A conventional wisdom that cuts across contemporary ideological lines is that American manufacturing, long the engine of American prosperity, has been laid low by a combination of globalization, indifference to the plight of workers and unfair foreign competition.

In fact, U.S. manufacturing has never been more productive or yielded more output. And while rapid changes in technology, global competition and the declining power of organized labor have undermined the economic stability of less-skilled labor – and entire regions – efforts to turn back the clock are an economic (if not political) dead end. Indeed, to understand what’s happened and what should be done to repair the very real damage requires some historical perspective.

A Capsule History

An underappreciated fact: the industries that powered the United States’ rise in the 20th century, and in turn revolutionized the economies of the world, were born in the Midwest heartland. This cradle of America’s industrial economy, where the oil, aviation, steel, machine tool, consumer durable goods and processed foods industries germinated, also spawned assembly-line manufacturing that ushered in global mass production.

These industries – and autos in particular – sparked the growth of great cities across the upper Midwest and Great Lakes region along with an interdependent network of smaller factory towns sprinkled liberally amidst the region’s cornfields and forests. A highly integrated supply chain providing the inputs of everything from farm machinery to chemicals to pharmaceuticals grew up, stretching from Minnesota through the Great Lakes to West Virginia.

Come the middle of the 20th century and the collapse of war-devastated foreign competitors, U.S. manufacturers, led by giants like Flint, Michigan-born General Motors and Pittsburgh-based U.S. Steel, presided over the economic reconstruction of Europe. But then they had no competition for more than a decade and enjoyed the easy pickings from pent-up post-war domestic demand. As a result, the entrepreneurs who launched these manufacturing empires saw their progeny grow complacent and lose their zeal for quality. Though still churning out lots of product, by the 1970s much of the Midwest’s mighty manufacturing base had degenerated into what self-styled “shoprat” Ben Hamper in Flint called “assembly line anarchy.”

As Hamper wrote in his 1991 book Rivethead: Tales from the Assembly Line – life on the assembly line in post-war “heydays” at GM’s Flint Truck and Bus plant was all about fighting boredom and enduring repetitive tasks with the aid of booze secreted among car parts, along with “doubling up” on jobs to cover for co-workers taking off for their cottages “up-North” or for Mark’s Lounge across the street.

Then the idyll broke. Manufacturing economies in Europe and Asia reemerged, built around quality control and process efficiency and aided by revolutions in transportation and communications that leveled oceans as market barriers. Complacent American companies were forced into a desperate race for survival.

These new global competitors drove a dramatic restructuring of the industrial heartland’s heavy industry. Whole sectors pioneered in the U.S., ranging from electronics to automated machine tools, went elsewhere. The giant car assembly complexes like the aforementioned Flint Truck and Bus, were either shuttered or radically transformed to cut costs and improve quality. And in the process, those armies of shoprats were replaced by platoons of technicians. The region saw once-thriving communities bleed residents and manifest signs of decay – all earning the region the pejorative moniker the “Rust Belt.”

Nostalgia Masks the New Reality

When I arrived in Flint in the early ’90s to work on economic and community development, GM’s local payroll had already dropped from 70,000 to 7,000, and a city built for a quarter million residents was home to less than 100,000. In this environment, memories of assembly-line anomie faded; what remained was nostalgia for the 1950s and ’60s – a nostalgia for what seemed to have been a workers’ utopia, with good jobs for the taking, crowded schools and playgrounds, well-tended parks, soap-box derbies and packed Friday night high school football.

In communities like Flint, which are today trying to conjure a path toward some form of economic and civic renewal, the deepest lament is the loss of high-paying jobs that don’t require much education – jobs that turned out to depend on the splendid isolation of a market in which American manufacturers could profitably sell whatever they wanted to consumers lacking a choice. This same nostalgia informs the pitch made by politicians (including the Trump administration) to residents of the heartland – promises to “bring back manufacturing.” Indeed, this is the pledge that undergirds the current tariff regime and the zero-sum-game trade wars that now engulf the world.

But there can be no bringing back this past. As Scott Bernstein, president of Beta Steel Group in Michigan, put it: “Nothing is the same. Got to be better, smarter, faster.”

In fact, Bernstein was not to be disappointed. While many manufacturers did resist change (or changed too late), others like the Big Three automakers rallied, investing in quality, restructuring production to cut costs, upskilling workers and diversifying into new processes and higher-value product lines. The mists of nostalgia obscure this dramatic restructuring that has been going on for the past 40-plus years.

Truth is, America never really “lost” manufacturing – it has just radically changed. The value-added by manufacturing output has actually tripled since the mid-1970s recession. But there’s no hiding the reality that change came at the cost of social dislocation: of the U.S. total workforce, manufacturing employment has fallen to just 9 percent.

And what of the global market? At 16 percent, the U.S. remains a manufacturing powerhouse, second only to China in its share of global output – a number greater than Japan, Germany and South Korea combined.

Moreover, second place is in many ways better than first: China’s industrial workforce is much less productive than its U.S. counterpart. With value-added of over $141,000 per worker, the United States boasts the world’s most productive manufacturing industry, beating second place South Korea by over $44,000, and China by a whopping $120,000!

However, more productive labor does not automatically mean better-paid labor. Real wages in U.S. manufacturing as a whole began to decline in the early to mid-1970s, largely reflecting the disappearance of the high-wage, low-skill jobs that had been an artifact of U.S. manufacturing dominance and sheltered markets in the post-war decades.

Today, with some exceptions like work in meatpacking (and other jobs native-born Americans increasingly aren’t willing to do), manufacturing jobs are both high-paying and high-tech. The catch: they’re scarce and generally require specialized skills. This is reflected in the dramatic shift over the past 20 years in the occupational mix of people working directly in manufacturing. As the economy recovered from the 2007-8 recession, traditional blue-collar production occupations never came back, while knowledgeworker jobs enjoyed big gains.

Catching Up

Over the past 70 years, even as once-dominant global manufacturing economies regained their footing, new ones including China, South Korea, Mexico and Vietnam began to play a more important role in what became a wildly competitive sector. A key enabler was the increase in economic interdependence based on materials and parts through an increasingly tightly knit global network. Rather than retreat from globalized production, U.S. manufacturers adapted by tapping the massive efficiencies of cross-border supply chains.

While never as isolated as commonly thought, today it is virtually impossible, and certainly would be unprofitable, to sever U.S. manufacturing from the world. For example, smartphones (a U.S. innovation) draw on some 45 countries for components and materials. By the same token, there is no longer any such thing as a U.S.-made automobile – parts often cross in and out of the U.S. some six to eight times before coming together as vehicles ready to drive off the lot.

As a result, tariffs touted by the White House as a means of protecting U.S. manufacturing from competition have the opposite effect. Much of the cross-border commercial traffic hit by tariffs is comprised of materials, parts and components rather than finished products. Indeed, 2025 data show that intermediate goods constitute an even larger portion of U.S. trade than a decade ago, with approximately half of all goods imported into the United States so classified. These imported components are essential for much of so-called “domestic” production. Intermediate goods also make up a significant portion of exports, with industrial supplies accounting for 38 percent of total exports in 2022.

Advanced economies like the U.S. operate in environments in which manufacturers operate an integrated global “co-production” system, with small competitive edges determining whether individual components are in, say, Mexico, Vietnam or the United States. Indeed, it is best thought of as a co-production system powerfully “machined” by competition to deliver the highest quality at the lowest possible cost, which is possible only because of complex international supply chains. Against this backdrop, any spanners thrown in the works – like tariffs that effectively negate comparative advantage – increase costs for everyone.

New analysis from the Economic Innovation Group shows that the Trump tariffs particularly hurt the competitive position of advanced high-tech manufacturing products – defined as those product lines made by a workforce with double the national share of STEM workers. These are sectors like transportation equipment, computer and electronic products, chemical products, machinery and electrical equipment and components – high-value products that the U.S. Midwest specializes in that can deliver the concomitant high wages U.S. workers expect.

EIG found that manufacturers of these higher tech products depend more on imported materials and components than lowtech, low-wage employers. Chemical and pharmaceutical makers import one-third of their inputs and equipment, while transportation equipment manufacturers import more than one-quarter. Higher tariffs on all these inputs will likely increase costs of their product lines for Americans, making these business’ products less competitive in export markets, and hurting these industries’ workers and U.S. consumers alike.

Manufacturing nostalgists forget that our great industries were actually internationalized pretty quickly for the same competitive reasons and realities that exist today. Soon after his game-changing introduction of the assembly line in Dearborn and Detroit, auto pioneer Henry Ford moved some production across the river to Windsor, Canada, to serve an expanding market. Ford initially planned to source auto parts locally, keeping small towns healthy and workers on the land with his “Village Industries” program. But he soon realized this would not work and began sourcing materials globally. Looking for cheap, reliable (and non-imbibing) workers, he also sent boats to Yemen to bring back immigrant workers. This ironically proved to be the vanguard of a Middle Eastern diaspora that now defines Southeast Michigan.

High Wages Only Come from High Value

At this moment in industrial evolution, what we make and sell has to be high-value and high-quality if it is to generate decent wages. This in turn implies that almost all high-paying jobs require substantial skills. Indeed, a study at Georgetown University’s Center on Workforce and the Economy found that 95 percent of all jobs created since the Great Recession required some form of post-high school technical or higher education.

The U.S. and Midwest regions’ impressive productivity gains in recent decades – the massive amount of wealth per manufacturing worker that shows up in today’s data – reflect the fact that constant competition combined with technological change can keep the manufacturing industry thriving. I recently saw the process first-hand on tour with European economic development officials inspecting the state of play of communities and companies across the industrial Midwest.

We visited now thriving, high-tech Pittsburgh (which has rebounded after its steel industry collapsed in the ’70s) as a center of robotics, AI and medical technology. We toured the National Robotics Engineering Center, which is run by Carnegie Mellon University and housed in an old emptied out steel mill. There, researchers told us of their work to automate everything in our lives.

Outside Erie, Pennsylvania, a historic manufacturing hub that has made products ranging from bicycles to massive locomotives, Penn State undergraduates are developing new products and processes for local plastics manufacturers utilizing 3D printers – and collecting patents. In the process they are preparing to transition to good paying jobs with area employers.

In Youngstown, Ohio, another former steel city rivaling Pittsburgh in its heyday, startups are growing out of the Youngstown Business Incubator, part of a federally funded manufacturing innovation hub. Instead of steel, rising firms are making giant machine tools that spit out custom designed precision parts for defense and aerospace uses.

In Cleveland, where the big players in steel and auto parts imploded, a center for medical science research focused on bioengineering is working on artificial body parts under the umbrella of the Cleveland Clinic and Case Western Reserve University. These devices are of course much more valuable than the molds and sprockets produced nearby in the golden decades of Midwestern industry.

In Grand Rapids, Michigan’s legacy furniture makers turn out the highest-tech digitized office environments in the world – equipment befitting the bridge of Star Trek’s Enterprise. Among their products: office equipment purchased by the German Ministry of Information Technology.

Columbus, Indiana, is the home of Cummins, the classic Midwest-factory-town anchor employer and engine company. But unlike many Midwest towns with a dominant manufacturing employer, Columbus is more than holding its own: Cummins is booming thanks to its tireless efforts to lead the industry in energy-efficient green technologies.

These examples confirm what specialists have widely concluded: that America does not need a new policy toward manufacturing. Rather, it needs more nuanced intervention that helps businesses to innovate and, in some cases, that protects the broader economy from structural weaknesses that undermine the country’s long-term security.

The Prospect for Creating (Or Hanging Onto) Good Jobs

Today there is no shortage of recipes floated for the “rebirth” of manufacturing in America. Tariffs and a new protectionism embodied in the Trump administration’s “America First” rhetoric are but one extreme on a continuum. At the other is a new “abundance” agenda in which streamlined regulation and unfettered AI are promised to unleash the gods of growth anew.

But if the real experience of the U.S. manufacturing sector as described here is accurate, neither extreme is on the mark. A pragmatic pro-manufacturing, pro-growth agenda needs to be fashioned from elements that have worked very well for America in the past.

First, give the private sector the leeway to compete on quality and cost in an increasingly interdependent world – and don’t try to put globalization back in the bottle. Meanwhile, accept there is a legitimate (but limited) role for government to promote the national interest through intervention in markets. In particular, government needs to provide “public goods,” whose return cannot be fully captured by private actors. These public goods include, for example:

• Basic research
• High-quality universal education, which today means access to tertiary education for all along with upskilling for workers in transition
• Infrastructure that includes high-quality transportation and communication
• Rules of the road that fairly police competition and protect intellectual property
• Efficient environmental regulation, like taxes on pollutants that minimize direct intervention
• Support for open, rules-based international trade

This is a pretty familiar agenda, but one that has sadly been given short shrift in the teeth of interest group politics, myopic populism and geopolitical competition. More than any nation we have excelled at creating disruptive innovations and technologies that periodically transform the economy, creating whole new business sectors and good paying jobs in the process. Henry Ford did it when he pioneered mass production, which was copied around the world. We’ve done it many times since – think smartphones, GPS and mRNA technology. And we are doing it again now as leaders in AI.

This ongoing innovation process isn’t the fruit of an industrial policy, if by industrial policy one means either picking winners or bankrolling a revival of open-hearth steel mills. An effective industrial policy creates a business environment in which the private sector and the market do their thing, with guardrails against market power and negative externalities ranging from pollution to endangerment of workers.

Nurturing this environment for privatesectorled growth has historically been the United States’ strong suit. America once led the world in providing advanced education for the masses. Think of the creation of the world’s largest network of low-cost public and land grant universities during the 1800s (first built in the states of the heartland), the community college system (first created in Joliet, Illinois, and Dayton, Ohio, to train the workforce demanded by an industrial economy) and programs like the GI Bill.

But sadly, we’ve scaled back on this monumental effort. In particular, America has evaded its collective responsibility to retrain effectively those who are dislocated by trade and automation.

By the same token, we have begun to question the value of government investments in science and cutting-edge technology. After World War II basic and applied research dollars poured from the federal government, bringing game changers ranging from the transistor to the polio vaccine. Now the Trump administration’s populist war on elite universities threatens to throttle the geese that have laid the golden eggs.

Arguably no less important to sustaining our manufacturing competitiveness, America must revivify a relatively open immigration system that has allowed the best and the brightest to flock to the U.S. – bringing their competitive spirit and creative genius. It is no accident that the heights of Silicon Valley are heavily populated by foreign-born founders – or that a disproportionate number of new Main Street businesses in industrial states like Michigan are the work of foreign-born residents.

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This is the real recipe for a striving America and a thriving manufacturing sector that we once animated and that we need to animate again. And contrary to conventional wisdom, government investments that spurred the success of the manufacturing giants did not favor “manufacturing” per se. The most successful government investments, ones that ultimately led to competitive manufacturing, were sector-agnostic.

Look at the two big competitions run under the Biden administration to provide federal funding for non-coastal tech hubs and innovation engines. The winners – many anchored by leading universities across the Midwest and U.S. heartland – are working on advances in, among other fields, quantum computing, advanced materials, energy storage, bioinformatics and advanced sustainable plastics and textiles.

Importantly, these winners are working on innovations of their own imagination and talent – not what the government decides. If there is an element of state direction to these initiatives it is better understood as place-focused policy, bringing economic enablers to the heartland people and places where they are needed the most.

Midwest manufacturing not only survived but has reshaped itself after the dislocation of the 1980s and 1990s, and it has thrived in the decades since the high-water mark for labor-intensive, assembly-line production as seen in Flint’s glory days. Yes, there’s been a substantial cost to the region and to individual workers associated with this rise from the proverbial ashes. But public support for the affected people and places should start with “do no harm” – not with a wasteful, self-defeating effort to turn back the clock.