One year after the United States implemented wide-ranging tariffs, an analysis by Morgan Stanley's economic team finds scant proof of broad-based reshoring. Instead, the bank's sector framework indicates firms have largely reoriented supply chains without materially expanding domestic production capacity.
The report measures changes using industrial production, imports and exports across sectors. On that basis, overall import penetration for all goods rose to 33.6% in December 2025 from 32.8% a year earlier. For durable goods, import penetration increased to 43.5% from 42.7% over the same period.
"The data shows reorientation of supply chains is greater than reshoring," Morgan Stanley said, noting that sectors flagged as exhibiting potential reshoring signs contributed about 1.1% to domestic supply growth in volume terms, while sectors categorized as offshoring added roughly 1.4%. In other words, the volume of offshoring outpaced potential reshoring.
Measured in dollar terms, the bank cited Bureau of Economic Analysis and Census data showing U.S. domestic production climbed by just over $100 billion, roughly 1.5%, in 2025. Imports expanded by approximately $150 billion, or about 5.3%, during the same year.
Machinery provided the closest indication of reshoring: imports into the sector declined while domestic output rose. Even so, total domestic machinery supply increased by only approximately 1% in 2025 after flat growth in 2024, leaving the sector's capital stock expansion minimal. Import dependence for machinery remained elevated at roughly 44%.
Steel and iron, which were subject to Section 232 tariffs raised from 25% to 50% in 2025, saw a meaningful fall in imports - down 30.1% - alongside a 6% increase in industrial production. Despite those movements, Morgan Stanley noted total U.S. steel supply edged down slightly at the margin. The report added that U.S. steel prices now trade at about twice Chinese levels and carry a roughly 50% premium over European prices, with the market adjusting through price changes rather than larger domestic volume gains.
Aerospace delivered the largest share of industrial production gains since an October 2024 trough, but Morgan Stanley emphasized that this reflected Boeing's recovery from production constraints rather than the creation of new capacity within the sector.
Perhaps most striking was the jump in import dependence for computers and AI-related goods. Morgan Stanley reported AI-linked imports were running at an annualized rate of in excess of $550 billion, representing about 17% of total U.S. imports, up from single-digit shares two years earlier. Taiwan alone accounted for roughly 40% of those AI-related imports.
Foreign direct investment into U.S. manufacturing also remained below earlier highs, the report noted. Recent annual levels of FDI into manufacturing ranged between $110 billion and $125 billion, substantially below the 2015 peak that exceeded $200 billion, based on BEA figures cited by Morgan Stanley.
Summing up the findings, the bank observed that reshoring entails more than redirecting trade flows - it requires rebuilding domestic capacity, which raises both the cost and time required to expand that capacity. That distinction helps explain why import reliance has grown even as some supply-chain adjustments took place.
Implications and sectors affected
- Manufacturing: Despite some shifts in supply chains, overall import penetration rose and domestic capacity expansion remained modest.
- Steel and metals: Tariff increases corresponded with lower import volumes and higher domestic prices, but overall supply did not expand materially.
- Technology and AI-related goods: Import dependence surged, with a large share supplied by Taiwan.
- Aerospace: Output gains largely reflect a recovery in Boeing's production rather than new domestic investment.
Data sources cited in the report: Morgan Stanley economists referenced Bureau of Economic Analysis and Census data for production, import and export figures, and BEA data for foreign direct investment levels.