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Miami Herald
21-05-2025
- Business
- Miami Herald
Can Trump's Tariffs Help Create a ‘Golden Age' of US Manufacturing?
President Donald Trump has said he wants to return the United States to a "golden age" of manufacturing and is trying to force the issue for many industries by slapping high tariffs on foreign products. However, their implementation, marked by abrupt shifts, pauses and fluctuations in levies, has sparked instability across the U.S. economy, as well as rattled global markets and longstanding partnerships. To some, like former Trump White House adviser Steve Bannon, the initial disruption is the path to a "robust," "hegemon-like," "reindustrialized" America—one that promises to put tens of thousands back to work in well-paying manufacturing jobs. Others, like Colin Grabow, associate director at the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies, argue the entire premise of reshoring and reindustrialization is flawed, as American manufacturing isn't on the decline, just manufacturing employment. Total industrial production in the U.S. is on the rise, rebounding from a sharp dip in April 2020 during the COVID-19 pandemic and returning to around 2018 levels, according to Federal Reserve Economic Data, or FRED. Industrial output now surpasses the heyday of American factories—thanks largely to efficiency gains and technological innovation. In the 1950s, manufacturing made up almost 30 percent of America's GDP, according to the Federal Reserve Bank of St. Louis, although that has since dropped to about 10 percent. Yet the U.S. remains the world's second-largest manufacturer, behind only China and well ahead of the third- and fourth-place contenders, Japan and Germany. Despite the recent rebound in output, manufacturing employment has steadily declined over the past few decades—a core concern for Trump supporters rallying around the promise of reshoring, which promises to bring tens of thousands of jobs back stateside. Manufacturing jobs in the U.S. hit a peak in 1979, with over 19 million people employed in the sector, according to the U.S. Bureau of Labor Statistics. Forty years later, manufacturing jobs accounted for less than 13 million in the U.S. Manufacturing's falling share of employment over this time has coincided with job growth in service-providing industries, including professional and business services, education and health services, and leisure and hospitality, BLS data shows. Some experts, like Andrew Yang, a former presidential candidate and founder of the Forward Party, point to automation for the major manufacturing job losses. Others acknowledge that automation played a role but also point to China's entry into the World Trade Organization in 2001, arguing that access to cheaper foreign labor markets has siphoned off American jobs. Abe Eshkenazi, CEO of the Association for Supply Chain Management, called it "extremely fickle" to bring back manufacturing for certain industries, specifically apparel and textiles, due to the labor costs. Even laptops, semiconductors and other electronics could be tough to make in the U.S. "We really like to get started young with [potential workers], letting them see that perhaps their next career move is here in Macomb County. Even if they go off to college they can come back here," Rowinski added. "We have seen an uptick in the number of international businesses that are looking for a footprint here in Macomb County." The majority of plans for U.S. manufacturing is focused on , their batteries and semiconductors. In Arizona, Taiwan Semiconductor Manufacturing Company is expanding its U.S. manufacturing investment by an additional $100 billion. The company announced in March that it has plans for three new fabrication plants, two packaging facilities and an R&D team center. It is the largest single foreign direct investment in U.S. history and is expected to create tens of thousands of jobs, according to the company. Nearby, in Texas, Samsung made a $17 billion investment in manufacturing in 2021, which the company said would create 1,800 jobs over the next decade. Tesla is also planning to invest nearly $200 million to open a plant near Houston and county officials estimate the plant could employ up to 1,500 people, with salaries ranging between $50,000 and $150,000. But the real winners in the manufacturing renaissance in the U.S. are southern states, which accounted for nearly two-thirds of the increase in manufacturing facility construction in the two years to April 2024, data released last year showed. Playing in the South's favor is the number of "right to work" states, meaning people can't be obligated to join a union even if their employer has one. It has the potential to keep labor costs down, and North Carolina, South Carolina and Georgia, where manufacturing is rising, has some of the lowest union membership rates in the country. Electricity in the South also tends to run lower than other areas of the country, reducing overhead costs for a factory. Even if there is a rise in manufacturing jobs and people wanted to fill them, Port of Los Angeles Executive Director Gene Seroka noted that it probably won't be very big and the industry certainly won't look like it did decades ago. A recurring theme in Trump's manufacturing push is what Grabow calls "a kind of politics of nostalgia"—a "romanticized," rose-colored-glasses vision of the assembly line days where union jobs provided for the family. This account does not fully acknowledge the realities then or the automated, high-tech reality of today's industry, which Yang said is factories filled with "robot arms as far as the eye can see." "What you're not seeing is investment and reshoring among American firms," Yang told Newsweek in response to Trump's tariff rollout. "What you're disinvesting." Yang warned that these blanket tariffs trigger "tougher pricing on all of [manufacturers'] components," followed by "tougher markets when they try and sell," because if they sell abroad "their margins will be lower." The result, he argued, isn't a manufacturing hiring boom, but instead a wave of layoffs and disinvestment in the industrial sector. "The tariffs as a reindustrialization policy are really boneheaded, and destructive," Yang said. Compounding the issue is the reality that reshoring a supply chain isn't an overnight shift; it's a yearslong process that hinges on long-term confidence in economic policy, several experts told Newsweek. Without that stability and predictable trade policy, many companies will be hesitant to commit to any expensive, long-term plans, leading to less investment into American supply chains. With such a deep investment needing to be made, it's unclear if America could surpass China's production in a manufacturing war. China did not become a manufacturing powerhouse by chance. Chinese leader Deng Xiaoping's reforms, beginning when he came to power in 1978, were aggressive and targeted and required Beijing to relinquish a level of state control. Experimental special economic zones in southern China, large industrial parks where logistics and supply chains became centralized, were key to the transition into a relatively freer market. Foreign investment arrived slowly at first, then all at once, drawn by tax breaks, favorable regulatory environments and the availability of manpower and machinery. Vertically integrated supply chains, as well as rail and port infrastructure that sprang from hubs like Dongguan and Shenzhen, on the border with Hong Kong, facilitated the rise of players like telecoms giant Huawei and EV titan BYD. By 1998, China's population had reached 1.25 billion. Its then leader, Jiang Zemin, declared that the newly established World Trade Organization "would be incomplete without China," a position backed by the United States under the conviction that its formal entry into global supply chains would benefit the U.S. In 2001, with U.S. manufacturing employment in decline, China joined the WTO with a labor surplus and a myriad of future entrepreneurs among its ranks. "In the 1990s, China couldn't provide enough jobs through the state sector alone. There was a push to get folks off the 'iron rice bowl' and into the private sector. Beijing supported this effort by supplying facilities and equipment, and favorable policies helped further pave the way. Many Chinese interpreted these official initiatives as a broader green light for entrepreneurial activity," Paul Midler, author of Poorly Made in China, told Newsweek. In the early 2000s, factory owners worked together to drive China's rise to the top of the manufacturing world, Midler said. They shared supplier leads and traded technical knowledge and production shortcuts. "Information flowed fast and the network effects were powerful, creating a momentum that outsiders rarely saw and still don't fully understand," Midler said. Chinese manufacturing today accounts for roughly one-third of global output, the United Nations Industrial Development Organization estimates, a higher share than North America and Europe. China positioned itself at the center of global manufacturing by partially opening up to the rest of the world at the right time, incentivizing companies to move their manufacturing abroad. A sizable portion of its society still shares the characteristics of manual labor, toiling for long hours and sleeping in dormitories, sometimes 10 to a room. Last year, nearly 300 million Chinese people—over one-fifth of the population—were classified as migrant workers who made a living in cities where they did not officially reside, according to government data. But China's rising middle class and the emergence of high-value sectors like IT have also forced its leaders to reckon with cultural shifts associated with a much richer and smarter society. In recent years, the Chinese tech industry has rebelled against the expectation of grueling and illegal "996" schedules—9 a.m. to 9 p.m., six days a week. For years, the economic trend lines looked favorable to Beijing, which had spent decades shaping industrial policy. Made in China 2025, a 10-year blueprint to upgrade Chinese manufacturing in 10 strategic sectors, was perhaps the clearest articulation of the grand plan to dominate old and new industries including IT, robotics and green tech, by not only becoming self-reliant but by enlarging the critical dependencies of others on China, too. In automation, where successful integration can free up valuable human capital in every field, China has a commanding foothold. In 2023, China ranked third in the world for robot density in the manufacturing industry, behind South Korea and Singapore, according to the International Federation of Robotics. The United States was 10th. China pushed its risky model for globalization to the limit. As it chipped away at strategic industries overseas, including in the Global South, it expected the world to accept the same dependencies that Beijing itself would never countenance. "It's a model based on the wrong assumption that China is not big enough for the world. It's the other way around—China is too big for the world. China could produce for the moon if it were populated, but it isn't, so until we find another planet, China's model is wrong," said Alicia García-Herrero, chief economist for Asia-Pacific at the investment bank Natixis. "It's not just the U.S.—everybody is going to say: 'Wait a minute. Balance your model. This cannot be that you produce everything for everybody, everywhere.' China would not like to be deindustrialized either." The U.S. has little to gain by copying the Chinese model, even in part, García-Herrero told Newsweek. America's strengths lie in innovation, university and industry linkages, and access to other free markets. It will need the help of allies near and far—Mexico and especially India can build robots, too—and their cooperation in friendly supply chains ought to be won with carrots rather than sticks, she said, because "the U.S. cannot become self-reliant on its own." China's state-run media has largely dismissed Trump's pledge to revitalize American manufacturing as a means of addressing economic security concerns, but the derision appears to miss the point. While the U.S.'s market-oriented economy will not let it produce everything it needs, for everything else, non-Chinese alternatives will emerge. Chinese goods may continue to flow into the U.S. market via existing transshipment routes or by way of Chinese-owned manufacturing plants in third countries. But on the whole, the world seems to be headed toward a two-way split. Although many still see full divestment from China as high unlikely, especially for critical materials like rare earth metals, markets have a way of recalibrating themselves after a major shock, such as in the pandemic. It took China 15 years to become the world's factory and it could take half that time to establish new supply chains with multiple countries, García-Herrero said. Liu Pengyu, a spokesperson for China's embassy in Washington, D.C., said: "The achievements of industries such as automobiles and shipbuilding in China are the result of enterprises' technological innovation and active participation in market competition." "Economic and trade cooperation between China and the United States is mutually beneficial. Forceful decoupling will not only undermine the normal trade and investment but also hurt the stability of production and supply chains between the two countries and globally. This is not in the interests of any party, including the United States," Liu told Newsweek. Recent years may not have been branded as a reshoring revolution quite like Trump's but they've quietly fueled a boom in U.S. factory construction. For Democratic Senator Tammy Baldwin, the push for increased American manufacturing stems from national security concerns, telling Newsweek "our national security is in jeopardy when we cannot make things here because we have lost the capacity to do so." She noted that the CHIPS Act, which was passed under former President Joe Biden with bipartisan support, created incentives to bring back semiconductor manufacturing to the U.S. as a matter of national security. "What we're spending building factories, adjusted for inflation, in 2024 was twice what it was in 2019," Dean Baker, economist and co-founder of the Center for Economic and Policy Research, said. "We've never seen a boom like that" in the postwar era, he added. According to FRED, total manufacturing construction spending topped $234 billion as of March 2025—a dramatic rise over the past decade. While the focus of U.S. manufacturing conversations is on semiconductors and cars, when it comes to what America is making, food, beverage and tobacco products are highest on the list. They account for about 17 percent of gross output in dollars—the highest of any subsector—according to the Department of Commerce. Chemical products plus petroleum and coal products are tied for second at 13 percent, followed by cars at about 10 percent. Bannon, a self-described populist and prominent figure in crafting the Make America Great Again movement, called out American manufacturing as little more than "final assembly" work—especially in the auto industry, where factories often import all the parts and simply put them together in the U.S. Instead, he argued, Trump's focus is on "bringing high value-added manufacturing jobs back." In addition to those jobs, Bannon described an "entire ecosystem" to be developed around the factories, from small supporting services and businesses like coffee shops, restaurants and stores for factory workers to go to nearby, to larger-scale operations such as consulting and engineering design firms that support the industry more broadly. Indeed, manufacturing can have a trickle-down effect. For every $1 spent in manufacturing, there's a $2.64 impact to the overall U.S. economy. And for every one worker in manufacturing, another 4.8 workers are added to other sectors. You need construction workers to build factories, people to supply the materials and truckers to move the product. And if a manufacturing boom hits an area and leads to an increase in people moving there, that area will need to offer more places to eat and shop, among other services, leading to more job creation. "That one manufacturing job is going to crowd in jobs in non-traded goods and services that help that manufacturing job to exist. So reshoring manufacturing would lead to expansion in other lines of business," Gordon Hanson, a Professor of Economics, Harvard Kennedy School, told Newsweek. The service business is "very much a gig economy, but here in manufacturing you have a chance to get a skill set that you can use over a long period of time and actually have a high paying job," Bannon said. He maintained there's a strong appetite for these roles, as did Baldwin, who described them as "very attractive," noting that the plants are "not your grandfather's factory." However, it's possible that even if there is a rise in manufacturing, workers won't be the ones benefiting the most. Or, at least not in the traditional sense. Factories will be driven by artificial intelligence and it's possible those jobs will go to college graduates who know how to program the technology. Yang warns that automation is going to slash what may be thought of as the typical factory role. "The industries that are most likely to need human workers tend to be the dirtiest, the least appealing, and the cheapest," he said. Related Articles Americans' View of the Economy Reverses Four-Year Trend in New PollChina's Next-Level AI Could Overtake US: New ReportChina Pauses Sanctions on US Companies in Trade War ClimbdownAutomakers Change Production, Sales Plans Based on Trump TariffsUS Economic Outlook Darkens as Major Forecast Records Steep DropGM Ends US Vehicle Exports to China Amid Trade Tensions 2025 NEWSWEEK DIGITAL LLC.
Newsweek
21-05-2025
- Business
- Newsweek
Can Trump's Tariffs Help Create a 'Golden Age' of US Manufacturing?
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. President Donald Trump has said he wants to return the United States to a "golden age" of manufacturing and is trying to force the issue for many industries by slapping high tariffs on foreign products. However, their implementation, marked by abrupt shifts, pauses and fluctuations in levies, has sparked instability across the U.S. economy, as well as rattled global markets and longstanding partnerships. To some, like former Trump White House adviser Steve Bannon, the initial disruption is the path to a "robust," "hegemon-like," "reindustrialized" America—one that promises to put tens of thousands back to work in well-paying manufacturing jobs. Others, like Colin Grabow, associate director at the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies, argue the entire premise of reshoring and reindustrialization is flawed, as American manufacturing isn't on the decline, just manufacturing employment. Factory located in Carson City, CA. Factory located in Carson City, CA. Alexandre Oliveira/Getty Total industrial production in the U.S. is on the rise, rebounding from a sharp dip in April 2020 during the COVID-19 pandemic and returning to around 2018 levels, according to Federal Reserve Economic Data, or FRED. Industrial output now surpasses the heyday of American factories—thanks largely to efficiency gains and technological innovation. In the 1950s, manufacturing made up almost 30 percent of America's GDP, according to the Federal Reserve Bank of St. Louis, although that has since dropped to about 10 percent. Yet the U.S. remains the world's second-largest manufacturer, behind only China and well ahead of the third- and fourth-place contenders, Japan and Germany. Despite the recent rebound in output, manufacturing employment has steadily declined over the past few decades—a core concern for Trump supporters rallying around the promise of reshoring, which promises to bring tens of thousands of jobs back stateside. Manufacturing jobs in the U.S. hit a peak in 1979, with over 19 million people employed in the sector, according to the U.S. Bureau of Labor Statistics. Forty years later, manufacturing jobs accounted for less than 13 million in the U.S. U.S. President Donald Trump displays a signed executive order imposing tariffs on imported goods during a 'Make America Wealthy Again' trade announcement event in the Rose Garden at the White House on April 2, 2025... U.S. President Donald Trump displays a signed executive order imposing tariffs on imported goods during a 'Make America Wealthy Again' trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC. More Andrew Harnik/Getty Manufacturing's falling share of employment over this time has coincided with job growth in service-providing industries, including professional and business services, education and health services, and leisure and hospitality, BLS data shows. Some experts, like Andrew Yang, a former presidential candidate and founder of the Forward Party, point to automation for the major manufacturing job losses. Others acknowledge that automation played a role but also point to China's entry into the World Trade Organization in 2001, arguing that access to cheaper foreign labor markets has siphoned off American jobs. Abe Eshkenazi, CEO of the Association for Supply Chain Management, called it "extremely fickle" to bring back manufacturing for certain industries, specifically apparel and textiles, due to the labor costs. Even laptops, semiconductors and other electronics could be tough to make in the U.S. Employees at hotdog maker Kahn's & Company working the production line, Cincinnati, Ohio, 1950. Employees at hotdog maker Kahn's & Company working the production line, Cincinnati, Ohio, 1950. Marsh Photographers/Cincinnati Museum Center/Getty Finding that workforce is also a huge hurdle for companies to get around, and Eshkenazi said younger people aren't as interested in doing manual jobs. Some companies have even brought workers to the U.S. from Taiwan to solve labor shortage problems. "We will have those individuals, but the labor is just not there right now," he said. "The domestic supplier ecosystem, transportation, rail warehousing, talent development, all need to be developed. The infrastructure just isn't there in the short term, but we're already experiencing challenges in terms of warehousing and in terms of truck drivers and in terms of rail." A Manufacturing Mecca Macomb County, the third-smallest county in Michigan by size but the state's third most populous, has been a manufacturing mecca of sorts for decades—known primarily for factories associated with the "big three" automakers, General Motors, Ford and Stellantis (formerly Chrysler), in addition to building aircraft, spacecraft, ground vehicles, weapon systems and other equipment for U.S. defense. "We look at the opportunity to really kind of embed more of that workforce training and upskilling to make sure that our manufacturers are able to actually produce and use some of this technology to be very efficient," Vicky Rowinski, Macomb County planning and economic development director, told Newsweek. Chief Strategist to the President Steve Bannon speaks during the Semafor World Economy Summit 2025 at Conrad Washington on April 23, 2025 in Washington, DC. Chief Strategist to the President Steve Bannon speaks during the Semafor World Economy Summit 2025 at Conrad Washington on April 23, 2025 in Washington, DC. Kayla Bartkowski/Getty "We really like to get started young with [potential workers], letting them see that perhaps their next career move is here in Macomb County. Even if they go off to college they can come back here," Rowinski added. "We have seen an uptick in the number of international businesses that are looking for a footprint here in Macomb County." The majority of plans for U.S. manufacturing is focused on , their batteries and semiconductors. In Arizona, Taiwan Semiconductor Manufacturing Company is expanding its U.S. manufacturing investment by an additional $100 billion. The company announced in March that it has plans for three new fabrication plants, two packaging facilities and an R&D team center. It is the largest single foreign direct investment in U.S. history and is expected to create tens of thousands of jobs, according to the company. This aerial photo taken on August 10, 2022 shows the view of a Taiwan Semiconductor Manufacturing Company (TSMC) factory in Nanjing, in China's eastern Jiangsu province. This aerial photo taken on August 10, 2022 shows the view of a Taiwan Semiconductor Manufacturing Company (TSMC) factory in Nanjing, in China's eastern Jiangsu province. STR/AFP/via Getty Nearby, in Texas, Samsung made a $17 billion investment in manufacturing in 2021, which the company said would create 1,800 jobs over the next decade. Tesla is also planning to invest nearly $200 million to open a plant near Houston and county officials estimate the plant could employ up to 1,500 people, with salaries ranging between $50,000 and $150,000. But the real winners in the manufacturing renaissance in the U.S. are southern states, which accounted for nearly two-thirds of the increase in manufacturing facility construction in the two years to April 2024, data released last year showed. Playing in the South's favor is the number of "right to work" states, meaning people can't be obligated to join a union even if their employer has one. It has the potential to keep labor costs down, and North Carolina, South Carolina and Georgia, where manufacturing is rising, has some of the lowest union membership rates in the country. Electricity in the South also tends to run lower than other areas of the country, reducing overhead costs for a factory. Even if there is a rise in manufacturing jobs and people wanted to fill them, Port of Los Angeles Executive Director Gene Seroka noted that it probably won't be very big and the industry certainly won't look like it did decades ago. A truck driver passes stacked cargo containers at the Port of Baltimore in Baltimore, Maryland, on October 14, 2021. Closed factories, clogged ports, no truck drivers -- up and down the global supply chain there... A truck driver passes stacked cargo containers at the Port of Baltimore in Baltimore, Maryland, on October 14, 2021. Closed factories, clogged ports, no truck drivers -- up and down the global supply chain there are problems, raising concerns that it could disrupt the global economic recovery. More Jim Watson/AFP/via Getty A recurring theme in Trump's manufacturing push is what Grabow calls "a kind of politics of nostalgia"—a "romanticized," rose-colored-glasses vision of the assembly line days where union jobs provided for the family. This account does not fully acknowledge the realities then or the automated, high-tech reality of today's industry, which Yang said is factories filled with "robot arms as far as the eye can see." "What you're not seeing is investment and reshoring among American firms," Yang told Newsweek in response to Trump's tariff rollout. "What you're disinvesting." Yang warned that these blanket tariffs trigger "tougher pricing on all of [manufacturers'] components," followed by "tougher markets when they try and sell," because if they sell abroad "their margins will be lower." The photo taken on April 26, 2025 shows an employee working on a lithium battery production line at a factory in Huaibei, in eastern China's Anhui province. The photo taken on April 26, 2025 shows an employee working on a lithium battery production line at a factory in Huaibei, in eastern China's Anhui province. AFP/via Getty The result, he argued, isn't a manufacturing hiring boom, but instead a wave of layoffs and disinvestment in the industrial sector. "The tariffs as a reindustrialization policy are really boneheaded, and destructive," Yang said. Compounding the issue is the reality that reshoring a supply chain isn't an overnight shift; it's a yearslong process that hinges on long-term confidence in economic policy, several experts told Newsweek. Without that stability and predictable trade policy, many companies will be hesitant to commit to any expensive, long-term plans, leading to less investment into American supply chains. With such a deep investment needing to be made, it's unclear if America could surpass China's production in a manufacturing war. China's Rise to Power China did not become a manufacturing powerhouse by chance. Chinese leader Deng Xiaoping's reforms, beginning when he came to power in 1978, were aggressive and targeted and required Beijing to relinquish a level of state control. Experimental special economic zones in southern China, large industrial parks where logistics and supply chains became centralized, were key to the transition into a relatively freer market. Foreign investment arrived slowly at first, then all at once, drawn by tax breaks, favorable regulatory environments and the availability of manpower and machinery. Vertically integrated supply chains, as well as rail and port infrastructure that sprang from hubs like Dongguan and Shenzhen, on the border with Hong Kong, facilitated the rise of players like telecoms giant Huawei and EV titan BYD. By 1998, China's population had reached 1.25 billion. Its then leader, Jiang Zemin, declared that the newly established World Trade Organization "would be incomplete without China," a position backed by the United States under the conviction that its formal entry into global supply chains would benefit the U.S. In 2001, with U.S. manufacturing employment in decline, China joined the WTO with a labor surplus and a myriad of future entrepreneurs among its ranks. A wing spar assembly robot is pictured in the Boeing factory on October 23, 2017 in Everett, Washington. Boeing began production of the 777X jetliner, which will feature many of the fuel-saving innovations and comforts... A wing spar assembly robot is pictured in the Boeing factory on October 23, 2017 in Everett, Washington. Boeing began production of the 777X jetliner, which will feature many of the fuel-saving innovations and comforts of the Boeing 787. More Stephen Brashear/Getty "In the 1990s, China couldn't provide enough jobs through the state sector alone. There was a push to get folks off the 'iron rice bowl' and into the private sector. Beijing supported this effort by supplying facilities and equipment, and favorable policies helped further pave the way. Many Chinese interpreted these official initiatives as a broader green light for entrepreneurial activity," Paul Midler, author of Poorly Made in China, told Newsweek. In the early 2000s, factory owners worked together to drive China's rise to the top of the manufacturing world, Midler said. They shared supplier leads and traded technical knowledge and production shortcuts. "Information flowed fast and the network effects were powerful, creating a momentum that outsiders rarely saw and still don't fully understand," Midler said. Chinese manufacturing today accounts for roughly one-third of global output, the United Nations Industrial Development Organization estimates, a higher share than North America and Europe. China positioned itself at the center of global manufacturing by partially opening up to the rest of the world at the right time, incentivizing companies to move their manufacturing abroad. A sizable portion of its society still shares the characteristics of manual labor, toiling for long hours and sleeping in dormitories, sometimes 10 to a room. Last year, nearly 300 million Chinese people—over one-fifth of the population—were classified as migrant workers who made a living in cities where they did not officially reside, according to government data. But China's rising middle class and the emergence of high-value sectors like IT have also forced its leaders to reckon with cultural shifts associated with a much richer and smarter society. In recent years, the Chinese tech industry has rebelled against the expectation of grueling and illegal "996" schedules—9 a.m. to 9 p.m., six days a week. For years, the economic trend lines looked favorable to Beijing, which had spent decades shaping industrial policy. Made in China 2025, a 10-year blueprint to upgrade Chinese manufacturing in 10 strategic sectors, was perhaps the clearest articulation of the grand plan to dominate old and new industries including IT, robotics and green tech, by not only becoming self-reliant but by enlarging the critical dependencies of others on China, too. In automation, where successful integration can free up valuable human capital in every field, China has a commanding foothold. In 2023, China ranked third in the world for robot density in the manufacturing industry, behind South Korea and Singapore, according to the International Federation of Robotics. The United States was 10th. Workers build a Ford Focus on the assembly line at the Ford Motor Co.'s Michigan Assembly Plant December 14, 2011 in Wayne, Michigan. Workers build a Ford Focus on the assembly line at the Ford Motor Co.'s Michigan Assembly Plant December 14, 2011 in Wayne, Michigan. Bill Pugliano/Getty China pushed its risky model for globalization to the limit. As it chipped away at strategic industries overseas, including in the Global South, it expected the world to accept the same dependencies that Beijing itself would never countenance. "It's a model based on the wrong assumption that China is not big enough for the world. It's the other way around—China is too big for the world. China could produce for the moon if it were populated, but it isn't, so until we find another planet, China's model is wrong," said Alicia García-Herrero, chief economist for Asia-Pacific at the investment bank Natixis. "It's not just the U.S.—everybody is going to say: 'Wait a minute. Balance your model. This cannot be that you produce everything for everybody, everywhere.' China would not like to be deindustrialized either." The U.S. has little to gain by copying the Chinese model, even in part, García-Herrero told Newsweek. America's strengths lie in innovation, university and industry linkages, and access to other free markets. It will need the help of allies near and far—Mexico and especially India can build robots, too—and their cooperation in friendly supply chains ought to be won with carrots rather than sticks, she said, because "the U.S. cannot become self-reliant on its own." China's state-run media has largely dismissed Trump's pledge to revitalize American manufacturing as a means of addressing economic security concerns, but the derision appears to miss the point. While the U.S.'s market-oriented economy will not let it produce everything it needs, for everything else, non-Chinese alternatives will emerge. Chinese goods may continue to flow into the U.S. market via existing transshipment routes or by way of Chinese-owned manufacturing plants in third countries. But on the whole, the world seems to be headed toward a two-way split. Although many still see full divestment from China as high unlikely, especially for critical materials like rare earth metals, markets have a way of recalibrating themselves after a major shock, such as in the pandemic. People work at EV fast-charger manufacturer Kempower on April 23, 2024, in Durham, North Carolina. People work at EV fast-charger manufacturer Kempower on April 23, 2024, in Durham, North Carolina. Allison Joyce/AFP/via Getty It took China 15 years to become the world's factory and it could take half that time to establish new supply chains with multiple countries, García-Herrero said. Liu Pengyu, a spokesperson for China's embassy in Washington, D.C., said: "The achievements of industries such as automobiles and shipbuilding in China are the result of enterprises' technological innovation and active participation in market competition." "Economic and trade cooperation between China and the United States is mutually beneficial. Forceful decoupling will not only undermine the normal trade and investment but also hurt the stability of production and supply chains between the two countries and globally. This is not in the interests of any party, including the United States," Liu told Newsweek. The Politics of Manufacturing Recent years may not have been branded as a reshoring revolution quite like Trump's but they've quietly fueled a boom in U.S. factory construction. For Democratic Senator Tammy Baldwin, the push for increased American manufacturing stems from national security concerns, telling Newsweek "our national security is in jeopardy when we cannot make things here because we have lost the capacity to do so." She noted that the CHIPS Act, which was passed under former President Joe Biden with bipartisan support, created incentives to bring back semiconductor manufacturing to the U.S. as a matter of national security. "What we're spending building factories, adjusted for inflation, in 2024 was twice what it was in 2019," Dean Baker, economist and co-founder of the Center for Economic and Policy Research, said. "We've never seen a boom like that" in the postwar era, he added. According to FRED, total manufacturing construction spending topped $234 billion as of March 2025—a dramatic rise over the past decade. While the focus of U.S. manufacturing conversations is on semiconductors and cars, when it comes to what America is making, food, beverage and tobacco products are highest on the list. They account for about 17 percent of gross output in dollars—the highest of any subsector—according to the Department of Commerce. Chemical products plus petroleum and coal products are tied for second at 13 percent, followed by cars at about 10 percent. Construction of Amazon Mid-Atlantic Region data center in Northern Virginia, Loudoun County, USA. Construction of Amazon Mid-Atlantic Region data center in Northern Virginia, Loudoun County, USA. Getty Bannon, a self-described populist and prominent figure in crafting the Make America Great Again movement, called out American manufacturing as little more than "final assembly" work—especially in the auto industry, where factories often import all the parts and simply put them together in the U.S. Instead, he argued, Trump's focus is on "bringing high value-added manufacturing jobs back." In addition to those jobs, Bannon described an "entire ecosystem" to be developed around the factories, from small supporting services and businesses like coffee shops, restaurants and stores for factory workers to go to nearby, to larger-scale operations such as consulting and engineering design firms that support the industry more broadly. Indeed, manufacturing can have a trickle-down effect. For every $1 spent in manufacturing, there's a $2.64 impact to the overall U.S. economy. And for every one worker in manufacturing, another 4.8 workers are added to other sectors. You need construction workers to build factories, people to supply the materials and truckers to move the product. And if a manufacturing boom hits an area and leads to an increase in people moving there, that area will need to offer more places to eat and shop, among other services, leading to more job creation. "That one manufacturing job is going to crowd in jobs in non-traded goods and services that help that manufacturing job to exist. So reshoring manufacturing would lead to expansion in other lines of business," Gordon Hanson, a Professor of Economics, Harvard Kennedy School, told Newsweek. The service business is "very much a gig economy, but here in manufacturing you have a chance to get a skill set that you can use over a long period of time and actually have a high paying job," Bannon said. He maintained there's a strong appetite for these roles, as did Baldwin, who described them as "very attractive," noting that the plants are "not your grandfather's factory." However, it's possible that even if there is a rise in manufacturing, workers won't be the ones benefiting the most. Or, at least not in the traditional sense. Factories will be driven by artificial intelligence and it's possible those jobs will go to college graduates who know how to program the technology. Yang warns that automation is going to slash what may be thought of as the typical factory role. "The industries that are most likely to need human workers tend to be the dirtiest, the least appealing, and the cheapest," he said.
The Herald Scotland
21-04-2025
- Business
- The Herald Scotland
Will the Trump tariff wars end by 2028? We asked economists.
Trump has enacted a flurry of tariffs in the early days of his administration. Tax rates now range from zero (on certain exempted products, such as duty-free items from Canada and Mexico) to more than 100% (on many imports from China, among other trade targets). Tariff policy seems to shift almost daily. It's tough to predict where the rates will sit in a week, let alone in three years, at the end of Trump's term. But it's a question worth asking. Consumers want to plan future car and iPhone buys. Retailers want to predict where prices are headed on clothing and computers. Manufacturers want to divine where to build their next factory. We asked four economists and academicians to predict what Trump's tariff policy may look like in 2028, and what factors might shape it. Here's what they told us. These are their comments in full, edited for clarity. Colin Grabow, associate director, Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute No crystal ball is needed to see that tariffs will almost certainly be higher in 2028 than when President Trump took office in January - the only question is by how much. Another outcome would be deeply surprising. For America, the tariff man cometh. Between his first term and the early days of his second, Trump has managed to bury the United States under an avalanche of tariffs. The onslaught has been so extensive that the United States now has its highest average tariff rate in over a century - and more seem on the way. Digging the United States out of this mess will take some doing. Unfortunately, few seem eager to grab shovels. Congressional Republicans are highly reluctant to cross a leader who remains incredibly popular within the party, while Democrats have traditionally been more supportive of protectionist policies favored by organized labor. Assembling a veto-proof coalition to restore sanity to US tariff policy is a tall order. Absent such an intervention, President Trump's de facto tariff switch is likely to remain in the 'on' position. Although some relief could be found in 'deals' with certain countries, or as part of a market-calming exercise, a complete unwinding is deeply improbable. Josh Bivens, chief economist, Economic Policy Institute In 2028, average tariffs could be 5% - about double their level when Trump took office. Or they could be 25%, or even higher than that. The fact that nobody can say with any certainty where tariff rates will be is absolute poison for every business and family in America trying to make plans for their future. Should you build a new factory? Buy a new home? Take out loans for your kids' college? Choose a different industry to work in? All these crucial decisions depend on the state of America's interconnectedness with the rest of the world. Until this is clarified - and truly clarified, not subject to the ever-changing whims of one man - all Americans will be held in limbo, and this will crush economic growth. Most economic policies create winners and losers. The Trump tariff policy is almost entirely creating losers, unless some insiders are timing their stock market purchases around advanced knowledge about new announcements and pauses. What was once unthinkably dumb and corrupt now seems entirely possible. Bernard Yaros, lead U.S. economist, Oxford Economics It's difficult, if not impossible, to know where tariffs will end up in 2028. However, a safe bet would be to assume that the significantly higher tariffs on China will remain in effect, as decoupling from the world's second-largest economy seems to be one of the administration's clearest goals amid the chaotic rollout of reciprocal tariffs this month. Sector-specific tariffs on steel, aluminum, motor vehicle and motor vehicle parts, and others will likely stick as well. Yet, it's probable that the across-the-board reciprocal tariffs on all countries other than China and all products outside certain sectors will either get significantly watered down or go away by 2028. The administration could water down these reciprocal tariffs via further exemptions, targeted toward consumer goods, in a bid to mitigate the inflationary impact. On the other side of the 2026 midterms, you could craft a scenario in which enough lawmakers on both sides of the aisle turn against the reciprocal tariffs and a supermajority in both chambers of Congress overrides a presidential veto to vote down the reciprocal tariffs. Robert Gulotty, associate professor of political science, University of Chicago In 2028, the Trump administration will be in campaign mode and may be trying to take actions that limit blowback from tariffs. In the previous Trump administration, this meant using ad hoc authorities to allocate billions of dollars of cash to farm communities affected by Chinese retaliation. My research with Anton Strezhnev suggests that those efforts moved voters in the 2020 election, particularly in rural communities. They will likely try again. We also saw reversals on the tariffs themselves, as exemptions on steel and aluminum were granted to Canada and Mexico in advance of the approval of a renegotiated NAFTA. However, I worry new cash disbursements and targeted tariff exemptions will have little effect on the overall state of trade policy for the U.S. Unless things dramatically change by 2028, the world will have gone through four years of dramatic and unpredictable policy swings. Measures of formal trade restrictions, like the average tariff, mean little for firms that cannot guess whether their customers will face a tax or not. There may be an appetite for some kind of global deal to reduce this uncertainty, but who would bother negotiating a treaty with a government that is unconstrained by scraps of paper?"
USA Today
20-04-2025
- Business
- USA Today
Will the Trump tariff war be over by 2028? We talked to economists.
Will the Trump tariff war be over by 2028? We talked to economists. Show Caption Hide Caption Auto industry could get exemptions from tariffs, Trump says President Donald Trump said he's considering temporary tariff exemptions for automakers amid attempts to move manufacturing back to the U.S. It's hard enough to track President Trump's tariffs from one day to the next. Imagine trying to predict where import taxes will stand in 2028. And yet, that's exactly what we asked four experts to do. Trump has enacted a flurry of tariffs in the early days of his administration. Tax rates now range from zero (on certain exempted products, such as duty-free items from Canada and Mexico) to more than 100% (on many imports from China, among other trade targets). Tariff policy seems to shift almost daily. It's tough to predict where the rates will sit in a week, let alone in three years, at the end of Trump's term. But it's a question worth asking. Consumers want to plan future car and iPhone buys. Retailers want to predict where prices are headed on clothing and computers. Manufacturers want to divine where to build their next factory. We asked four economists and academicians to predict what Trump's tariff policy may look like in 2028, and what factors might shape it. Here's what they told us. These are their comments in full, edited for clarity. Colin Grabow, associate director, Herbert A. Stiefel Center for Trade Policy Studies, Cato Institute No crystal ball is needed to see that tariffs will almost certainly be higher in 2028 than when President Trump took office in January − the only question is by how much. Another outcome would be deeply surprising. For America, the tariff man cometh. Between his first term and the early days of his second, Trump has managed to bury the United States under an avalanche of tariffs. The onslaught has been so extensive that the United States now has its highest average tariff rate in over a century − and more seem on the way. Digging the United States out of this mess will take some doing. Unfortunately, few seem eager to grab shovels. Congressional Republicans are highly reluctant to cross a leader who remains incredibly popular within the party, while Democrats have traditionally been more supportive of protectionist policies favored by organized labor. Assembling a veto-proof coalition to restore sanity to US tariff policy is a tall order. Absent such an intervention, President Trump's de facto tariff switch is likely to remain in the 'on' position. Although some relief could be found in 'deals' with certain countries, or as part of a market-calming exercise, a complete unwinding is deeply improbable. Josh Bivens, chief economist, Economic Policy Institute In 2028, average tariffs could be 5% − about double their level when Trump took office. Or they could be 25%, or even higher than that. The fact that nobody can say with any certainty where tariff rates will be is absolute poison for every business and family in America trying to make plans for their future. Should you build a new factory? Buy a new home? Take out loans for your kids' college? Choose a different industry to work in? All these crucial decisions depend on the state of America's interconnectedness with the rest of the world. Until this is clarified − and truly clarified, not subject to the ever-changing whims of one man − all Americans will be held in limbo, and this will crush economic growth. Most economic policies create winners and losers. The Trump tariff policy is almost entirely creating losers, unless some insiders are timing their stock market purchases around advanced knowledge about new announcements and pauses. What was once unthinkably dumb and corrupt now seems entirely possible. Bernard Yaros, lead U.S. economist, Oxford Economics It's difficult, if not impossible, to know where tariffs will end up in 2028. However, a safe bet would be to assume that the significantly higher tariffs on China will remain in effect, as decoupling from the world's second-largest economy seems to be one of the administration's clearest goals amid the chaotic rollout of reciprocal tariffs this month. Sector-specific tariffs on steel, aluminum, motor vehicle and motor vehicle parts, and others will likely stick as well. Yet, it's probable that the across-the-board reciprocal tariffs on all countries other than China and all products outside certain sectors will either get significantly watered down or go away by 2028. The administration could water down these reciprocal tariffs via further exemptions, targeted toward consumer goods, in a bid to mitigate the inflationary impact. On the other side of the 2026 midterms, you could craft a scenario in which enough lawmakers on both sides of the aisle turn against the reciprocal tariffs and a supermajority in both chambers of Congress overrides a presidential veto to vote down the reciprocal tariffs. Robert Gulotty, associate professor of political science, University of Chicago In 2028, the Trump administration will be in campaign mode and may be trying to take actions that limit blowback from tariffs. In the previous Trump administration, this meant using ad hoc authorities to allocate billions of dollars of cash to farm communities affected by Chinese retaliation. My research with Anton Strezhnev suggests that those efforts moved voters in the 2020 election, particularly in rural communities. They will likely try again. We also saw reversals on the tariffs themselves, as exemptions on steel and aluminum were granted to Canada and Mexico in advance of the approval of a renegotiated NAFTA. However, I worry new cash disbursements and targeted tariff exemptions will have little effect on the overall state of trade policy for the U.S. Unless things dramatically change by 2028, the world will have gone through four years of dramatic and unpredictable policy swings. Measures of formal trade restrictions, like the average tariff, mean little for firms that cannot guess whether their customers will face a tax or not. There may be an appetite for some kind of global deal to reduce this uncertainty, but who would bother negotiating a treaty with a government that is unconstrained by scraps of paper?"
Yahoo
02-04-2025
- Business
- Yahoo
How Trump's ‘Liberation Day' tariffs could kill American innovation
On Wednesday, President Donlad J. Trump announced a sweeping new round of tariffs on goods coming into the United States. Standing in the Rose Garden, he declared the moment 'liberation day,' though it was hardly the first time the government has tried to protect domestic manufacturers from foreign competition. The practice dates to America's founding. After states ratified the Constitution and seated the first Congress, James Madison sponsored, and his colleagues passed, the country's first major piece of legislation: the Tariff Act of 1789. President George Washington signed the bill into law, setting off centuries of spiraling consequences for American competition and innovation that experts say should serve as a cautionary tale for a litany of modern industries, including clean energy technology. The Tariff Act levied, among other fees, a duty of 50 cents per ton on goods imported by foreign ships. The goal was to raise money and bolster American shipbuilders. Some iteration of this effort has existed virtually ever since; most recently as the 1920 Jones Act, which restricts domestic shipping to vessels that are built and registered in the United States, owned by American firms, and staffed by U.S. citizens. In an era of wooden ships and limited globalization, these protections had little effect. American timber and American ships were naturally the best route for most companies. Before the revolution, even the British built one-third of their ships here. But by the late 1800s, technology was changing. Steamships and metal hulls were rapidly becoming the norm, yet U.S. shipbuilders remained insulated from competition. In 1900, the U.S. produced about 20 percent of the world's ships by tonnage. By 1914, U.S.-flagged merchant vessels carried just 10 percent of ocean trade. In the 1970s, U.S. shipyards were building about 5 percent of the world's tonnage. Today it's around two-tenths of a percent — less than 5 ships per year. 'U.S. shipbuilders haven't been competitive since just after the Civil War,' said Colin Grabow, associate director of the Herbert A. Stiefel Center for Trade Policy Studies at the libertarian Cato Institute. Grabow is an expert on the Jones Act and says American companies are still feeling its impacts. The U.S. only recently, for example, gained access — via a manufacturing license — to a Finnish dredging ship that the rest of the world has been able to use for 30 years. Offshore wind developers have pointed to the Jones Act as a major impediment to transporting turbines. The price of a U.S.-built ship is now as much as five times higher than those built abroad — up from a difference of about 20 percent in 1920. Grabow says Trump's tariff push is set to create the same sort of protectionist woes that the shipbuilding industry has faced, on a much larger scale. 'We're going to keep your foreign competitors out. What's the incentive to innovate in that kind of environment?' he said. 'If you look around the world, countries that are more closed and more protectionist don't tend to be cradles of innovation.' Clean energy technologies could be especially hard hit because so many key components — from batteries to solar cells — come predominantly from overseas. The tariffs Trump announced Wednesday range from 10 percent on the United Kingdom to 20 percent on the European Union. China will face duties of 34 percent, while Cambodia's stand at 49 percent. These are in addition to a 10 percent tariff on all other countries the president announced and the recent hikes targeting aluminum, steel, and auto manufacturers. 'Taxpayers have been ripped off for more than 50 years,' Trump said in remarks at the White House. 'But it is not going to happen anymore.' Tariffs could raise hundreds of billions of dollars in revenue but those added costs are often passed on to consumers and could result in higher prices for cars, heat pumps, or utilities. 'People are focused on the immediate price impacts,' said Catherine Wolfram, an economist focused on energy at the MIT Sloan School of Management. But the longer the tariffs are in place, the greater the chance that America's clean energy industry falls further behind the rest of the world, especially China. Electric vehicles are one area that this could play out. If foreign competitors are tariffed out of the U.S. market, domestic automakers may not feel the need to produce cars with longer ranges, more efficient technologies, or other cutting-edge features. 'The same logic applies whether you're talking about solar cells or any other input into the clean tech space,' said Wolfram. 'One of our core strengths is that we're innovative [and] you're protecting American companies from pressure to innovate.' The reverse logic is also true, says Steven Knell, president of Energy Intelligence, an industry analysis firm. Trump's tariffs will not only ease the impetus for domestic inventiveness but also make it more expensive for American companies to adopt innovations developed abroad. 'Some of what has allowed the clean tech industry to be successful over the course of the last 20 years has been globalized market opportunities,' he said. 'That's certainly a potential risk of the way in which the administration is suggesting it's going to pursue things.' Arguments for protectionism often fall into a few buckets, said Grabow, including national security and the need to boost fledgling industries, but those policies have tended to remain in place far beyond their stated need. 'That's one of the dangers with protectionism, is once you put that in place, it's hard to put the toothpaste back in the tube,' he said. 'Historically, you find very few examples of where the government gets rid of protectionism.' Grabow points to decades of government support for the sugar industry as another example of a sticky situation. Using a mix of quotas, tariffs and price supports, the Government Accountability Office found, in 2023 that federal policies aimed at protecting sugar farmers are raising prices and, on the whole, costing Americans $1 billion each year. The tariffs that Trump instituted in his first term have similarly been shown to be a net drag on the American economy. 'They've done the studies, they've done the math on it and we know it's been an economic loser. But [President Biden] didn't get rid of them,' said Grabow, citing the historical power Interest groups and lobbyists have shown in keeping protections in place. With Trump's latest moves, he says, 'take that dynamic and apply it all across the board.' For Wolfram, Trump's tariffs are only part of the problem when it comes to clean energy. Their impacts, she said, will be exacerbated by the fact that his administration is also trying to dismantle climate policy — especially the Inflation Reduction Act — and is targeting federal scientific research, and scientists, as part of its sweeping government cuts. 'It's a triple whammy,' she said, adding that there could be even more to come. 'Four years is a long time.' This story was originally published by Grist with the headline How Trump's 'Liberation Day' tariffs could kill American innovation on Apr 2, 2025.
