Morgan Stanley: tariffs failed to bring factories back to US
A Morgan Stanley note says there is only limited evidence of US factory reshoring a full year after sweeping tariffs took effect. The bank found capacity-spend increases concentrated in semiconductors and defense, while traditional manufacturers have largely held off on new domestic plants.
Morgan Stanley economists wrote Friday that the sweeping tariff package put in place in 2025 has produced only limited evidence of industrial reshoring after a full year. The bank reached the conclusion by analyzing post-tariff capacity-expansion plans tracked by the National Association of Manufacturers. Manufacturers cite higher labor costs and long plant build times as reasons to defer investment decisions.
The note found that most of the additional spending is concentrated in narrowly subsidized segments such as TSMC's Arizona expansion and Lockheed Martin's missile production. Investor appetite in consumer electronics, textiles and light metalworking remains under pressure. The bank stressed that even importers who price tariffs as a cost line are choosing to keep supply chains offshore.
Morgan Stanley said the current backdrop also poses a risk to the Federal Reserve's price stability mandate. Although tariff revenue is highlighted by the Trump administration, hard data on real manufacturing expansion has not yet confirmed the policy thesis. The note flagged the second half of 2026 as the key test window for capital-expenditure decisions.
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