For three years, the manufacturing sector has been beaten up badly, the result of failed public policy on regulation, energy and international trade. Mistakes out of Washington cost jobs while making things more expensive for consumers and American companies.

The good news is that things are finally starting to change — and manufacturing is poised for a resurgence.

In the beginning of 2023, manufacturing started to hemorrhage jobs. There are now some 200,000 fewer people employed in the sector compared to about three years ago. Similarly, by the summer of 2022, surveys from regional Federal Reserve banks and purchasing manager indexes began pointing to not just a slowdown but contraction.

Those surveys showed production, factory orders, employment and outlook all turning red just as costs exploded during Joe Biden’s 40-year-high inflation and volatile interest rates. Prices paid by businesses and consumers alike shot up while workers were slowly but steadily let go.

It’s important to note that these hard times for America’s manufacturers began long before last year when President Donald Trump’s tariffs were announced, let alone finally implemented. It’s obvious just from looking at a timeline of events that Trump’s tariffs didn’t cause the sector to begin deteriorating some two and a half years before he was even reelected.

So, what sparked the decline? American industry has been hamstrung for decades by a variety of bad actors, both foreign and domestic. However, many of those factors were exacerbated during the Biden years, and that turned a post-COVID recovery into a sector-wide recession.

Consider, for example, that regulatory compliance costs on American manufacturers are so high that they typically amount to tens of thousands of dollars per employee, with the pain concentrated among small businesses. The Biden administration threw fuel on the fire by adding over $1.8 trillion in new regulatory burdens — an ignominious presidential record.

Since that excessive regulatory burden is nonexistent in many other countries, manufacturers have been tempted to move their operations overseas for years, and Biden sealed the deal for more companies. The icing on the cake in some cases was the anti-energy policies of the last administration.

So-called “green energy” mandates, along with blocking either permits or leases directly, contributed to the 73% explosion of energy prices during the first year and a half of Biden’s tenure. Those significantly higher input costs made domestic production much more expensive, and that was particularly true in energy-heavy sectors like manufacturing.

Even after energy prices came down from their record high, they were still more than 34% higher at the end of Biden’s term than when he was inaugurated. Offshoring manufacturing and laying off Americans becomes a no-brainer when domestic energy costs rise by one-third in just four years courtesy of the government strangling energy supply.

Meanwhile, China has been building 50 coal power plants annually in recent years, adding tremendous capacity to put downward pressure on prices and attract more manufacturers. But China and other nations also engage in unfair trade practices like subsidizing specific industries and stealing intellectual property. Theses unscrupulous practices undermine American manufacturing.

Fortunately, Trump’s reciprocal trade policies are helping to level the international playing field by forcing other nations to the negotiating table with the goal of reducing both tariff and non-tariff barriers, like quotas. For example, when Canada limits imports from America, it hurts American exporters, from dairy farmers to factory workers.

Along with the efforts to rebalance international trade, the Trump administration has also rolled back a record amount of overregulation, including the $1 trillion endangerment finding last week, cut taxes for many manufacturers, and helped boost production of affordable, reliable energy — all of which puts downward pressure on prices.

And that tremendous effort is starting to pay off. After three long years in the doldrums, there are finally signs that the slide in manufacturing may be coming to an end and the sector could be turning the corner this year.

In January, the sector added jobs instead of losing them. The Institute for Supply Management’s purchasing manager index for manufacturing shot up to the highest level in almost three years and indicated the sector expanded for the first time in more than two years. Survey data from the regional Federal Reserve banks also point to a coming expansion. The construction industry added 30,000 jobs last month, almost all of which were for building factories that will employ manufacturing workers once completed.

As factory orders and production pick up, the layoff notices will be replaced with “help wanted” signs. American manufacturing didn’t get into this mess overnight, and the fix isn’t instantaneous either. But the long-awaited recovery looks like it will finally arrive later this year.

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E.J. Antoni, Ph.D., is chief economist and the Richard Aster fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.

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