Why America’s AI Boom Isn’t an Industrial Boom

To close such gaps, companies hoping to build at home could start by using modular, off-site methods that can cut project timelines by half and capital costs by 10 to 20%, and deploying technology, collaborative contracting, and more to lower construction costs. Also AI- and robot-first operating models can help employers transform labor productivity. Our analysis found such steps could close half to two-thirds of the U.S. cost gap.

Where cost competitiveness isn’t possible, companies can compete on service quality, brand, customer proximity, and innovation. Complex drug therapies, for example, command premium margins and a decade or more of effective commercial exclusivity. Performance and trust can sustain premium prices. Increasingly, unrestricted access to the U.S. market also matters.

Policymakers face their own challenges. They cannot protect, nurture, ringfence, or subsidize every industry.  Instead, they can support industries that can solve America’s so-called “Achilles heels,” the roughly 25% of imported manufactured goods that are critical to national security, exposed to supply concentration, and derived from geopolitically distant trading partners. The scale of intervention required, whether selective trade measures, financial support, industrial policy, or other measures, is substantial. The task is about triage, deciding which industries justify a scale of intervention that would change the playing field, starting with the 25% of imported manufactured goods in which dependencies are most pronounced. Policymakers will also want to work to address existing skews in the international trading system.