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The US lags behind other top countries in its proportion of manufacturing value added to GDP, World Bank data reveals

October 26, 2023
By: Conor Gowder

Manufacturing in the U.S. accounts for 90% of private-sector R&D, employs 80% of the nation’s engineers, and contributes trillions to the economy—according to Deloitte—with every dollar spent in manufacturing leading to an additional $1.81 added to the economy. However, despite its key importance, the U.S. lags behind much of the world in its proportion of manufacturing value added—the difference between the price of a product or service and any associated production costs—to the economy, seeing less value added each year as a percentage of GDP.

Manufacturing value added as percentage of the GDP has remained virtually stagnant worldwide. Japan’s and India’s have stayed fairly consistent, while China, Germany, and the U.S. experienced regular declines. In 1997, the U.S. figure for value added by manufacturing to its GDP was 16%, while in 2021 this share had dropped to just under 11%. China saw nearly 28% value added in 2022—a drop from 32% in 2004.

Figure 1: Comparison of the proportion of added value to GDP among the top five countries by GDP.

The proportion of value added to GDP has decreased in these countries because the GDPs of nearly all of these countries have consistently grown at a faster pace than their manufacturing sectors. Thus, their added manufacturing value may still be increasing in dollar amount even if the percentage share has decreased.

Yet, compared to the rest of the top five largest countries by GDP, in 2022, the U.S. had the lowest manufacturing value added as a percentage of its GDP at approximately 11%. The U.S., along with India at 13%, have values below the worldwide trend. China had the highest at 28%, followed by Japan at 20%, and Germany at 18%, as shown in Figure 1.

Globally, the value added by manufacturing as a percentage of GDP has decreased from 19% in 1997, to 16% in 2022. In 2009, the global value reached its lowest value at 15%, a half percent drop from the prior year and nearly a full point drop from 2007 (see Figure 2).

Figure 2: Global manufacturing, value added in current USD and as a percentage of worldwide GDP.

When considering manufacturing value added in current USD rather than as a percentage of GDP, nearly all are still seeing increased value year-over-year.

As illustrated in Figure 3 (below), China leads not only in its manufacturing value added as a percent of GDP, but also by sheer dollar amount, at nearly $5 trillion in 2022. This represents a nearly 700% increase from its 2004 value of $625 billion.

The four other nations experienced less exaggerated growths, led by the U.S., and followed by Germany, and India. Japan, unlike the others, instead saw a slight decline in manufacturing value added over the life of the available data.

Figure 3: Comparison of manufacturing value added in current USD among the top five countries by GDP.

While China’s growth in value added dollars is growing at an extremely rapid pace, returning to the first chart, this growth is not keeping pace with the rest of its economy. A similar trend can be observed with the U.S., where there is large growth in dollars, but a slight decline in its percentage of GDP, signaling that the pace of manufacturing value added is falling behind that of other industries.

NOTE: The World Bank DataBank offers a wide variety of metrics for countries across the globe. This article uses the metrics “Manufacturing, value added (% of GDP)” and “Manufacturing, value added (current US$)” The World Bank defines manufacturing by International Standard Industrial Classification (ISIC) divisions 15-37. More information on the methodology can be found here.

The World Bank data used in this article can be found by clicking on the hyperlinks in the above note, or the source links in each Figure.

manufacturing, gdp, international