“Bringing jobs back to America” was a major tag line throughout United States (US) President, Donald Trump’s campaign and continued at the start of his second term. The push to revitalise US manufacturing – particularly in foundational sectors like steel production – has gained momentum as policymakers emphasise economic resilience, job creation, and reduced reliance on global supply chains. However, this reindustrialisation faces significant hurdles, from shifting labour demographics to entrenched consumer preferences for low-cost imports.
The case for domestic manufacturing
Expanding steel production and other heavy industries could anchor a broader manufacturing resurgence. The US possesses abundant raw materials, including vast scrap metal reserves, which could be processed domestically rather than exported. By closing the gap between steel production and consumption, the US could add up to 87,000 jobs (unfortunately at a much higher labour cost point than many of the US’s steel producing counterparts) and boost US gross domestic product (GDP) by $26 billion to $29 billion annually.
Proponents argue that reindustrialisation isn’t just about nostalgia for mid-20th-century factories but about leveraging advanced technologies like automation, artificial intelligence (AI), and sustainable practices. Initiatives like REMADE (a US Department of Energy programme) have already demonstrated success, such as developing thermal spray technologies that repair aerospace components, saving 91,500 tons of emissions annually while adding 2.1 million tons of repairable parts to the supply chain.
The labour paradox
One of the most pressing challenges is the aging workforce. Nearly 25% of US manufacturing workers are over 55, and the median age of a manufacturing employee is 44 – which is older than the national workforce average. As Baby Boomers retire, they take decades of institutional knowledge with them, costing companies an estimated $47 million annually in lost productivity. Younger generations, meanwhile, show mixed interest in trade careers. While 78% of Americans report growing interest in blue-collar jobs among young adults, only 23% of non-trade workers plan to enter the field. This jumps to 50% for Generation Z.
Why the disconnect?
- Perception gaps: Many still view manufacturing as “dirty” or low-tech, despite advancements in robotics, clean energy, and semiconductor production.
- Education mismatch: Traditional institutions struggle to keep pace with rapid technological changes, leaving gaps in critical skills like CNC (computer numerical control) programming, robotics, and data analytics.
- Cultural shifts: Younger workers prioritise work-life balance and job security, which trade careers can provide but are aspects that are not being marketed effectively.
Consumer economy vs industrial revival
The US remains a consumer-driven economy where cost sensitivity often outweighs patriotic purchasing. While 45% of Americans question the value of a four-year degree, reshoring manufacturing faces stiff competition from countries with lower labour costs. For example:
- US manufacturing workers earn over $50,000 annually, compared to $13,000 in China.
- Tariffs and “Buy American” policies struggle to offset these disparities, often leading to automation-driven solutions (and an array of separate economic woes) rather than mass job creation.
Should production return, consumer goods like textiles or electronics may remain cheaper to import, even with added tariffs. High-tech sectors like aerospace and semiconductors offer more viable reshoring opportunities due to their reliance on innovation rather than labour intensity.
Paths forward
- Workforce reinvention:
- Upskilling programmes: Companies like Tesla are investing in partnerships with community colleges to train workers in advanced manufacturing.
- Knowledge transfer: Retaining older workers as mentors or part-time consultants can preserve institutional expertise.
- Media rebranding: Highlighting modern trade careers’ tech-driven, high-earning potential – 10% of current trade workers credit social media for influencing their career choice.
- Supply chain ecosystems:
Reshoring requires rebuilding local supplier networks. For instance, US semiconductor plants still rely on Asian facilities for assembly, creating bottlenecks. Public-private partnerships could incentivise clustered industries, as seen in automotive hubs like Detroit. - Policy and investment:
- Infrastructure modernisation: Upgrading ports, railways, and energy grids would reduce production costs.
- Targeted subsidies: Instead of blanket tariffs, support industries where the US holds competitive advantages, like in green steel production.
- Automation and AI:
Robotics could mitigate labour shortages. For example, fully automated factories in sectors like chemicals or pharmaceuticals require fewer workers but maintain high output.
Reindustrialising the US economy, particularly in sectors like steel, offers tangible benefits but demands a clear-eyed approach. Success hinges on bridging the generational skills gap, modernising infrastructure, and focusing on high-value industries where innovation offsets labour costs. While a full return to mid-20th-century US manufacturing dominance is unlikely, strategic investments in technology and workforce development could secure a more resilient, self-sufficient industrial base.
Market insights
Week’s key themes
- US and the United Kingdom (UK) reach a trade agreement, German DAX reaches new highs.
- Fed reaffirms its data dependent approach with no imminent rate cut in view.
- Brent crude prices edged higher on Friday, approaching $63/barrel and building positive trade talks sentiment.
- Trade optimism and shifting central bank signals have shaped currency markets this week.
Indices buoyed by improved sentiment
Global equities advanced overnight, with the Dow closing at its highest level since early April, while the S&P 500 and Nasdaq also posted gains, buoyed by resilient corporate earnings and a generally positive risk sentiment. However, individual names like tech companies, Arm Holdings and Roblox, saw sharp declines after disappointing guidance, highlighting selective pressure beneath the surface. Markets digested the newly announced US-UK trade agreement – the first major pact since the US imposed sweeping tariffs earlier this year. The deal, celebrated by both President Trump and UK Prime Minister, Keir Starmer, reduces tariffs on key goods like steel and cars but leaves a 10% tariff on most British exports in place. In exchange, the UK will open its market further to American beef, ethanol, and machinery, with the White House estimating a $5 billion boost in US exports. However, the agreement stops short of fully liberalising trade, and some details, particularly around agricultural access, remain unresolved.
In the UK, the FTSE 100 lagged and underperformed its European counterparts after the Bank of England’s (BoE’s) rate cut, while Germany’s DAX hit a new high, buoyed by robust German export data and corporate results, and rallying on hopes of cooling trade tension.
Bond yields reflect reduced probability of rate cuts by the Fed
Yields on the US 10-year Treasury note remained above 4.36% early on Friday, marking a second straight week of gains as traders responded to improving global trade sentiment and a reduced likelihood of imminent rate cuts. The market was buoyed by news of a US-UK trade deal, the first since the recent wave of US tariffs, which President Trump described as a significant step forward. Attention is now turning to high-level talks between US and Chinese officials in Switzerland, with the possibility of easing tariffs on the table depending on their outcome. Meanwhile, US Federal Reserve (Fed) Chair, Jerome Powell, adopted a cautious stance, emphasising persistent inflation risks and signalling no rush to lower rates despite trade uncertainties.
In the UK, the 10-year Gilt yield climbed past 4.5% after the BoE trimmed its policy rate by 25 basis points to 4.25% – its lowest level in two years – following a narrow vote. Policymakers cited progress on disinflation but remained divided over the pace of further cuts. The new US-UK trade agreement also aims to lower non-tariff barriers and provide protections for UK industries.
German 10-year Bund yields edged up to 2.5% as investors digested the Fed’s steady hand and the BoE’s rate decision.
In South Africa, the 10-year bond yield hovered near 11% amid political tensions and fiscal uncertainty.
Oil gets demand-hopes boost
Brent crude prices edged higher on Friday, approaching $63/barrel and building on the previous day’s momentum. The market found support from renewed optimism surrounding upcoming US-China trade negotiations, with investors hopeful that progress could be made between the world’s top two oil consumers. The announcement of a US-UK trade deal further lifted sentiment, while a sharper-than-expected decline in US crude inventories earlier in the week provided an additional boost. Despite these positives, oil’s advance was tempered by concerns over the expanded Organisation of the Petroleum Exporting Countries, OPEC+’s plans to increase output, ongoing uncertainty about the US economic outlook, and speculation that a US-Iran nuclear deal could bring more supply to the global market.
Meanwhile, gold prices slipped for a third straight session overnight, dropping to around $3,290/ounce as risk appetite improved on the back of trade optimism. The prospect of easing US-China tensions and the new US-UK agreement reduced demand for safe-haven assets. The Fed’s decision to keep interest rates steady, coupled with warnings about inflation and unemployment risks, reinforced a cautious policy outlook. Even with recent declines, gold was still set for a weekly gain, reflecting ongoing investor caution amid a complex global backdrop.
US Dollar Index bounces back above 100
The US Dollar Index extended its rally, nearing 101, as traders responded to the announcement of a US-UK trade deal and looked ahead to high-stakes talks between US and Chinese officials. The prospect of further agreements and possible tariff relief for China kept the greenback in demand, especially as the Fed signalled patience on interest rate cuts. Fed Chair Powell highlighted persistent risks to both inflation and jobs, reinforcing a cautious stance on monetary policy.
Elsewhere, the euro found stability just below $1.13/€, with investors weighing the European Central Bank’s hints at potential rate cuts against ongoing trade and inflation uncertainties, and a stronger greenback.
In the UK, the pound hovered near $1.33/£ after the BoE’s narrowly decided rate reduction and the unveiling of the US-UK trade pact, which preserved existing tariffs but opened the door for future cooperation.
Emerging market currencies, including the South African rand, also benefitted from the improved global outlook. The rand approached one-month highs, driven by improved global sentiment and risk appetite while supported by positive domestic developments such as Eskom’s assurances on power supply and new government economic initiatives. Markets are anticipating steady rates from the South African Reserve Bank and a possible easing later in the year. The rand is trading 1.15% stronger against the greenback for the week and is up 1.86% and 1.74% against the euro and pound, respectively.
* Please note that all data is as of the time of writing.
Key indicators:
USD/ZAR: 18.22
EUR/ZAR: 20.47
GBP/ZAR: 24.14
GOLD: $3,322
BRENT CRUDE: $63
Sources: Harvard Business Review, Manhattan Institute, Manufacturing Today, American Iron and Steel Institute, Refinitiv/Reuters and Bloomberg.
Written by: Citadel Advisory Partner and Citadel Global Director, Bianca Botes.