Donald Trump’s tariffs and deregulation are driving foreign investment into US manufacturing, but the investment surge is exposing major gaps in domestic supply chains. The Trump administration is working with foreign investors and small businesses to expand the US supplier base and ensure manufacturers can access the components and equipment they need
Donald Trump’s push to revive US manufacturing is attracting foreign companies with deep pockets, but a shortage of domestic suppliers threatens to become a weak link in the administration’s industrial revival.
US President Donald Trump’s tariff-driven effort to rebuild American industry is pulling in new waves of foreign investment, but officials now acknowledge that the country’s manufacturing base lacks a critical ingredient: enough domestic suppliers to support the factories being built.
US officials said the administration is actively working with foreign investors to map gaps in supply chains and help small and medium-sized American businesses scale up production to meet rising demand.
Assistant Secretary of the Treasury Chris Pilkerton and Small Business Administrator Kelly Loeffler told Reuters Trump’s tariffs on imports, combined with deregulation, were encouraging global companies to shift manufacturing and capital into the United States.
But Pilkerton cautioned that investment alone would not be enough to rebuild industrial capacity.
“It’s one thing to speak about supply chains at a high level. I think everybody wants it, but you know, you need to find the parts,” he told Reuters.
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The comments came during a visit to the historic Philadelphia shipyard now owned by South Korea’s Hanwha Ocean and Hanwha Group, which completed its acquisition in December 2024.
The deal was reviewed by the Committee on Foreign Investment in the United States (CFIUS), which is chaired by Pilkerton.
Hanwha Philly Shipyard CEO David Kim told Reuters the company has committed to investing $5 billion in the facility over the coming years, a move that could raise employment from about 2,000 workers to as many as 10,000.
The company has already invested more than $200 million to upgrade workforce training, production systems and shipbuilding capacity.
But the expansion also highlights a broader structural issue facing Washington: large-scale foreign investment brings capital and jobs, but also requires a deep and reliable network of US-based suppliers.
Kim said the shipyard depends on more than 1,000 suppliers to build a single large vessel, with roughly two-thirds currently based in the United States.
That share could rise as production increases and the company introduces artificial intelligence-based shipbuilding technologies already used in South Korea.
Washington wants small businesses to fill the gaps
To address the shortfall, the Trump administration is now trying to strengthen the domestic supplier ecosystem so that foreign-backed manufacturers can source more components within the US.
Pilkerton said he has launched a new “Strategic Vendor Program” designed to identify supply chain gaps and support domestic firms capable of filling them.
The programme is still in a pilot phase, and detailed criteria for selecting vendors have not yet been released.
He pointed to a recent visit to a quantum refrigeration company in Syracuse, New York, acquired by Finnish firm Bluefors, as an example of the challenge.
Executives at the company told him they had been unable to find a US-based supplier for dry compressors, a key component in their systems.
The case underscores a central limitation in Washington’s strategy: tariffs may encourage companies to manufacture in the US, but they do not automatically rebuild the complex network of component suppliers needed to sustain industrial production.
Tariffs alone cannot rebuild supply chains
Reviving US manufacturing has become a cornerstone of Trump’s economic agenda. His administration is using tariffs to make imports more expensive and push companies toward domestic production, while deregulation is intended to lower the cost of investing in the US.
But officials acknowledge that rebuilding supply chains will take time.
Modern manufacturing depends on extensive supplier ecosystems, ranging from specialised machinery and industrial inputs to precision components. If those inputs are not available domestically, companies may still rely on imports, limiting the effectiveness of tariffs.
The administration is therefore pursuing a dual strategy: attracting foreign manufacturers while simultaneously trying to expand the US supplier base that supports them.
Pilkerton also said the administration is working to make CFIUS reviews of foreign investments faster and more transparent.
The Treasury Department launched a new website in July to provide companies and legal advisers with clearer guidance on how foreign acquisitions are assessed.
It has also introduced a “Known Investor Program” aimed at identifying frequent investors and potentially speeding up future approvals after an initial detailed review.
The manufacturing jobs challenge
The push comes after decades of decline in US industrial capacity.
Loeffler said the Small Business Administration provided about $3 billion in funding to manufacturers in 2025, including $32 million for shipbuilding, as part of efforts to rebuild domestic production.
She noted that the US has lost roughly 90,000 factories and about 5 million manufacturing jobs over the past four to five decades.
The challenge now, she said, is ensuring that new investment does not result in isolated industrial sites, but instead helps rebuild a broader manufacturing ecosystem.
The Hanwha shipyard illustrates both the opportunity and the challenge. A $5 billion investment could create thousands of jobs at a single facility, while demand for more than 1,000 suppliers per ship could open up significant opportunities for American small and medium-sized businesses.
For the Trump administration, expanding that supplier network will be critical if its tariff-led strategy is to deliver a sustained industrial revival.
Foreign companies may be willing to bring capital and technology to the United States. But Washington now faces a more difficult task — ensuring that American businesses are ready to supply the factories, shipyards and advanced manufacturing facilities that this investment wave is creating.
With inputs from agencies.
