The United States has long been a global leader in technology, manufacturing, and innovation. However, in recent decades, the country has faced increasing competition from nations like China, particularly in the areas of semiconductor manufacturing, supply chain dominance, and STEM workforce development. In response, Congress introduced and passed multiple versions of the America COMPETES Act aimed at strengthening U.S. competitiveness and securing economic leadership in critical industries.
The latest iteration, the America COMPETES Act of 2022, was signed into law with the promise of revitalizing domestic manufacturing, ensuring supply chain security, and advancing scientific research. With a significant focus on bolstering semiconductor production and reducing dependence on foreign suppliers, the Act was framed as a critical step toward safeguarding the future of American industry. But does it actually work?
While the Act includes billions in funding and policy incentives, its effectiveness remains a subject of debate. Has it genuinely strengthened American manufacturing or fallen short due to regulatory loopholes, outsourcing concerns, and ineffective implementation? This paper explores the history of the America COMPETES Act, examines its key provisions, and evaluates its real-world impact on U.S. manufacturing and economic security.
The Evolution of The America COMPETES Act
The America COMPETES Act is not a single piece of legislation but rather a series of laws that have evolved over time, each iteration aiming to bolster U.S. innovation and industrial competitiveness.
The first version, signed into law in 2007 by President George W. Bush, focused primarily on scientific research and STEM education. With funding directed at the National Science Foundation (NSF), the Department of Energy (DOE), and the National Institute of Standards and Technology (NIST), the 2007 Act sought to boost innovation and ensure that the U.S. maintained its technological edge. However, it lacked specific manufacturing incentives, meaning the impact on domestic production was minimal.
In 2010, the Act was reauthorized under President Barack Obama, with increased funding and expanded initiatives to encourage research commercialization. This reauthorization built upon the foundation laid in 2007, but once again, it did little to address the growing reliance on foreign manufacturing—particularly in the semiconductor sector, where China was rapidly gaining dominance.
By the time the 2022 version of the America COMPETES Act was introduced, the urgency had escalated. Global supply chain disruptions, semiconductor shortages, and increasing geopolitical tensions with China had highlighted America’s vulnerabilities. Unlike its predecessors, the 2022 Act specifically targeted supply chain resilience, domestic semiconductor production, and manufacturing workforce development. These additions marked a shift from purely research-focused policies to direct investments in industrial competitiveness.
Key Provisions of The 2022 America COMPETES Act
The 2022 Act allocated a record $52 billion to support domestic semiconductor manufacturing, addressing the industry’s growing dependency on foreign suppliers. This funding was intended to provide incentives for companies to build semiconductor fabrication plants in the U.S., reducing reliance on Taiwan and China.
Another $45 billion was earmarked for strengthening domestic supply chains, with a focus on reshoring critical industries such as medical supplies, batteries, and rare earth minerals. The goal was to prevent future shortages of essential goods and to fortify the nation against disruptions like those seen during the COVID-19 pandemic.
Additionally, the Act strongly emphasized STEM education and workforce development, recognizing that a strong manufacturing base requires skilled labor. Investments were made in training programs, apprenticeships, and university research to ensure that the next generation of American workers is prepared for high-tech manufacturing jobs.
However, one of the more controversial elements of the Act was its immigration reforms, which introduced a new visa category for foreign entrepreneurs and removed green card caps for STEM PhD holders. While intended to attract high-skilled talent, these provisions raised concerns about potential labor market disruptions and whether they might inadvertently suppress wages for American workers.
The Act’s Impact on American Manufacturing
The effectiveness of the America COMPETES Act ultimately depends on whether it delivers tangible benefits to domestic manufacturers and workers. On paper, its provisions are designed to strengthen industrial competitiveness, but real-world implementation has been mixed.
One of the biggest successes has been the semiconductor industry’s response. Several companies, including Intel and TSMC, have announced multi-billion-dollar investments in U.S. semiconductor manufacturing facilities. This suggests that financial incentives from the Act have directly impacted reshoring critical production. However, questions remain about the long-term sustainability of these investments, particularly in an industry driven by global market dynamics.
In contrast, the Act’s supply chain resilience efforts have faced significant hurdles. While funding has been allocated, meaningful reshoring of industries has been slow. Many companies continue to rely on Chinese manufacturing due to lower costs, regulatory advantages, and entrenched supply networks. Additionally, loopholes in U.S. trade policy—such as the de minimis exemption, which allows shipments under $800 to enter duty-free—continue to provide incentives for companies to source products from overseas. Unless these structural issues are addressed, the America COMPETES Act may struggle to achieve its full intended impact.
Another area of concern is workforce development. Despite increased funding for STEM education, American manufacturing still faces a significant labor shortage. The Act’s initiatives in this area will take years to yield measurable results, and in the meantime, manufacturers continue to face challenges in finding skilled workers.
Case Studies: Successes and Shortcomings
To further assess the Act’s effectiveness, it is useful to examine specific case studies:
- Semiconductor Manufacturing: Intel announced a $20 billion investment in U.S. chip production, and TSMC followed with plans for a $40 billion facility in Arizona. These are positive signs that domestic chip manufacturing is gaining traction, though production at these sites is still years away.
- Battery Production: Ford and GM have ramped up investments in U.S.-based EV battery plants, partly influenced by incentives from the Act. However, sourcing raw materials remains a challenge, as much of the lithium and rare earth elements used in battery production are still controlled by China.
- Textile and Apparel Industry: Despite supply chain investments, the fast fashion industry continues to exploit de minimis loopholes, allowing foreign-made garments to flood the U.S. market tariff-free. As a result, American textile manufacturers continue to struggle against cheap imports.
Policy Recommendations and Future Considerations
The America COMPETES Act takes meaningful steps toward revitalizing U.S. manufacturing, but to secure long-term industrial independence, policymakers must address several critical shortcomings. While funding semiconductor production and STEM education is essential, the Act does not fully resolve structural issues such as trade loopholes, foreign corporate advantages, and workforce shortages. A stronger, more comprehensive industrial policy is needed to ensure that American manufacturing thrives beyond short-term government incentives.
Strengthening “Made in USA” Protections
One of the biggest challenges facing domestic manufacturers is that U.S. law still allows foreign-made goods to benefit from policies intended to support American production. The Buy American Act and related provisions are meant to prioritize domestic goods in federal procurement, but they are riddled with exceptions that allow foreign companies to compete for U.S. government contracts.
Our recent analysis of SAM.gov procurement data found that over $4.5 billion in Buy American Act waivers were granted in 2022 alone (similar numbers for other recent years as well), allowing foreign manufacturers to supply goods for federally funded projects. Some of the largest beneficiaries of these waivers were companies based in China and Mexico, directly undercutting the goal of bringing jobs back to the U.S.
To address this, the federal government must tighten restrictions on waivers and ensure that American manufacturers are given genuine preference in federal contracts. Policies such as increasing the minimum U.S. content requirement for federal purchases from 55% to 75%—a measure proposed by the Biden administration—would provide a more robust incentive for domestic production.
Beyond federal procurement, stricter “Made in USA” labeling enforcement is also necessary. Companies have increasingly exploited weak enforcement mechanisms to falsely market products as American-made when, in reality, key components are sourced overseas. A 2021 FTC ruling imposed a record $1.2 million fine on a company that falsely labeled its Chinese-made products as “Made in USA.” While this was a step in the right direction, significantly more oversight and enforcement will be required to curb deceptive marketing practices.
Closing Trade Loopholes That Undermine U.S. Manufacturing
While the America COMPETES Act seeks to restore domestic production, trade policies that favor foreign companies remain a major obstacle. Perhaps the most glaring issue is the de minimis exemption, which allows any shipment valued under $800 to enter the U.S. duty-free, regardless of its origin. This loophole has become a backdoor for Chinese e-commerce giants like Temu and Shein, which ship millions of individual packages directly to U.S. consumers without paying tariffs or undergoing proper customs scrutiny.
A 2023 investigation revealed that China-based retailers are exploiting de minimis rules to ship over 2 million packages per day into the U.S., bypassing import duties that American businesses must pay. This creates a significant disadvantage for domestic manufacturers, who cannot compete with ultra-cheap foreign imports that avoid tariffs and regulatory costs.
Congress has introduced bipartisan proposals to reform de minimis rules, such as lowering the threshold from $800 to $200 and applying additional scrutiny to packages originating from non-market economies like China. However, these measures have yet to gain widespread legislative traction. Without such reforms, efforts like the America COMPETES Act will continue to be undermined by an unchecked flood of foreign imports that erode the competitiveness of American-made goods.
Ensuring Semiconductor Investments Translate to Long-Term Manufacturing
One of the most celebrated aspects of the America COMPETES Act is its $52 billion investment in semiconductor production, aimed at reducing America’s reliance on Taiwan and China for critical microchips. The semiconductor industry is essential not only for consumer electronics but also for automotive manufacturing, defense systems, and medical devices.
While semiconductor giants like Intel and TSMC have announced plans to build multi-billion-dollar chip plants in the U.S., the long-term effectiveness of these investments remains uncertain. One major concern is that funding alone will not guarantee sustained domestic production—especially if companies continue to rely on foreign suppliers for key components.
For example, even with new U.S.-based chip fabrication plants, 90% of the world’s advanced semiconductor packaging and assembly still takes place in Asia, meaning that American-made chips could still require final processing overseas. Without a corresponding investment in end-to-end semiconductor supply chains, the U.S. risks becoming dependent on foreign partners for critical stages of chip production.
To ensure the long-term viability of these investments, policymakers should:
- Expand incentives for advanced packaging and assembly to ensure that chips manufactured in the U.S. are also packaged domestically.
- Mandate stronger domestic sourcing requirements for semiconductor firms receiving federal funding to prevent companies from using government subsidies while still outsourcing key production steps to China.
- Develop strategic stockpiles of essential raw materials, such as rare earth elements and lithium, to prevent supply disruptions in the chip manufacturing process.
Without these measures, America’s semiconductor resurgence could be short-lived, with companies pocketing federal subsidies while continuing to rely on foreign supply chains.
Revamping Workforce Development to Support Manufacturing Growth
While the America COMPETES Act includes funding for STEM education, it does not fully address one of the biggest obstacles to reshoring U.S. manufacturing: the skilled labor shortage.
According to the National Association of Manufacturers, the U.S. currently has over 800,000 unfilled manufacturing jobs, with projections indicating that 2.1 million positions could go unfilled by 2030 due to a lack of skilled workers. Even as companies build new factories, they are struggling to find qualified technicians, machinists, and engineers.
To bridge this gap, the federal government must take a more aggressive approach to workforce training by:
- Expanding apprenticeship and vocational training programs that provide direct pathways into manufacturing careers.
- Providing tax incentives to companies that invest in workforce development, such as on-the-job training and tuition reimbursement for employees pursuing technical degrees.
- Modernizing community college curricula to focus on next-generation manufacturing skills, including automation, robotics, and advanced materials.
Countries like Germany and Switzerland have successfully used apprenticeship models to maintain strong industrial bases, and the U.S. could benefit from adopting similar policies. If workforce shortages are not addressed, new factories built under the America COMPETES Act could sit idle simply because there are not enough trained workers to operate them.
Shifting from Short-Term Subsidies to a Long-Term Industrial Strategy
While the America COMPETES Act provides a significant funding boost to key industries, it does not establish a long-term industrial policy. Instead, it operates as a series of one-time grants and incentives, which—if not correctly structured—could lead to short-term investment surges without sustained economic benefits.
Countries like China, Japan, and South Korea have built manufacturing dominance not through one-time subsidies, but through decades-long strategic investment in domestic industries. The U.S. must adopt a similar approach by:
- Establishing permanent reshoring tax credits to encourage companies to maintain long-term domestic production.
- Creating a national manufacturing investment fund that provides low-interest loans to companies investing in U.S. facilities.
- Implementing a clear industrial policy framework that outlines America’s long-term goals for manufacturing leadership.
Without such structural changes, the U.S. risks repeating past cycles where initial government investments spark short-term industry growth, only for production to shift back overseas once subsidies expire.
Is It Actually Effective?
The America COMPETES Act is a well-intentioned effort to restore U.S. manufacturing strength, but its actual effectiveness remains a work in progress. While significant investments in semiconductors and supply chains are promising, challenges such as trade loopholes, slow implementation, and workforce shortages threaten to undermine its impact.
If the U.S. truly wants to regain its competitive edge, policymakers must go beyond temporary funding measures and implement structural reforms prioritizing American-made products, domestic labor, and long-term industrial independence. Only then can the nation ensure that it is not just competing, but leading, in the global economy.
