America’s Artificial Intelligence Manufacturing Boom
Orders for core business equipment surged 3.3 percent in March, the Commerce Department reported Wednesday, the largest monthly gain since the summer of 2020.
The engine behind the jump was unmistakable: orders for computers and electronic products climbed 3.7 percent to $29.6 billion, rising in 11 of the last 12 months. The artificial intelligence investment cycle is accelerating rather than slowing down. It hardly seems to have noticed the war in Iran or concerns about rising oil prices.
But the most important thing about the March durable goods report is not that businesses are spending heavily on AI. That has been obvious for some time. What matters is where the spending is showing up. It is showing up in domestic manufacturing orders — not in a surge of imports.
This is a point that deserves more attention than it has received. The AI boom is generating enormous demand for servers, networking equipment, chips, and the electrical and industrial hardware needed to build and power data centers. In an earlier version of the American economy — the one that prevailed before President Trump began restructuring trade policy — that demand would most likely have been met primarily by foreign producers. American companies would have placed their orders, and container ships from East Asia would have delivered the goods. The demand would have been American. The production would have been someone else’s, probably China’s.
That is not what is happening. Instead, the AI investment wave is translating directly into orders at American factories. Core capital goods orders — nondefense, excluding aircraft — blew past the 0.5 percent consensus forecast by a wide margin. February’s gain was revised up from 0.6 percent to 1.6 percent. Shipments of core capital goods, which flow into the equipment investment line of GDP, rose 1.2 percent after a 1.3 percent advance the month before. These are not import figures. These are domestic manufacturing orders and domestic shipments.
Yes, we’re still importing microchips and technology. No one expected Trump would end our import dependence entirely, and even hardened economic nationalists do not think we should not purchase any technology from abroad. Trump’s innovation is rebalancing trade, not ending it.
The broader report told a similar story. Orders for machinery rose 0.8 percent. Electrical equipment gained 0.8 percent. Primary metals advanced 0.4 percent. These are the upstream industries that supply the materials and components for the buildout of AI infrastructure, and they are producing here. Primary metals, recall, were on their deathbed before Trump’s tariffs were put in place.
The gains were broad enough to push headline durable goods orders up 0.8 percent to $318.9 billion, snapping three consecutive monthly declines and beating expectations of a 0.5 percent rise.
Trump’s Election Made the Difference
None of this was inevitable. The default path of the pre-Trump economy was to let American innovation quickly translate into the construction of global supply chains delivering imported goods, regardless of the consequences for domestic industrial capacity or even whether such production was actually cheaper than domestic manufacturing. This meant that every great wave of capital investment — from the internet buildout of the late 1990s to the smartphone revolution of the 2010s — produced far more manufacturing activity abroad than at home. American innovation funded foreign factories, and American intelligence created foreign jobs.
Trump’s tariffs, his reshoring incentives, and his broader reorientation of trade policy changed the calculus. They raised the cost of relying on foreign production and created incentives to build domestically. Critics spent years arguing that this could never work, that America should simply accept the decline of its manufacturing sector and acclimate to a slower rate of growth and lower wages. But the March durable goods report is what it looks like when a massive new source of demand meets an economy that has been restructured to capture the production, not just the consumption.
The AI boom could have been another American invention that enriched foreign manufacturers. Instead, it is becoming an American manufacturing story. That did not happen by accident.
