild domestic production capacity, according to a new report by McKinsey Global Institute.
The report, titled “Ramping up manufacturing in America?”, said the debate around “Made in America” has intensified amid rising geopolitical tensions, supply-chain vulnerabilities, and growing concerns over national security and economic resilience.
“’Made in America’ has been part economic policy and part rallying cry for generations,” the report noted. “But the United States has been producing less and less of the global total. In 2000, it was the world’s leading manufacturer. Today, the country produces just a quarter of China’s output.”
While the US remains the world’s second-largest manufacturing producer, the report said globalisation, trade liberalisation, and the rise of lower-cost emerging economies led to a “great unbundling” in which production increasingly shifted overseas while America retained much of the technology and manufacturing know-how.
McKinsey said the issue has now moved beyond economics into the realm of strategic security, as the United States imports nearly $3 trillion worth of manufactured goods annually. Of this, around 25 per cent are considered highly exposed to disruption because they are critical to national security, sourced from only a few suppliers, or heavily dependent on geopolitically distant countries.
The report described these vulnerable imports as America’s “Achilles’ heels,” with products such as semiconductors, smartphones, laptops, rare earth magnets, pharmaceuticals, and advanced electronics among the most exposed.
According to McKinsey, manufacturing of exposed products would need to double on average to fully meet domestic demand. In some sectors, the challenge is significantly larger. For example, the report estimated that production capacity would need to increase more than fivefold for certain pharmaceutical ingredients and more than tenfold for AI servers and advanced electronics.
The report also examined whether the US could simply maximise existing factories to boost output. It estimated that running factories at peak historical capacity could generate an additional $660 billion in manufacturing output.
However, McKinsey cautioned that such gains would do little to address the country’s biggest strategic vulnerabilities.
“Running today’s factories at peak capacity would generate $660 billion more in output — but hardly touch the biggest exposures,” the report said.
The additional production would largely come from sectors such as transportation equipment, metals, chemicals, plastics, rubber, wood, and paper products, while highly exposed sectors like electronics would still remain heavily dependent on imports.
McKinsey argued that replacing vulnerable imports would require an industrial expansion with “no global precedent,” noting that even China does not currently produce all the categories of exposed goods at the scale the US imports them.
The report estimated that manufacturing exposed imports domestically, along with rebuilding the upstream supply chains needed to support them, could require approximately $2 trillion in capital expenditure, equivalent to around 6 per cent of US GDP.
It added that financing alone would not solve the challenge. The transformation would also require skilled labour, infrastructure, energy availability, and faster regulatory approvals.
“Nothing will happen without a business case,” the report said, adding that rebuilding manufacturing competitiveness would involve trade-offs, prioritisation, and new approaches to technology, automation, and workforce development.
Published on May 29, 2026
