U.S. officials are working with foreign investors to identify gaps in domestic manufacturing supply chains and expand the capacity of smaller U.S. suppliers. The effort includes a pilot Strategic Vendor Program and changes to foreign-investment review processes as officials seek to strengthen supplier networks supporting new manufacturing investment.
Key Takeaways
- U.S. officials are identifying supply-chain gaps affecting domestic manufacturing capacity.
- The Treasury Department and Small Business Administration are involved in the initiative.
- A pilot Strategic Vendor Program is intended to strengthen domestic supplier networks.
- Treasury has introduced changes intended to make certain foreign-investment reviews faster and more transparent.
- Officials are seeking greater participation from U.S. small and medium-sized suppliers in manufacturing supply chains.
U.S. officials are working with foreign investors to identify weaknesses in U.S. manufacturing supply chains and help small and medium-sized businesses expand their capacity. The effort is intended to ensure that domestic suppliers can provide components needed by manufacturing operations receiving new foreign investment.
The initiative involves the U.S. Department of the Treasury and the Small Business Administration. Treasury officials are also working through the Committee on Foreign Investment in the United States, or CFIUS, on changes affecting foreign-investment reviews.
The supply-chain effort focuses on a practical requirement of manufacturing expansion: new production facilities need reliable access to parts, components and other inputs. Foreign investment can provide capital for expanding U.S. manufacturing operations, but those operations also depend on suppliers capable of meeting production requirements.
Officials have identified gaps in domestic sourcing as an issue for some foreign-invested businesses. The reported effort therefore places greater attention on the capacity of U.S. suppliers that support manufacturing operations.
Small and medium-sized businesses are a central part of the initiative because they can provide components and services to larger manufacturing operations. Expanding their capacity can help foreign-invested manufacturers obtain more inputs from domestic suppliers.
The supply-chain issue also follows other pressures on U.S. manufacturers. Previous reporting has examined rising manufacturing input costs, including pressures associated with tariffs and supply-chain disruptions.
The approach does not eliminate the need for foreign investment. Instead, the reported initiative addresses the supplier requirements associated with manufacturing facilities receiving foreign capital.
Federal Officials Launch Strategic Vendor Program
Treasury has introduced a pilot Strategic Vendor Program intended to strengthen domestic supply chains and support the ability of smaller businesses to serve foreign-invested companies.
The program remains in its pilot phase. Detailed guidance on how vendors will be identified has not been issued, leaving the initiative focused initially on identifying supply-chain requirements and potential domestic suppliers.
The program places supplier capacity within the broader process of supporting foreign investment in U.S. manufacturing. Rather than concentrating solely on attracting capital, the effort also considers whether domestic businesses can supply the manufacturing operations that receive that investment.
For small and medium-sized manufacturers, participation in larger industrial supply chains can require additional production capacity and the ability to meet the specifications and delivery requirements of major customers. The Strategic Vendor Program is intended to help address those supply-chain requirements.
The Treasury initiative is also connected to CFIUS, the interagency committee responsible for reviewing certain foreign investments in the United States for national-security implications. The Treasury serves as the chair of CFIUS.
The relationship between foreign investment review and domestic supplier capacity gives the initiative two distinct components. One addresses the review of foreign investment, while the other addresses the manufacturing ecosystem required to support investment after it enters the U.S. economy.
Foreign Investment Increases Demand for Domestic Suppliers
Photo Credit: Unsplash.com
Foreign investment in U.S. manufacturing can create additional demand for domestic suppliers when newly acquired or expanded facilities increase production.
The issue is also relevant to cross-border manufacturing networks. Earlier coverage of U.S.-Mexico trade talks examined manufacturing standards, industrial sourcing requirements and the cross-border supplier relationships supporting North American production.
A Philadelphia shipyard provides a specific example of the supply-chain requirements associated with manufacturing expansion. The facility was acquired by South Korea’s Hanwha Ocean and Hanwha Group in December 2024 following a CFIUS review.
Hanwha has pledged to invest $5 billion in the facility in the coming years. The investment could increase employment at the shipyard from approximately 2,000 workers to 10,000.
The shipyard relies on more than 1,000 suppliers for each large ship it builds, according to company officials. About two-thirds of those suppliers are based in the United States.
The supplier base demonstrates the number of businesses that can be involved in supporting a single large manufacturing operation. Increased production at the facility could require additional suppliers as the shipyard expands its output and capabilities.
The shipyard example also illustrates the distinction between foreign investment and domestic economic participation. Capital from a foreign investor can finance manufacturing expansion, while U.S.-based suppliers can provide components, services and other inputs required by the facility.
The reported federal initiative is intended to improve connections between those two parts of the manufacturing system. Officials are seeking to identify domestic businesses that can meet supplier requirements associated with foreign-invested manufacturing operations.
The approach also applies beyond shipbuilding. Other foreign-invested manufacturers can face similar requirements when expanding U.S. production and seeking reliable domestic sources for specialized components.
Treasury Updates Foreign Investment Review Processes
Treasury is also working to make the CFIUS review process more transparent and efficient for foreign investors.
The department launched a new website in July intended to give companies, investors and their attorneys more information about how CFIUS evaluates potential foreign acquisitions and investments.
Treasury has also established a Known Investor Program designed to identify companies that invest in the United States repeatedly and potentially speed up subsequent reviews after an initial review process.
The Known Investor Program is separate from the Strategic Vendor Program. The former concerns the foreign-investment review process, while the latter is aimed at domestic supply-chain capacity.
Treasury has described CFIUS as an interagency committee that reviews certain transactions involving foreign investment in U.S. businesses and real estate to determine their effect on U.S. national security. The department has also said the Known Investor Program is being developed to improve process efficiency without changing CFIUS jurisdiction.
The review changes therefore address the administrative side of foreign investment, while the supplier initiative addresses the manufacturing capacity needed after investment decisions are made.
The two efforts are relevant to companies considering U.S. manufacturing investments because investment decisions can involve both regulatory review and operational requirements. Foreign investors must comply with applicable CFIUS processes while also securing the suppliers needed to operate manufacturing facilities.
Treasury’s work on review efficiency is intended to provide greater clarity around the foreign-investment process. The Strategic Vendor Program addresses a separate operational challenge involving domestic manufacturing suppliers.
Trade policy can also affect the cost and structure of manufacturing supply networks.Â
U.S. Manufacturers Rely on Expanding Supplier Networks
Domestic suppliers can play a significant role in determining whether manufacturing facilities have access to the components and services required for expanded production.
The reported federal initiative focuses on small and medium-sized businesses because these companies can form important parts of larger manufacturing supply chains. Their ability to increase output can affect the capacity of foreign-invested manufacturers operating in the United States.
The Philadelphia shipyard example provides a measurable illustration. Its manufacturing operations depend on more than 1,000 suppliers, with approximately two-thirds located in the United States. The planned investment and potential employment expansion could therefore involve a substantial network of domestic businesses.
Federal officials are seeking to identify similar supplier requirements and connect foreign-invested businesses with U.S. companies that can meet them. The Strategic Vendor Program remains in a pilot phase, so its eventual scope and implementation details are still being developed.
The Small Business Administration has also provided funding for U.S. manufacturers. In 2025, the agency provided approximately $3 billion in funding for manufacturers, including $32 million for shipbuilders, according to officials involved in the initiative.
The manufacturing-support effort places small businesses within a larger supply-chain framework. Rather than treating manufacturing capacity as limited to individual factories, the approach considers the network of suppliers needed to support production.
For foreign investors, access to reliable domestic suppliers can be an operational requirement when expanding U.S. manufacturing. For U.S. small and medium-sized businesses, the expansion of those facilities can create opportunities to become suppliers to larger industrial operations.
The federal initiatives now underway address both sides of that relationship: improving the process for reviewing foreign investment and identifying domestic supplier capacity needed to support manufacturing expansion.
Frequently Asked Questions
What are U.S. manufacturing supply chain gaps?
U.S. manufacturing supply chain gaps occur when domestic manufacturers cannot readily obtain required components, materials or services from available U.S. suppliers. Federal officials are working to identify these gaps as foreign-invested manufacturing operations expand.
What is the Strategic Vendor Program?
The Strategic Vendor Program is a Treasury pilot intended to strengthen domestic supply chains and help small and medium-sized U.S. businesses expand their capacity to serve foreign-invested manufacturers.
How does foreign investment affect U.S. manufacturing suppliers?
Foreign investment can expand manufacturing operations in the United States, increasing demand for domestic suppliers capable of providing components and services needed for production.
What changes has Treasury made to foreign investment reviews?
Treasury launched a website providing additional information about CFIUS reviews and has established a Known Investor Program intended to improve efficiency for certain repeat foreign investors.
How important are small businesses to U.S. manufacturing supply chains?
Small and medium-sized businesses can supply components and services to larger manufacturing facilities. The federal initiative specifically seeks to help these businesses expand their capacity to meet the requirements of foreign-invested operations.
