Joe Biden drove American manufacturing offshore. Donald Trump is bringing it back. That is the unmistakable message in the latest Institute for Supply Management manufacturing report.
In May, the ISM manufacturing index breached the magic 50 mark for the fifth straight month, signaling expansion across America’s factory floor. The latest reading came in at a robust 54.0 — the highest level since May 2022 and comfortably above expectations.
This is not noise. This is a trend. New orders rose to 56.8. Production remained in expansion at 54.3. Supplier deliveries stayed elevated at 60.6. The rival S&P Global manufacturing index also showed expansion. Across the major indicators, American manufacturing is no longer flatlining. It is waking up.
The reason is simple: President Trump has changed the incentive structure.
Under Bidenomics, the message to manufacturers was clear. Produce offshore. Import into America. Exploit cheap labor abroad. Navigate weak trade enforcement. Absorb higher domestic energy and regulatory costs. Let China and its transshipping proxies in Southeast Asia take the factory jobs while Washington celebrated press releases and subsidies that never fixed the structural problem.
Under Trumpnomics, the message is the opposite. Build here. Hire here. Invest here. Source here. Produce here. Sell into the greatest consumer market in the world from inside the tariff wall rather than outside it.
That is the power of combining tough tariffs with pro-investment tax policy. Tariffs raise the cost of importing foreign-made goods into the American market. Tax reform lowers the cost of building, equipping, modernizing, and expanding factories inside the American market. Put those two together and the boardroom math changes overnight.
That is how you rebuild an industrial base. You do not beg companies to come home. You change the economics so coming home becomes the rational decision.
The result is a powerful new incentive stack. Tariffs punish the offshore model. Full expensing rewards the onshore model. Lower taxes improve the return on domestic capital. Buy American procurement strengthens demand for U.S.-made goods. Deregulation and permitting reform lower the time and cost of construction. Energy dominance lowers the cost of every weld, shipment, furnace, machine tool, assembly line, and factory shift.
This is why capital-goods orders are strong. This is why durable-goods orders have surged. This is why nonresidential fixed investment has jumped. This is why factory construction employment has climbed sharply. This is why capital-goods imports now make up more than 40 percent of total goods imports — a sign that America is importing the machinery, tools, and equipment needed to rebuild production capacity here at home.
As for what looks to be the only “weak spot,” in the latest ISM manufacturing data—manufacturing employment remains below the expansion line—this is simply a sequencing issue. First come orders. Then production. Then capital investment. Only then comes robust hiring.
To put this another way, after decades of deindustrialization, the first stage of a manufacturing comeback will always show up in orders, machinery, construction, overtime, and productivity before it shows up fully in payrolls.
You cannot reverse forty years of offshoring in five months. But in the last five months of the ISM data, you can see the turn.
There is also the matter of a prices index that remains high. Manufacturers are still facing elevated input costs, much of it tied to energy, petroleum derivatives, shipping, and supply-chain uncertainty from the Middle East shock.
The message here for the Fed is “don’t make this worse with a rate hike.”
This is not classic overheating from excessive domestic demand. It is an energy-and-supply-chain problem. A rate hike will not drill a barrel of oil, reopen a sea lane, refine a gallon of gasoline, unload a port, or lower the cost of diesel. It will simply raise the cost of capital for the very manufacturers now trying to expand.
Bernanke and Greenspan understood this. Both refused to raise interest rates into the teeth of an oil price shock. Fed hawks should take note.
Bottom line: The ISM manufacturing index at 54.0 is not the finish line. It is the opening bell. The American factory floor is stirring. The supply chain is shifting. The boardroom calculus is changing. The offshoring model is under pressure.
Now Washington has one job: do not smother the recovery.
