--- title: The Bullwhip Economy: How COVID Reshaped American Manufacturing description: The Bullwhip Economy: How COVID Reshaped American Manufacturing canonical: https://time.com/branded-content/-partner-name-/the-bullwhip-economy-how-covid-reshaped-american-manufacturing/ article:opinion: false article:content_tier: free article:published_time: 2026-08-20T15:44:28.959Z article:modified_time: 2026-08-20T15:44:08.763Z article:section: Branded Contributor Content og:title: The Bullwhip Economy: How COVID Reshaped American Manufacturing og:description: The Bullwhip Economy: How COVID Reshaped American Manufacturing og:url: https://time.com/branded-content/-partner-name-/the-bullwhip-economy-how-covid-reshaped-american-manufacturing/ og:site_name: TIME og:image: https://static.time.com/v3/assets/bltea6093859af6183b/bltf8cd30403c44122d/6a70d1fa65e47d6d9cd96b58/image1_(6).jpg?branch=production&width=1999&quality=75&auto=webp&crop=16:9 og:image:width: 1999 og:image:height: 1124 og:image:alt: TIME og:type: article twitter:card: summary_large_image twitter:title: The Bullwhip Economy: How COVID Reshaped American Manufacturing twitter:description: The Bullwhip Economy: How COVID Reshaped American Manufacturing twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/bltf8cd30403c44122d/6a70d1fa65e47d6d9cd96b58/image1_(6).jpg?branch=production&width=1999&quality=75&auto=webp&crop=16:9 ---  # The Bullwhip Economy: How COVID Reshaped American Manufacturing > Sponsored content. 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They are at time.com/newsletters and are separate from a paid subscription.  Image credit: Unsplash Image credit: Unsplash John Stewart spent much of his career in industrial manufacturing. He’s seen supply chain crunches, demand cycles, and rate shocks. But nothing prepared him or anyone else in this industry for what happened between 2020 and 2025\. What the industry experienced wasn’t a downturn. It was a bullwhip. Many across the manufacturing industry are familiar with the term “bullwhip effect.” It is a supply chain phenomenon driven by minor shifts in consumer demand and retail. These shifts cause much larger swings and alterations as you move up the supply chain, heavily impacting manufacturers and raw material providers. But Stewart argues that since 2020, manufacturing has experienced a far more pronounced cycle, which he describes as a “bullwhip economy.” It began with the COVID-19 pandemic, cascaded through five years of compounding shocks, and some manufacturers are only now feeling the later effects of that cycle, contributing to one of the sector’s more significant swings in decades. The so-called “bullwhip economy” did not emerge by chance. John Stewart describes a five-step chain reaction that, in his view, reshaped manufacturing, supply chains, labor markets, and capital allocation. **The COVID-19 Pandemic** The five-step cycle began with an unprecedented global shockwave: the COVID-19 pandemic. Governments responded with global fiscal stimulus, of which the United States was responsible for approximately $5.2 trillion. On the ground, that looked like $600 in weekly unemployment benefits for Americans to existing payments. This heavily impacted workers in lower- and middle-market industrial verticals, and while these benefits were incredible for workers facing a once-in-a-lifetime crisis, they also changed short-term work incentives for some households. As pandemic restrictions eased, pent-up savings and delayed spending contributed to a sharp rebound in consumer demand. **A Surge in Demand Across the Industry** Many will remember the stay-at-home orders and the mass adoption of remote work. With these changes came shifts in spending habits. Many homeowners increased spending, particularly on home-related goods and improvements, home offices, and consumer electronics. Webcams, laptops, exercise equipment like treadmills and bikes, and even toilet paper became high-profile examples of the risks associated with sudden demand shifts and inventory imbalances. **Inflation Reaches a New Level** With so much changing, manufacturing companies naturally struggled to meet the rising demands of the market. What came next was a convergence of pressures as pandemic-era demand surged faster than supply could respond. Needless to say, manufacturers were facing exorbitant costs across most facets of production. Labor costs were also undergoing structural changes as wages increased. **Pressure Across the Supply Chain & the Destocking Process** What followed helped intensify the bullwhip effect across parts of the manufacturing economy. Inventories were drawn down across many markets as demand surged. Naturally, manufacturing companies were forced to keep up. They over-ordered inventory at peak prices, racing to secure materials while they were available. In a short amount of time, an inventory shortage flipped on its head and became an inventory excess. Manufacturers and producers of raw materials suddenly found themselves sitting on mounds of products. The problem was that all of that inventory had been purchased at peak prices - in many cases above pre-COVID cost levels. In many cases, inventory on hand had been acquired at costs the market could no longer fully support, leaving some companies to discount stock or absorb lower margins, and in some cases, couldn’t sell it at all. In many cases, that value was effectively lost as inventory was marked down and margins deteriorated from industrial balance sheets, quarter after quarter, with no formal recession to show for it. What made it worse was that public market valuations largely failed to reflect these losses. This created a huge market distortion that the industry is still reckoning with. A correction came in the form of “destocking,” a term John Stewart mentioned he hadn’t seen so prominently throughout decades of working in the industry before 2021\. After the COVID-19 boom, manufacturing companies stopped placing new orders and worked towards reducing stock. **Response From the Central Bank** For central banks in the United States, there was only one way to combat inflation: raise rates. In just 18 months, the U.S. Federal Reserve raised its benchmark rate to 5.5% - the fastest tightening cycle since the 1980s. Borrowing costs rose sharply, forcing many manufacturers to revisit assumptions built into earlier financial models, and business-friendly tax provisions expired, including the ability to deduct interest expense against company income. The cost of capital became materially more challenging for many manufacturers. The result was seven distinct headwinds hitting manufacturers simultaneously: energy costs, input inflation, labor shortages, supply chain disruption, currency dislocation, inventory excess, and rising rates, with several shocks carrying consequences that, in certain respects, invited comparisons to past periods of financial stress, including 2008, and all seven hitting at once. Manufacturing companies were among the sectors most affected, with the industry shrinking for nearly two years. **The Future Outlook: Manufacturing is Improving** Stewart believes the worst of the cycle may now be behind the sector. Many inventories have reset to pre-COVID supply-chain conditions. And the destocking phase that weighed on industrial activity for nearly three years appears largely complete. However, different sectors face varying recovery outlooks. Aerospace and defense have grown steadily over the past several years, buoyed by increased defense spending. North American automotive markets have rebounded considerably, but European production is still losing steam. And while the infrastructure sphere has seen spending bolster a stimulus-driven surge, medical technology is taking much longer to recover. But the direction across all of them is the same: up. At MiddleGround Capital, John Stewart’s firm, they’ve been operating through every phase of this cycle across hundreds of industrial businesses. What they see heading into 2026-2028 could represent a particularly attractive entry point for industrial manufacturing investment, according to Stewart’s view of the market. Many of the companies that survived this cycle did so by getting leaner, repricing their cost structures, and building operational discipline they didn’t have before. Add real demand growth on top of that foundation, and the setup is compelling. The whip has finally snapped. What comes next is the recovery. _The information provided in this article is for general informational and educational purposes only. It is not intended as financial advice. Readers should not rely solely on the content of this article and are encouraged to seek professional advice tailored to their specific circumstances. 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