President Donald Trump hopes to bring factory jobs back to the U.S. by imposing high tariffs on foreign manufacturing competitors, but those tariffs can only go so far in encouraging reshoring, analysts wrote in a note Thursday. Instead, they argue, the best path to revitalizing domestic manufacturing lies in automation and the growing accessibility of artificial intelligence.
“A surge in innovation—potentially driven by recent breakthroughs in robotics and generative AI—remains the most likely trigger to reverse the long-term stagnation in manufacturing productivity,” wrote analyst Joseph Briggs and his team.
While China expands its export dominance using automation and low-cost labor, the Bank of America Institute has identified signs of a manufacturing slowdown in the U.S. Among them: U.S. Census Bureau data showing a 6.3% drop in new orders for durable manufactured goods in April, and a declining Institute of Supply Management Manufacturing PMI since March—both pointing to contraction.
America’s productivity slump is part of a broader, two-decade slowdown in global manufacturing productivity. According to Goldman Sachs, this trend stems from reduced investment after the 2008 financial crisis and a tapering off of the early 2000s tech boom.
Trump’s trade strategy with China—including undisclosed new tariffs he’s hinted at—is designed to help the U.S. recover lost ground in manufacturing. But tariffs, the Goldman Sachs analysts say, are not a comprehensive solution. While they may increase consumer prices, they don’t do enough to make U.S. production competitive.
“Tariffs won’t significantly boost reshoring, because production remains much cheaper in many countries—even with tariffs—and China is likely to maintain export growth thanks to cost advantages and supportive industrial policy,” the note explained.
A Shift Toward Automation
Instead, Briggs emphasized, the U.S. needs to address its lag in automation.
A recent report from the Boston Consulting Group’s Henderson Institute found that the U.S. trails other major manufacturing nations in adopting AI on the factory floor. In BCG’s survey of 1,000 manufacturers worldwide, only 46% of U.S. respondents reported using AI for multiple functions, compared to a global average of 62% and 77% in China.
“This is one of the core technologies that could boost productivity in a cost-effective way,” Briggs told Fortune. “We just haven’t seen it take off at scale yet.”
Previously, U.S. manufacturers held back on automation due to caution following the global financial crisis, Briggs said. But now, the increasing affordability and widespread availability of automation and AI offer a real opportunity for change.
Some companies are already adapting. MSP Manufacturing, which makes precision aviation parts, recently adopted AI-powered software that can program machining tools. The switch reduced production time for each part from 90 minutes to just 22 minutes—including 15 minutes of final human input.
“I was like, holy snap, this is going to be a game changer,” said MSP President and COO Johnny Goode, speaking with Fortune. “Cutting down from 90 minutes to 22 is huge, and we’ve seen even more improvement as we’ve learned the software.”