However, the report says, the nation is missing a coordinated framework to align industry and government efforts, which has led to under-resourcing federal manufacturing programs, including Manufacturing USA, and a lack of investments to scale up production in proven areas.

As a result, U.S. manufacturing productivity — once a hallmark of the economy — has declined markedly in the past 15 years, the report says. China has been the world leader of manufacturing output since 2011, and currently holds around 35 percent of gross world manufacturing, compared to 12 percent in the U.S. The U.S. trade deficit in goods has also risen sharply, reaching a record $1.2 trillion in 2025, which includes a major deficit in advanced technologies such as aircraft, semiconductors, and robots.

“Even though the U.S. develops many manufacturing technologies, the nation continues to outsource most of its manufacturing and lags far behind other nations in production capacity,” said Theresa Kotanchek, chief executive officer of Evolved Analytics LLC and chair of the committee that wrote the report. “This presents risks to our supply chains, our economy, and our national security if we can’t access critical technologies when we need them most. Our report outlines actions to strengthen the Manufacturing USA program and U.S. advanced manufacturing so that we can grow the businesses and produce the technologies we need at home.”

The report calls on the National Economic Council, Office of Science and Technology Policy, the departments of Commerce, Defense, and Energy, and other agencies to develop within the next two years an industrial strategy — in concert with the National Security Strategy — that integrates technology development, scale-up financing, and leadership in standards, trade, and workforce development so that resources are aligned for a more robust U.S. advanced manufacturing posture.

Informed by tools available in leading advanced manufacturing countries, Congress and federal agencies should set policy to create new federal manufacturing and financing mechanisms that include long-term investment vehicles such as patient-capital funds, a sovereign wealth fund with a strategic focus on manufacturing, and intellectual-property backed lending financing. In addition, Congress should create a globally competitive research and development tax credit for manufacturing processes and technologies, as well as explore expanding other tax reforms that support manufacturing.

Congress should provide sustained, dedicated funding above current appropriations by 2030 to establish business development offices at each Manufacturing USA institute, the report says. These offices would support commercialization, scale-up, and regional ecosystem integration, particularly for entrepreneurs and small- and medium-sized manufacturers (SSMs) working in coordination with regional economic development organizations and federal manufacturing programs.

Technology transfer is central to the Manufacturing USA mission. Institutes need to support two small firm extremes, both of which often lack the capital and resources to scale up — at one end, small, innovative entrepreneurs with good ideas to develop nascent technologies and at the other, SSMs that need to implement proven technologies. Additionally, large, multinational corporations that are institute members want to accelerate technology transfer to reduce their risks in scaling up investments. The report recommends establishing dedicated in-house technology transfer teams to help bridge the innovation “valley of death” between early-stage research and full-scale production.

Supporting robust pathways to careers in advanced manufacturing is necessary to cultivate a skilled workforce that can operate, maintain, and improve complex emerging manufacturing technologies in areas such as robotics, data analysis, digital production, and new materials. Yet, attracting and retaining talent remains a challenge, the report says.

“Collaboration across institutions and work sectors, to align student outcomes with industry needs, is necessary for the U.S. to become a leader in advanced manufacturing,” said National Academy of Engineering President Tsu-Jae Liu. “This report highlights the importance of workforce development for achieving and maintaining a competitive edge in advanced manufacturing, for economic prosperity and national security. 

Manufacturing USA institutes should adopt a broad range of programs to address workforce education needs that are built around a unified advanced manufacturing curriculum, the report says. In collaboration with regional stakeholders, this should include broad support for manufacturing apprenticeships and the development of comprehensive online advanced manufacturing courses.

The report also calls for a new interagency council to enable cross-agency and cross-institute collaboration, reduce administrative barriers, develop a digital manufacturing strategy, and establish an integrated strategy for the manufacturing institutes. Cross-agency collaboration is important between institute sponsoring agencies as well as between the institutes and other federal programs, including the national laboratories and the Manufacturing Extension Partnership program, to ensure advanced manufacturing technologies developed by the institutes are disseminated widely. Federal funding on par with comparable effective programs abroad is critical for supporting these activities.

The National Academies of Sciences, Engineering, and Medicine are private, nonprofit institutions that provide independent, objective analysis and advice to the nation to solve complex problems and inform public policy decisions related to science, engineering, and medicine. They operate under an 1863 congressional charter to the National Academy of Sciences, signed by President Lincoln.

For more information, visit https://www.nationalacademies.org/.