The Trump Administration has a strategy to boost economic growth, trim the federal deficit and keep inflation in check. Whether it can be successful or not will be evaluated over time, but industrial and manufacturing construction activity is at the core of its plan.

Starting in the first Trump term, a trade war with China pushed many sourcing managers to reconsider their global supply chain strategies. 

The pandemic and the global supply chain crisis of 2021 and 2022 only accentuated the need to rapidly fix national sourcing risk. Everything from defense industry products to pharmaceuticals, construction materials, electrical panels, microchips and more exposed the supply chain’s fragility. 

As a result of global sourcing diversification (which led to reshoring of manufacturing into the United States), the country saw construction spending in industrial and manufacturing facilities surge from an average of $60 billion a year in the decade prior to the pandemic to more than $237 billion a year in 2024. 

With an annual growth rate of 11.4% in 2024, it was the second-fastest growing U.S. sector based on annual percent change and the largest construction sector based on nominal spending within nonresidential construction. It even outpaced total spending on multifamily residential construction.

In the five years since 2019, manufacturing construction activity is 195% higher than it was in 2019 and grew at an annual rate of 24% over those five years (19% when adjusted for inflation). 

Data centers were certainly a large part of the growth surge, but broad-based manufacturing construction was present in nearly every region. Areas of the country with favorable tax structures, good distribution systems, inexpensive and stable energy supplies and an educated and stable workforce have garnered the lion’s share of this growth. 

What’s ahead 

Moving forward, this could change. The Trump administration is making several moves that will accelerate manufacturing construction spending and potentially modify where much of it is located. 

In the early years of this term, incentives are high for companies to reshore production. Tariff risk is high, with everything from blanket tariffs to the potential for retaliatory tariffs at any time. Even new Treasury Secretary Scott Bessent has floated the potential for a universal tariff on all imported products of 2.5% to start, then slowly graduating from there as the market is allowed to adjust and adapt. This might replace blanket tariffs (such as the percentage on China or proposed tariffs on other trading partners). The bottom line, however, is that tariffs will continue to play a large role in the new administration’s strategy. 

Changes close to home

The administration has vowed to speed up the permitting processes for new construction, ease regulatory burdens, cut red tape and even offer tax incentives to attract new investment. 

Longer term, one strategy the administration is using is easing regulatory restrictions on new natural gas power plant construction. Many developers are discussing locating these new power plants close to natural gas production zones (near or literally on top of large U.S. natural gas deposits). Developers are also looking at sites for data centers and industrial operations (especially those that consume a lot of electricity) to follow the construction of these new natural gas power plants. Contractors will want to begin watching these regions closely for future construction projects and opportunities. 

Also note that construction starts on new manufacturing or data center facilities will not have to wait for the power plant to be built. Many firms will jump on real estate opportunities and start their projects if they are certain a new plant will be built in the near future.

Incentives aimed at pushing firms to increase U.S. manufacturing production will only accelerate over the next four years. Again, this is part of a general global supply chain diversification strategy stemming from trade war risk, global supply chain bottlenecks, challenges coming out of COVID-19 and the effects of automation and robotics that have helped close the cost of production gap. 

Based on these conditions, it would not be a far reach to expect manufacturing nonresidential construction to continue to grow at an annual rate between 11% and 15% (inflation adjusted) if trends continue.

leungchopan / stock.adobe.com