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As the U.S. economy completes its first quarter of 2025, the industrial sector is a clear focal point of the new administration and its desire to drive growth. This can most notably be seen through key policy shifts, infrastructure investment, advancements in domestic manufacturing, implementation of tariffs, incentives for reshoring, and deregulation efforts. All of which are designed to create a more favorable environment for the US industrial, manufacturing, construction, and infrastructure sectors.
By understanding these factors, investors can better evaluate how industrial ETFs fit into the evolving investment landscape.
Policy Shifts Driving Industrial Growth
Several initiatives have been launched that are designed to reshape the industrial landscape. These policies mainly focus on trade, environmental regulations, and targeted investments designed to boost domestic manufacturing and stimulate growth.
Trade Policies: Tariffs and Reciprocal Measures
In February the U.S. government announced a 25% tariff on all steel and aluminum imports. By reducing the reliance on imports from overseas, the government aims to nurture the domestic steel and aluminum industry by reducing outside competition. Commerce Secretary Howard Lutnick emphasized the goal of fostering "a big, strong domestic steel and aluminum capability."
Environmental Policy Rollbacks
Many in the new administration felt the industrial sector was being hamstrung by overly aggressive environmental policies and bureaucracy. To address this, EPA Administrator Lee Zeldin announced nearly three dozen deregulatory actions including the following.
- Revised emission standards for power plants
- Relaxed toxic metal limits from coal plants
- Expanded permissible uses for oil and gas wastewater
These actions are designed to boost industrial growth by easing restrictions viewed as barriers to expansion.
America First Investment Policy & Industrial Initiatives
The America First Investment Policy was introduced in February to help promote domestic investment in emerging technologies such as artificial intelligence and advanced manufacturing. The policy seeks to strengthen national security, productivity, and economic resilience by prioritizing investment from U.S. allies and strategic partners.
Additionally, in a March 2025 President Trump announced the creation of a new Office of Shipbuilding which provides tax incentives to the American shipbuilding industry. Aimed at supporting both commercial and military shipbuilding, it further highlights the administration’s broader goal of re-establishing critical manufacturing in the U.S.
Infrastructure Spend as a Growth Catalyst: Lessons from Recent Investments
History has shown that investments made to the U.S. infrastructure have been a catalyst for economic growth by fueling job creation, increasing GDP, and improving productivity.
One of the most recent examples of this was the expansion of broadband access via the Bipartisan Infrastructure Law (BIL). This allocated significant funding to improve internet connectivity across the country. The Broadband Equity, Access, and Deployment program alone is projected to contribute $84.8 billion to GDP, while the Affordable Connectivity Program is expected to add $32.7 billion, bringing the total projected economic boost to $127.3 billion over the next five years. These investments are also estimated to generate 230,000 jobs, particularly in rural and underserved areas.
The CHIPS and Science Act is another example of note, revitalizing U.S. semiconductor manufacturing and resulting in 37 projects totaling $272 billion in investments and a predicted 36,300 jobs. As part of this, the Taiwan Semiconductor Manufacturing Company alone committed $65 billion to its Arizona facility.
Similarly, the Inflation Reduction Act (IRA) helped fuel clean energy infrastructure investments, leading to 210 projects projected to create nearly 403,000 jobs. These projects are estimated to add $156 billion to the U.S. GDP and generate $32 billion in tax revenue.
Meanwhile, transportation infrastructure has seen a major boost under the Infrastructure Investment and Jobs Act (IIJA), with over 60,000 projects launched nationwide to modernize roads, bridges, ports, and public transit systems. According to the American Society of Civil Engineers (ASCE), these improvements could save the average household $700 per year by reducing vehicle maintenance costs and improving transit efficiency.
Finally, rising energy demands from data centers and renewable energy projects have accelerated power grid modernization. Between 2023 and 2028, power demand from data centers alone is expected to increase by 3% annually, leading to record-breaking investments in power infrastructure.
Conclusion: A Promising Horizon for Industrial ETFs
As the economy continues to grow, industrial ETFs stand to benefit from favorable policies, ongoing infrastructure investment, and technological innovation. The continued push for reshoring and modernization also signals strong long-term growth potential in this area.
Staying informed about policy changes and economic trends will be crucial for investors navigating this evolving landscape. With ongoing economic shifts, industrial ETFs remain a strategic option for those seeking exposure to the industries shaping the next phase of economic expansion.
