Given a combination of recent geopolitical and economic events affecting global trade, U.S. manufacturing should be on a roll. But in the past two years, that hasn’t exactly been the case.

The push to reshore production from China and other historically low-cost countries back to the U.S., coupled with disruptions caused by the COVID-19 pandemic, opened the door for a theoretical resurgence of domestic manufacturers. Indeed, the country saw a “strong wave” of investment in new plant construction and capacity expansion between 2020 and 2024, according to Matthieu Kulezak, senior analyst with Interact Analysis, a provider of market intelligence for global technology research.

Since then, however, the momentum toward reshoring has been “clearly fading, with leading indicators pointing to a sharp slowdown in new product activity,” Kulezak writes in a recent post.

He cites findings from the Index of Business Applications for Manufacturing Facilities, showing a “significant weakening” of momentum in early 2025, with a 31.9% year-over-year decline in May of that year. Activity in 2026 has been “mostly flat,” Kulezak told SupplyChainBrain.

So what happened? The latest surge in domestic plant construction was driven in large part by speculative actions by finance, investment and real estate companies, Kulezak says. They were anticipating a flood of demand for new facilities coming out of the pandemic, only to see it sputter out within a few years. Notwithstanding all the talk about the need for shifting production out of Asia and back to the U.S., companies began delaying or scaling back new investments in response to “macroeconomic uncertainty.” 

The trend was seen in factories of all sizes, confirming that “overall manufacturing capacity has weakened, not just small facility construction,” Kulezak says.

Stumbling blocks for investors include rising interest rates and energy prices, resulting in the Producer Price Index for building and renting new factories and warehouses becoming “as expensive as it has ever been.”

The drop in new factory construction doesn’t necessary signal a weakening in U.S. manufacturing overall, Kulezak notes. Instead, the nation’s existing manufacturing base has been able to meet demand largely through expansion and boosting of throughput at existing sites. Kulezak says capacity utilization “stabilized and increased” through 2025. But the trend does suggest that the excitement over reshoring has been tempered to some extent by reality. Even with its own factory wages rising, China continues to be a dominant force in key sectors of global manufacturing. And a good portion of production fleeing China is landing instead in Southeast Asia or, closer to U.S. markets, Mexico.

At U.S. brownfield sites, the key initiative has been growing investment in automation, particularly robotics. Interact Analysis reports “rapid expansion” of mobile robot deployments, suggesting annual growth of 22% to 24$ through 2030. Many industry analysts view automation as essential to any reshoring efforts, given the relatively high cost of U.S. labor over that of China and Mexico.

Kulezak says existing U.S. factory capacity has room to accommodate demand growth. Capacity utilization today “is still fairly low,” he notes. “When industry has a lot of orders, it can add a shift. It doesn’t need new factories.”

While U.S. factory capacity continues to grow, the real action in the American and global industrial sector today is in the construction of massive data centers to support artificial intelligence. In many cases, they’re competing with old-line factories for space, permits and energy resources. That’s where a good portion of present-day real estate speculation is directing its investments.

Kulezak stresses that investment and modernization in U.S. manufacturing remains strong in comparison to a number of other countries. “When you look at orders for new machinery, there’s still demand at the end of the day,” he says. “The total available market for automation is very large in the U.S.”

Even if the American industrial sector isn’t poised to benefit from a mass transfer of production capacity from overseas, total domestic manufacturing output isn’t dropping. Says Kulezak: “A lot of things are still happening.”