One year after the United States imposed sweeping tariffs, analysts at Morgan Stanley found limited evidence that American manufacturers have moved production back onshore, with supply chain reorientation outpacing any genuine domestic capacity expansion.
Using a framework that tracks industrial production, imports and exports across sectors, Morgan Stanley economists said the U.S. economy has become more, not less, reliant on imports over the period.
Overall import penetration for all goods rose to 33.6% in December 2025 from 32.8% a year earlier, while durable goods penetration climbed to 43.5% from 42.7%, the report said.
"The data shows reorientation of supply chains is greater than reshoring," the broker said. In real terms, sectors showing potential reshoring signals added only approximately 1.1% to domestic supply growth, while sectors classified as offshoring contributed approximately 1.4%, meaning offshoring outpaced potential reshoring in volume terms.
In 2025, domestic production rose by just over $100 billion, or approximately 1.5%, while imports increased by approximately $150 billion, or approximately 5.3%, Morgan Stanley said, citing Bureau of Economic Analysis and Census data.
Machinery came closest to a reshoring signal, with imports declining and domestic production rising, yet total domestic machinery supply grew only approximately 1% in 2025 after 0% growth in 2024, leaving overall capital stock expansion minimal. Import dependence in the sector remained elevated at approximately 44%.
Steel, subject to Section 232 tariffs raised from 25% to 50% in 2025, saw iron and steel imports fall 30.1% while industrial production rose 6%.
However, total steel supply fell at the margin. U.S. steel prices now trade at roughly twice Chinese levels and carry a 50% premium over European prices, with adjustment occurring through prices rather than volumes, the report said.
Aerospace accounted for the largest share of industrial production gains since an October 2024 trough but reflected Boeing’s recovery from production constraints rather than new capacity, Morgan Stanley said.
Computers and AI-related goods showed the sharpest rise in import dependence. AI-linked imports ran at an annualized rate of over $550 billion, accounting for approximately 17% of total U.S. imports, up from single digits two years earlier, with Taiwan alone supplying roughly 40%.
Manufacturing foreign direct investment into the U.S. remained at $110 billion to $125 billion in recent years, well below the 2015 peak of over $200 billion, the report noted, citing BEA data.
"Reshoring is not simply a redirection of trade flows — it requires rebuilding domestic capacity, which raises the cost & time needed to expand capacity," Morgan Stanley said.
source https://www.investing.com/news/stock-market-news/morgan-stanley-sees-limited-evidence-of-reshoring-after-one-year-of-tariffs-4741039
