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CBS News
09-04-2025
- Business
- CBS News
Trump overstates the number of U.S. factories lost since NAFTA while defending tariff hikes
President Trump has argued his new tariffs will help reverse the long decline of U.S. manufacturing, pointing to the loss of "90,000 factories" since the North American Free Trade Agreement took effect in 1994. "Since the very beginning of NAFTA, our country lost 90,000 factories," Mr. Trump said during his Rose Garden speech on April 2, as he announced a host of tariff hikes . The president repeated the claim in his Monday remarks . While the U.S. has seen a decline in the number of factories, the claim of 90,000 factories lost appears to be based on outdated data and includes small facilities with only a few employees. The 90,000 figure matches a 2020 analysis by the Economic Policy Institute, a left-leaning think tank, which found that there was a net loss of about 91,000 manufacturing establishments between 1997 and 2018. However, the analysis relied on Census Bureau data that was significantly revised in 2021, the group told CBS News. The updated figures show a net loss of about 70,500 manufacturing establishments from 1997 to 2022, the most recent year for which data is available. The data, from the Census Bureau's Business Dynamics Statistics, also suggests that many of these shuttered facilities employed only a handful of people. Nearly a quarter of the 70,500 closed manufacturers employed four or fewer workers, the data shows. Only 2% of the shuttered plants employed 500 or more people — there were 4,569 of those in 1997 and 3,136 in 2022. The White House did not respond to a CBS News inquiry about the data. Mr. Trump also said in the Rose Garden that "5 million manufacturing jobs were lost" since the beginning of NAFTA. The same Economic Policy Institute analysis in 2020 found that 4.7 million manufacturing jobs were lost. More recent data from the Bureau of Labor Statistics shows job losses from January 1997 to January 2025 are closer to 4.5 million. For years, Mr. Trump has called NAFTA the "worst trade deal ever made," blaming that agreement for undermining U.S. manufacturing jobs. The pact eliminated most trade barriers between the U.S., Mexico and Canada, and remained in effect until 2020 , when Mr. Trump signed the U.S.-Mexico-Canada Agreement, or USMCA, into law. The USMCA agreement, negotiated by his administration, continued many aspects of NAFTA with updates to some of the rules . Supporters argued NAFTA made the U.S. richer, but critics say it cost jobs — particularly in industries facing competition from lower wage workers in Mexico. Estimates vary, but Economic Policy Institute economist Robert Scott suggested in a 2014 analysis that NAFTA led to the loss of nearly 690,000 U.S. manufacturing jobs . However, free trade with China has been a bigger factor than a North America trade agreement, many economists say. MIT researchers found that nearly 1 million manufacturing jobs were lost to China from 1999 to 2011 as the U.S. normalized trade relations with the country. Economists note free trade is far from the only cause of factory closures. Multiple U.S. recessions in the last few decades have also contributed. And a rise in automation has caused manufacturing to shrink as a share of GDP in many developed countries across the globe since the 1950s, according to Joshua Meltzer, a senior fellow at the Brookings Institution, a nonprofit think tank. "Essentially manufacturing has just become increasingly efficient, automated and so forth. And we've just needed less labor to be producing more and more stuff," Meltzer said. The number of U.S. workers employed in the manufacturing industry peaked at 19.6 million jobs in 1979, according to the Bureau of Labor Statistics . The sector shed over 6 million jobs since then, and roughly 12.7 million people work in manufacturing today. "You can always count manufacturing plants that have shut down, but without a broader set of context to understand why that's happened [and] what's happening to the manufacturing sector more broadly, it's just a cherry picked data point," Meltzer said.
Yahoo
31-01-2025
- Business
- Yahoo
Is America still a nation of small businesses?
America is proud of being a nation built on the back of small business. Or at least that's the narrative we tell ourselves, writes reader Peter McMahon from the Hill Country outpost of Boerne, Texas. But, he writes, 'does that story still exist or has 'corporate America' changed the story to a myth?' Subscribe to The Post Most newsletter for the most important and interesting stories from The Washington Post. Stellar question, Peter! And you may be on to something. On a firm-by-firm basis, small businesses score an easy win, according to beautifully detailed Census Bureau data - the invaluable Business Dynamics Statistics - built from government records drawn from just about every private sector employer in the country. About 60 percent of American businesses have fewer than five employees, and 98 percent have fewer than 100 employees. But we're not sure about the utility of a measure that counts Goldman Sachs and Tariq's #1 Halal Food equally - even if we can all agree that Tariq makes the superior chicken biryani. If we weigh America's businesses instead by the number of their employees, we see the trend Texas Pete feared: Before the Great Recession, most Americans worked for businesses with fewer than 500 employees. Today, it's reversed, with 53 percent of us working for businesses with 500 or more workers. The rule applies across the economy - the smaller the business, the slower the growth. But the real drivers of this economy-wide shift sit at the extremes: Businesses with fewer than 100 employees have steadily lost ground while business with more than 10,000 employees have gained. To understand what's driving this shift, we called Stacy Mitchell, who co-directs the small-biz boosters at the Institute for Local Self-Reliance in Portland, Maine. 'The notion of being a nation of small businesses and farmers and people who control their own destiny when it comes to the economy is very much aligned with the idea that we're a country where we control our own political destiny,' Mitchell said. But Mitchell has now entered her 'I told-you-so' era - our words, not hers - as much of the mainstream, particularly the Biden administration, has awakened to the dangers of unchecked corporate consolidation. Big-business supremacy wasn't inevitable, Mitchell said. Given an even playing field, nimble, local entrepreneurs show time and again that they can provide better service at lower costs. Our situation today, she said, came from a conscious decision to make the playing field less even. 'In the 1970s and '80s, politicians from both political parties began to abandon small business,' she said. 'There was a sense that the key to progress was ever-larger corporations, that if we let companies get bigger they would be more efficient, they would generate all these benefits.' This shift from fairness to efficiency led to cuts in antitrust enforcement. For example, in the early 1980s, the Reagan administration stopped enforcing the 1936 Robinson-Patman Act, which protected local grocers by forcing suppliers to sell at the same price to all their customers - thus preventing the Walmarts of the day from strong-arming suppliers into sweetheart deals. For a recent piece in the Atlantic, Mitchell chronicled the effect of this decision by painstakingly assembling data on more than a century of grocery-industry consolidation. It shows the market share of the largest grocery chains fell in the wake of the act and hovered just below 20 percent until the 1990s. But in that decade, as deregulation begot accelerating consolidation, the market share of the dominant players soared. By 2022, just four chains controlled more than half the market. We see the same pattern in the Business Dynamics Statistics, where grocery firms with at least 10,000 employees go from employing about a third of workers in 1978 to employing about two-thirds of workers in 2022. Grocers stand out because they're such a major employer. But there are 20 industries among the 280-plus for which we have data that saw even faster consolidation. They include many other retailers - health, clothing, auto parts and tires, home furnishings, sporting goods, and electronics - but also motion pictures and, biggest of all in terms of employment, general hospitals. It's not even worth charting their opposite numbers, the industries where consolidation has fallen. The only ones to escape it have shriveled to the point where it's hard for anyone to scrape together 10,000 workers - think coal mining or tobacco manufacturing. Similarly, there are few bright spots among the firms where very small businesses (fewer than 100 employees) are making gains. The exceptions include beverage manufacturing (which includes microbreweries, distilleries and wineries in addition to the cola colossuses), an 'other services' category that includes parking lot attendants and pet groomers, and a transportation category that includes independent truckers, tow trucks and snowplows. The industries in which huge employers added the most jobs included grocery stores and hospitals, but also other fast-growing, super-centralized industries such as dollar stores and employment agencies, a category that includes temp workers. One of the biggest drags on small-business employment came from cut-and-sew clothing manufacturing, a classic example of an industry that simply struggled across the board. But other sectors show a clearer pattern of consolidation. Take gas stations. While gas station employment has remained fairly steady, small owners have slowly vanished. In the late 1970s, about 73 percent of gas station staff worked for firms with fewer than 100 employees. Today, it's 39 percent. Or clothing stores. Their employment boomed during the mall and big-box eras. But in the process, tiny businesses went from employing 55 percent of workers to just 16 percent today. A surprise came when we looked at the sectors that had done the most to stem the tiny-business decline. Tiny restaurants added 3.6 million jobs since the late 1970s, enough to offset almost all of the combined 4 million in losses from the 131 industries that shed tiny-business jobs. One caveat is that BDS counts some franchises as small businesses, but that seems fair enough - a locally owned franchise with fewer than 100 workers sounds like a small business to us. With all that in mind, could restaurants be a secret small-business success story? Despite all the anecdotes about how many restaurants fail in their first year, it turns out they've quietly conquered America. They have the biggest job growth of any industry since the late 1970s, well ahead of employment services and hospitals. Separate data from the Bureau of Economic Analysis shows that U.S. restaurant spending kept setting records, so small businesses in the restaurant industry may simply have been swept along in Americans' long and increasingly torrid love affair with not cooking at home. But what of that devastating failure rate? Something on the order of 60 percent of restaurants are said to fail in the first year. But when you start tracking the citations, the sourcing gets iffy. So we turned to the Business Employment Dynamics from the Bureau of Labor Statistics. Not to be confused with the Business Dynamics Statistics above, the BED grows from the universally beloved Quarterly Census of Employment and Wages, the ultra-high-quality labor market data derived from official unemployment insurance records for just about every business in the country. The QCEW has tracked individual businesses for decades, which allows it to follow each establishment from founding to failure. And with those records, it produces a remarkable little report on private-sector business survival rates. The results left us rattled. Of all restaurant and related establishments born in 2023, an incredible 86.4 percent survived to 2024. (We're basing this on the accommodation and food services sector, of which almost 80 percent are restaurants). Their 13.6 percent failure rate was the lowest of all 19 sectors measured. Over the past decade, the five-year restaurant failure rate was just 44 percent, better than the total private-sector rate of 49 percent. The majority of restaurants didn't fail until Year 7 - honestly a pretty good half-life in U.S. business terms. The highest failure rate was claimed by businesses in the information sector, a broad segment that includes everything from newspapers to telecom to tech start-ups. Why have small restaurants bucked the trend? We got hold of the single human on the planet most suited to answer: Adam Ozimek. In 2019, Ozimek co-founded Decades, a restaurant (and bowling alley, and arcade) in Lancaster, Pennsylvania. He still helps run it, but by day, he works as chief economist at the Economic Innovation Group, a bipartisan D.C. think tank focused on boosting small-business creation, entrepreneurship and the like. Ozimek agreed America's rapid restaurant growth probably helped smaller operators such as himself. He reminded us of an authoritative 2022 paper in the top journal Econometrica that analyzed the living daylights out of the BDS and found slowing workforce growth deserved much of the blame for the dominance of big businesses. Their complex work imparts a simple lesson: Growth means new blood and new opportunities. Without it, older, bigger firms have the upper hand. Imagine, Ozimek said, a town with just one grocery store and a falling population. 'If you open up a second grocery store, that means you have to steal every customer from that other grocery store,' Ozimek said. It's tough sledding. 'In contrast, if you live in a place where population is growing … every year there's gonna be more new customers. I don't have to steal customers from somebody else.' He pointed us to University of Texas economist Shikhar Singla, who analyzed almost five decades of rules from the Federal Register - AI helped him identify almost 60,000 rules and proposed rules - and showed that as regulations become more costly in an industry, sales and employment at small businesses fall. Why does this happen? It reminds us of something Mitchell said about tax law. The more complicated it gets, the more it favors the big guys. Remember Tariq's halal truck: He can't set up shell companies in the Cayman Islands to shelter his gyro gains from the IRS, so he may forever pay higher tax rates than his well-capitalized competition. The rise of the internet posed another obstacle to small business, Mitchell said. A few national gatekeepers - think Facebook, Amazon (founded by Jeff Bezos, who owns this newspaper), Uber and Google - have been able to squeeze small businesses who need their platforms to sell or advertise. That seems like another clue. Unlike many retail sectors, restaurant dining seems almost internet-proof. We struggle to foresee a future in which all of our pizza and pad Thai is dropshipped from a single warehouse somewhere outside Nashville. Graphics: Related Content Helicopters flying along Potomac frequently pose dangers to passenger jets Earthquake sensors could help track a different threat: Falling space debris Not far from Trump's White House, immigrants grapple with unknowns
