A year after the US imposed massive tariffs, Morgan Stanley analysts found only limited evidence of manufacturing returning home: the reorientation of supply chains is significantly outpacing the actual expansion of domestic capacity.

Using a methodology for tracking industrial production, imports, and exports by sector, Morgan Stanley economists found that over the period under review, the US economy became more, not less, dependent on imports.

According to the report, the overall share of imports in goods consumption increased to 33.6% in December 2025 from 32.8% a year earlier, and for durable goods, it rose to 43.5% from 42.7%.

"The data suggest that supply chain reorientation is prevailing over reindustrialization," the bank noted. In real terms, sectors showing potential signs of reshoring accounted for only about 1.1% of the increase in domestic supply, while sectors offshoring accounted for about 1.4%, meaning offshoring outpaced potential reshoring in volume terms.

In 2025, domestic production grew by just over $100 billion, or about 1.5%, while imports increased by about $150 billion, or 5.3%, Morgan Stanley reports, citing data from the Bureau of Economic Analysis and the U.S. Census Bureau.

The machinery industry showed the closest signs of reshoring: imports declined, while domestic production increased. However, total domestic supply of machinery and equipment increased by only about 1% in 2025 after flatlining in 2024, leaving the overall expansion of the capital stock minimal. The industry's dependence on imports remains high at about 44%. In the steel sector, which is subject to Section 232 tariffs, which were increased from 25% to 50% in 2025, iron and steel imports fell by 30.1%, while industrial production grew by 6%.

However, overall steel supply has declined. US steel prices are now roughly double those in China and 50% higher than those in Europe, with adjustment occurring through pricing rather than volume, according to the report.

The aerospace industry has accounted for the largest share of industrial production growth since the October 2024 low, but this reflects Boeing's recovery from production constraints rather than the creation of new capacity, Morgan Stanley notes.

The sharpest increase in import dependence was recorded in the computer and artificial intelligence-related goods sector. AI-related imports reached an annual rate of over $550 billion, accounting for approximately 17% of total US imports, up from single digits two years ago. Taiwan alone accounts for approximately 40% of these supplies.

Foreign direct investment in the US manufacturing sector has remained at $110–$125 billion in recent years, significantly below the 2015 peak of over $200 billion, according to the report, citing data from the Bureau of Economic Analysis.

"Reshoring is more than simply rerouting trade flows: it requires rebuilding domestic capacity, which increases both the costs and time required to expand it," Morgan Stanley emphasized.