Goldman Sachs: Automation and AI, Not Tariffs, Key to Boosting U.S. Manufacturing Productivity

Recent analysis from Goldman Sachs suggests that tariffs alone will not significantly enhance U.S. manufacturing productivity. Instead, the focus should shift towards increased automation and the integration of artificial intelligence (AI) in factory operations. The U.S. has been experiencing a slowdown in manufacturing, partly due to heightened competition from China and a broader decline in manufacturing productivity. According to Goldman Sachs analysts, tariffs may not sufficiently reduce supply chain and labor costs to encourage reshoring. Therefore, the most promising approach to boosting manufacturing productivity lies in adopting advanced technologies such as robotics and generative AI.

The U.S. has been slower to implement AI in manufacturing compared to other global leaders. A report from the Boston Consulting Group (BCG) Henderson Institute indicates that only 46% of U.S. manufacturers have multiple use cases of AI in their plants, significantly lower than the global average of 62% and far behind China’s 77%. This lag in technological adoption is seen as a critical area for improvement.

Goldman Sachs analysts argue that while tariffs may not lead to substantial reshoring, increased automation could drive significant productivity gains. The analysts highlight that the U.S. has an opportunity to invest in factory automation due to the growing affordability and accessibility of these technologies. Examples from companies like MSP Manufacturing, which have seen dramatic reductions in production times through AI-powered software, illustrate the potential benefits of such investments.

Despite the potential of automation to enhance productivity, Goldman Sachs acknowledges that it may not entirely resolve the broader global manufacturing slowdown. This slowdown is attributed to the maturation of the tech sector and the need for widespread adoption of AI and robotics to drive significant productivity improvements. The future of domestic manufacturing productivity will depend on the pace of innovation and the extent to which these technologies are integrated into factory operations.