If you’ve been following the news, you’ve likely heard the constant tariff talk putting companies and consumers on high alert.
After COVID crippled supply chains in 2020 and 2021, causing product shortages, long lead times, and a fight for resources. But many industries also learned important lessons.
Today, rising tariffs could pose similar problems. As a result, more companies are exploring options to bring manufacturing home from overseas. Onshoring manufacturing does several things to improve the supply chain for critical products and wary industries, including:
Reshoring isn’t always perfect, but it’s an option for tariff-impacted companies.
But with so much effort spent on bringing manufacturing operations home, could companies unknowingly create another problem?
According to the Bureau of Labor Statistics (BLS), April’s unemployment rate was a robust 4.2%. Meanwhile, manufacturing employment has been steady for several months, though is down slightly since 2024.
Unfortunately, manufacturers already face a labor shortfall. Global professional services firm Deloitte estimates a 1.9 million worker gap in U.S. manufacturing. If true, adding manufacturing plants will only compound the issue.
Other employment data sources are less bad, but still not great. For example, Chamber of Commerce data shows 622,000 total manufacturing job openings. Similarly, Citi reported in December 2024 that we could need as many as 3.8 million workers by 2033. In their worst-case scenario, half of those jobs go unfilled.
Open jobs can lead to lost value across the board, including less production and fewer sales. Deloitte’s data suggests that the economy could lose $1 trillion due to unfilled manufacturing jobs.
With so many plates spinning, what should manufacturers consider before bringing operations home?
If there is a worker shortage, employees will inherently cost more to hire and retain. American workers also earn higher hourly wages compared to workers in other countries, adding to production costs.
Manufacturing also faces a culture crisis. In recent years, the industry has faced a stigma associated with boring, tiring, dirty, dangerous, and low-skill work. Although this short-sighted view of factory life isn’t always true, it’s still tough to break the perception others may have. Simultaneously, technology use has exploded, opening doors for younger people in other skilled labor positions.
Manufacturers also have the option to invest in automation, including artificial intelligence (AI). Rapidly improving automation technologies can boost production speed and processes with fewer human employees– for a cost.
Moving production back to the U.S. requires long-term solutions that reduce labor costs while limiting supply chain disruptions. Could AI and automation realistically be a solution?
When manufacturing jobs left the U.S. for other countries several decades ago, low-cost labor was a contributing factor.
The U.S. manufacturing industry reached its pinnacle in 1979 with 19.5 million employees. Since then, industry employment has fallen precipitously, bottoming out in 2010. As the country recovered from the Great Recession, manufacturers added jobs, reaching about 12.8 million employees by 2019. Soon after, the COVID-19 pandemic began.
Jobs have returned to 2019 levels, including about 407,600 people in electrical equipment, appliance, and component manufacturing. But will global shifts in the labor market lead to a domestic manufacturing boon?
Labor costs have risen in overseas countries, making reshoring operations more alluring for producers.
Still, manufacturers face several labor problems, and unsurprisingly, it largely comes down to money.
According to PwC data, China’s wages have increased 83% in the last decade. The rise is steep compared to a 3% increase in U.S. wages over the same period.
U.S. Fed Data tells a similar story, showing a constant, steady rise in hourly wages. The increase follows trends in other industries as employers track inflation and market conditions.
Of course, even with manufacturers paying more for overseas labor, it’s all relative. Data from Wells Fargo suggests U.S. workers are still earning far more per month than those in other countries, including:
As jobs come home, companies must try to protect the bottom line without charging higher prices.
In a country with 340 million people, there aren’t many people who aren’t working.
BLS data from April 2025 showed 7.1 million people out of work. Even if all of them took manufacturing jobs, we’d still fall short of what we’d need to meet 1970s employment levels.
Wells Fargo’s data goes one step further. The company says restoring manufacturing to 1970s levels, where 22% of jobs were in manufacturing, would require 22 million more workers. This comes with the caveat that those employees aren’t coming from other industries to fill jobs.
While not having enough people to fill anticipated jobs is one problem, luring them into the industry is another.
Remember when we highlighted the cost of labor in the U.S. versus overseas? Although U.S. workers earn more than their foreign counterparts to produce goods, the pay is still low compared to other industries. Unfortunately, that makes manufacturing jobs tough to recruit for, especially compared to flashier careers in booming industries like tech.
Face it, higher domestic labor costs inherently lead to more expensive goods and services.
Although companies can realize cost savings with shorter supply chains, consumers must support the idea, too. As Afina, a showerhead manufacturer, learned, the Made in America movement still faces price hurdles.
When Afina presented customers with Chinese products or U.S.-made ones at a higher price, customers overwhelmingly chose the lower price. This is only one example, but Integris data shows price is a deciding factor for most Americans.
American-made goods are often more expensive than foreign options, largely due to labor. However, with the ongoing tariff tango, rising import costs may push foreign products closer to their American counterparts.
With prices rising for many items, including daily staples, our dollars don’t go as far. Made in America then becomes a luxury rather than a must-have, especially for those with limited budgets.
Given the current situation, artificial intelligence and automation could potentially help.
First things first, the idea behind AI and automation is NOT to replace people. Instead, the technology should find ways to augment production methods and bolster productivity with fewer people.
Of course, automations have their own risks. For one, manufacturers replace long-term labor expenses with high upfront costs to buy and install machines. Secondly, while machines don’t take breaks like their human counterparts, they do need maintenance and repairs. Those jobs require highly skilled and highly paid labor to monitor, repair, and upgrade machines.
A great way to reduce labor costs is to hire and keep good employees, and that starts with getting them in the door.
Automations don’t mind dangerous, repetitive, or boring tasks, making manufacturing jobs safer and less demanding for humans. When prospective employees can focus on rewarding and challenging work, it’s easier for companies to attract talent.
Once hired, AI enables employees to train quickly and thoroughly. Throughout the day, machine learning and AI are constantly pulling and compiling information from experienced employees. Over time, the data becomes educational material for specific tasks with information from top-performing team members.
Machine learning is also pivotal for improving initial training. Systems can use real-time data and historical information to teach new employees their jobs. With a better handle on the manufacturing process, companies train employees more efficiently.
Finally, AI’s focus on collecting and dispensing information comes in handy when things break down. The technology can help employees troubleshoot issues using data to identify what went wrong and when.
With potential labor shortage concerns looming, it makes sense to supercharge productivity as much as possible.
Artificial intelligence is more than happy to take on low-skill, repetitive tasks with little human oversight. The automated machines not only move quickly but maintain high levels of consistency while doing it. As a result, they can produce constantly high-quality work 24/7 with only routine maintenance. In the meantime, team members can focus on more important work.
But as the 1980s hair band Poison once astutely noted, “Every rose has its thorn.” Automation systems and robots aren’t cheap, and the upfront costs can be daunting. Manufacturers also need engineers and mechanics to perform machine fixes and upkeep. Companies may balk at these expensive employees, but automation cost savings and other factors may offset those expenses.
Artificial intelligence and machines are great for crunching numbers, analyzing data, and performing simple tasks, but they still need help.
Complex data programs and automated robots can make us more productive, but they rely on good inputs. For example, robots have been mainstays on the automotive production line for decades but are still largely semi-autonomous.
Other things to consider are that manufacturing facilities aren’t the same as tech companies. While it’s possible to have robots write code and repair software bugs, it’s harder to replace people with critical thinking skills.
However, jobs like material handling could improve with AI. Material handling can be up to 50% of a factory’s operations costs, but automated systems may reduce expenses over time.
The truth is that manufacturers might have a few good reasons to jump into domestic production feet-first.
Automation and machines may be the tipping point for companies on the fence about bringing operations home. In a way, AI and machine learning could serve as the catalyst for investment.
Companies leaning into the automation-first mentality could easily integrate rapidly evolving technology into their operations.
Some companies are exploring domestic manufacturing, but there are still several unknowns beyond finding workers, including:
Time will tell, but we likely won’t have answers for a few years. For now, every solution is worth exploring, and the sky is the limit.