Yves here. We’ve pointed out that it would take at least ten years to meaningfully reverse US offshoring of manufacturing, and that pre-supposes a lot of industrial policy, something to which both neoliberals and the libertarians now in the US economic policy seat loathe. As they say in Maine, “You can’t get there from here.”
But a second chestnut also applies: “There’s no there there.” As this post explains. manufacturing is no longer what it once was. We made a similar point in our post on the devastating impact of tariffs on an already-battered car industry, that the future of manufacturing is “dark factories,” as in ones so highly automated that they have no no/few workers.
By James Scott, Reader in International Politics, King’s College London. Originally published at The Conversation
The “liberation day” tariffs announced by US president Donald Trump have one thing in common – they are being applied to goods only. Trade in services between the US and its partners is not affected. This is the perfect example of Trump’s peculiar focus on trade in goods and, by extension, his nostalgic but outdated obsession with manufacturing.
The fallout from liberation day continues, with markets down around the world. The decision to apply tariffs on a country-by-country basis means that rules about where a product is deemed to come from are now of central importance.
The stakes for getting it wrong could be high. Trump has threatened that anyone seeking to avoid tariffs by shifting the supposed origin of a product to a country with lower rates could face a ten-year jail term.
The White House initially refused to specify how it came up with the tariff levels. But it appears that each country’s rate was arrived at by taking the US goods trade deficit with that country, dividing it by the value of that country’s goods exports to the US and then halving it, with 10% set as the minimum.
It has been noted that this is effectively the approach suggested by AI platforms like ChatGPT, Claude and Grok when asked how to create “an even playing field”.
Economically, Trump’s fixation on goods makes no sense. This view is not unique to the president (though he feels it unusually strongly). There is a broader fetishisation of manufacturing in many countries. One theory is that it is potentially ingrained in human thinking by pre-historic experiences of finding food, fuel and shelter dominating all other activities.
But for Trump, the thinking is likely related to a combination of nostalgia for a bygone (somewhat imagined) age of manufacturing, and concern over the loss of quality jobs that provide a solid standard of living for blue collar workers – a core part of his political base.
Nostalgia is not a sensible basis for forming economic policy. But the role emotions play in international affairs has been receiving more attention. It has been identified as an “emotional turn” (where the importance of emotion is recognised) in the discipline of international relations.
Of course, that’s not to say that the concern over jobs and the unequal effects of globalisation is misplaced. It is clear that blue-collar workers have suffered in the US (and elsewhere) for the last 40 to 50 years, with governments paying little attention to the decline.
Data on weekly earnings in the US split by educational level show that wages for those without a degree have declined or stagnated since around 1973, particularly among men. This is the cohort that disproportionately voted for Trump. Globalisation has created many benefits, not least to the United States, but these tend to be concentrated among the better educated.
All too often the service-sector jobs that have filled the gap left by declining manufacturing have been precarious. That means low wages, low security, lack of union representation and few opportunities for moving up the ladder. It is unsurprising that there has been a backlash.
Can’t Turn Back the Clock
So will Trump’s tariffs plan address this? The great tragedy is that there is little reason to think that they will.
The loss of manufacturing jobs is partly about globalisation, which Trump is seeking to reverse. But research showsthat trade and globalisation are often more of a scapegoat than a driving force, responsible for only a small chunk of job losses (typically said to be about 10%).
The main cause of manufacturing’s decline is rising productivity. Today it simply requires fewer people to make goods due to the relentless increase in automation and the associated rise in how much each worker produces.
If the whole US trade deficit were rebalanced through expanding domestic industries, this would increase the share of manufacturing employment within the US by about one percentage point, from about 8% today to 9% according to US Bureau of Labor Statistics figures. This is not going to be transformative.
The effects of tariffs are also doubled-edged. They will probably shift some manufacturing back to the US – but this could be self-defeating. More US steel production is good for workers, but the higher cost of US steel feeds through to higher prices for the products manufactured with it.
This includes the cars Trump obsesses about. Less competitive prices means lower exports and a loss of jobs. The Lord giveth and the Lord taketh away.
The 1950s were a unique time. By the end of the second world war, the US was a manufacturing powerhouse, accounting for one third of the world’s exports while taking only around a tenth of its imports.
There were few other industrialised countries at the time, and these had been flattened by the war. The US alone had avoided this, creating a world of massive demand for US exports since nowhere else had a significant manufacturing base. That was never going to last forever.
The other point about that time in history is that the economic system had been shaped by colonialism. European powers had used their position of power to prevent the rest of the world from industrialising. As those empires were dismantled and the shackles came off, those newly independent countries began their own processes of industrialisation.
As for the US today, President Trump is mistaken if he really believes that tariffs will bring a new golden age of manufacturing. The world has changed.
“It is clear that blue-collar workers have suffered in the US (and elsewhere) for the last 40 to 50 years, with governments paying little attention to the decline.”
It feels like blue-collar workers have it better than the middle class PMC, earn more, at least in Canada. Electricians, plumbers, welders, construction workers, all seem to be earning higher on average than office workers, often still have unions. And the trades have unquestionably been doing better. Anecodotally, round my neighbourhood the McMansions with the 6.5 cars are owned by tradespeople, not execs.
Also, Yves, to your point that there is no there to return to, which is valid, since manufacturing plants have been roboticized, don’t give jobs anymore, it seems to me conceivable that if the auto industry is reshored, politicians could insist on a % of unroboticized assembly lines, and this could conceivably bring back the factory jobs. Not that any of the PMC or trades would take them.
From StatCan: Gov’t of Canada agency:(like BLS in US).
Construction per hour: $31.41(2020); $32.06(2021); $33.76(2022); $35.48(2023); $36.66(2024).
Our local BMW plant is technologically advanced but still employs 10,000 workers. As the article says, technology improves the productivity of those workers and helps them to produce a more consistent product but you still need those workers.
I’d say the real problem with Trump’s claimed goal is that he wants to turn a middle class country back into a developing country and those who voted for him are desperate to keep what prosperity they already have rather than move up from poverty to comfort via a factory lifestyle that requires not just the motivation but also the fitness. You have to pass a strength and fitness test to get a job at BMW.
So the Trump vision is really about providing enough full employment to allow the welfare state to be discarded and that is the real goal. His class think only they are entitled to be “useless eaters.”
Plus neither political party are very interested in the problems of Americans who are truly poor. It is our political system that is at the root of all this and that fails to keep up with social reality. And that reality is that for the reasons stated above America’s top of the heap position was only temporary and our ruling class needs to accept the situation they so zealously resist.
No Making Shit Up. That is false. China has car factories that are entirely automated. You don’t need workers save perhaps for cleaning, scheduled maintenance, and when things break.
I know that’s true but it doesn’t make full automation the obvious choice–particularly for BMW which is making ICE cars rather than the simpler electrics and constantly switches between steering position, models and custom features to suit customers who are wealthy and not seeking a $12,000 car.
So I was not alleging that all car factories require workers but rather that most real world factories do still need them. Also full automation is expensive and those Chinese factories are brand new, not legacy.
Just in the opinion realm I don’t think the robot future should be oversold for the present even if it’s coming eventually. Economist Dean Baker says much the same thing.
the crack pot theory of free trade and comparative advantage, has really massively reduced innovation, with everyone chasing the same manufactured products to try to take market share.
this is what china did, whilst china itself was protectionist.
now huge parts of the world have been de industrialized by quacks like bill clinton and tony blair.
the thing about the large parts of the world throwing off the shackles of the quackery called free trade, might well produce local innovations that china does not do.
that is why china is throwing so much money into R&D, they know that the industrial revolution has created more jobs than its destroyed.
its why china is so hell bent on keeping the rest of the world that listened to quacks like clinton and blair, out of manufacturing to protect their trade surplus and technological superiority.
so there might be a method in peter navorro’s madness.
https://rhodes-center-podcast.captivate.fm/episode/the-robots-may-be-coming-but-probably-not-for-your-job
The Robots May Be Coming, But Probably Not for Your Job
8th April 2021 • The Rhodes Center Podcast with Mark Blyth • Rhodes Center
——
https://medium.com/@b.savelkouls/the-myth-of-automation-replacing-jobs-how-it-actually-creates-new-opportunities-92ecc9cc5ba9
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The Myth of Automation Replacing Jobs: How It Actually Creates New Opportunities
Brian Savelkouls
Brian Savelkouls
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2 min read
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Sep 30, 2024
Automation is often viewed as a threat to jobs, with the widespread belief that it will lead to widespread unemployment. However, this is a common industry myth that needs to be dispelled. The reality is that automation creates new opportunities and can even lead to the creation of new jobs.
One of the primary benefits of automation is its ability to improve efficiency and productivity. By automating repetitive and mundane tasks, businesses can free up their employees to focus on more strategic and creative work. This, in turn, can lead to the creation of new roles and the need for new skill sets.
For example, as automation takes over certain tasks, the need for human oversight and management of these automated processes increases. This can lead to the creation of new roles such as automation engineers, data analysts, and process improvement specialists. These roles require a different set of skills and knowledge, which can create new job opportunities for workers.
Moreover, automation can also lead to the development of entirely new industries and products. As businesses become more efficient and productive, they can invest in research and development, leading to the creation of innovative solutions and services. This, in turn, can create new job opportunities in areas such as product design, software development, and customer service.”
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so far the industrial revolution has created more jobs than its destroyed. so i say bring on the robots, as long as we design them, make them, install them and service them, we stand a chance at innovation.
Anecdotally, Elon’s Fremont Tesla factory tried (and failed) to go fully automated. No dice. Maybe the Chinese know something we don’t…?
I’m pretty sure there are no fully automated car factories, even in China. Things like installation of wiring harnesses would be extremely difficult, if not impossible to do robotically with today’s technology. Things like interiors are also still too difficult and often change too much from vehicle to vehicle to fully automate. If we look at BYDs $12,000 Seagull at this link, we can see plenty of automation, but there are still portions where one can clearly see parts bins intended for human workers in the background.
I don’t see why any task would be too hard for robots. Robot assisted surgeries go into much tighter spaces and do much more refined work than human hands can do. And this is much more standardized than human surgeries. As for changing from model to model, AI would be very well suited for that.
Recently in Links, an article on the gigification of labor in Chinese manufacturing:
But the article is discussing research on non-auto manufacturing, so perhaps not entirely applicable to the above discussion of Chinese auto industry.
My understanding of robot assisted surgeries is that they still require a human surgeon to control the robotic parts.
*Sigh*
That is because a surgeon has incomplete knowledge of what he is dealing with until he makes the incisions and has a look. Humans are non-standard.
For instance, my doctor had to model over 100 parts for my hip replacements (bilateral), was not fully happy with any of them, had to modify the one he chose. Even then, he could not do what he planned to do with me because my hip flexors were so tight that if he had done things as he had intended, he was worried I’d tear a tendon post surgery.
You don’t have anything remotely like that with manufacture of cars. You know what you are dealing with in advance AND can design the components to facilitate robot assembly.
No fully automatable task is too complicated for robots. It’s a question of money, the number of processes and the number of times a process is used.
It you have thousand of different processes each used a few times per year, then robots usually are more expensive than workers, because you need to program the robots (needing still uncommon and thus very expensive, know how), and you are likely need more and / or more complicated, thus more expensive robots.
One big impediment is that the programming of the robots needs to be very exact. It has to catch not only the common failure modes, but next to all failures – and that’s something human programmers are bad at (i’m a programmer), and that isn’t getting better, unfortunately.
That also means the company has to do very extensive tests along the whole chain of robots, adding even more complexity (and the complexity already is high).
And that means the company has very expensive reasons to produce large series only, and change them rarely.
So the famous Xpeng Motors fab will not produce customized vehicles.
AI isn’t currently suited for that. You don’t want mistakes in that kind of fab, and AIs make mistakes. You can’t even rely on AIs to do only small changes.
That’s really a show stopper. A sixth finger on a hand – that is something to laugh about. If your AI randomly includes code to destroy the neighbor robot, then noone laughs.
Then there is the insurance problem. Insurance companies insist on processes, and AIs don’t follow processes and their thinking can’t currently be documented, because there is no real reasoning behind it.
Thinks will change, of course.
FWIW: According to https://www.reuters.com/business/autos-transportation/chinas-auto-workers-bear-brunt-price-war-fallout-widens-2023-09-05/, China employed 30 million workers in their auto and auto supply factories in 2023, producing in the neighborhood of 20 million cars.
A great article. Dr. Hudson & Wolfe agree: you can’t re-industrialize America in a few months. But a rumor floating around on Twitter seems to indicate that “the work force” Industrializing of the US would be done by Robot-Forces. What a great way for the Tech Billionaires to earn billions of $$s.
They give at least one job: mine.
I’m a FANUC certified Mechatronics Technician– industrial automation is my thing.
Got into the field during a mid-career change of professions, one undertaken after a lot of careful thought and study. I do recommend consideration of this line of employment to ones who have the interest and aptitude– it has treated me very well and I have no worries about ever wanting for work.
One can hope and wish for a return to the manufacturing heyday of America post WW2. However that was then and it was a long ago era. If one listens closely enough to administration personnel including Peter Navarro or Howard Lutnick, they appear deadly serious than American workers will build cars in Detroit or the upper Midwest again just like it was the 1960s.
Get in the DeLorean Marty! We’re going “Back to the Future”. That movie is fiction of course, much like the desired outcome in these tariff efforts by the aforementioned administration people. The only reasonable talking point I’ve heard discussed was the suggestion of tradecraft as a means to full time employment, college degree not necessarily required. South Carolina has training programs, for example, as I’m sure many other states feature as well.
The analysis misses the nitty-gritty of (economic) geography: factories need to located near the center of the market. For example, Tesla is the only car plant west of the Rockies in the US, after GM and then Toyota left Freemont for plants in the I-75 / I-65 corridor. There used to be auto assembly plants along the East Coast, those all closed, though BMW is in South Carolina for access to ports, it imports its engines while exporting more vehicles outside the USMCA than any other car company.
Lots of locations that used to have plants no longer make sense.
Then there’s the hiring side. I don’t think it’s possible to locate a plant that would need 1,000 “new” workers anywhere near me (the Shenandoah Valley). A modern plant needs people who understand basic math, who can stay on their feet all day, and without commuting an hour each direction. People in healthcare may fit those requirements, but all the healthcare facilities in my region are short staffed. But you also need an experience purchasing manager, an experienced maintenance crew, experience production managers, and of course engineers to design plants and products. You can’t build that sort of experience overnight, and that’s a huge barrier to reshoring.
Note too that long value chains work against reshoring in automotive and many other industries. The current supply chain relies on highly specialized plants that are currently scattered around the world, there’s lots of randomness as to where they are, but thet all need a global market to achieve a decent volume. Replicating those plants simply can’t be done, experienced teams are their core and not just specialized production setups that are highly proprietary. US customers will simply have to eat the tariffs.
Since automotive isn’t a high-margin industry, that means higher consumer prices, and lower volumes. The latter work against new investment, even were the policy environment stable. It’s not, vehicle safety, emissions regulations, taxes, much less costs – no one knows what those will look like a year from now, particularly since the industry has shifted long-term R&D and investment planning to EVs and not ICEs. Are all those now stranded assets?
It’s not being “trump-eted”, but the auto industry is already delaying new model development (and all the jobs that come with that) because they don’t know what safety requirements will be, they don’t know what emissions and fuel efficiency requirements will be, and they have no idea what costs will be. Most of their manufacturing costs are for purchased components and materials from “Tier I” direct suppliers, not for assembly plant costs. While low USMCA tariffs are still in effect for components, that appears more and more likely to change on May 3. Until then, Tier III suppliers won’t know what their costs will be, so Tier II suppliers can’t begin negotiations with the Tier Is, and the Tier I’s can’t even guess what they will need to charge their car company customers to cover their costs. Since almost any complex component has parts cross USMCA borders multiple times, will there be a drawback, to deduct US context, or will tariffs cascade to create effective tariffs that are 40% or higher? In many ways that’s moot, because no company is staffed to do such calculations, and US Customs will need to add staff and upgrade related IT. The likelihood is that numbers of small US suppliers will simply stop shipping, until such time as they know their customers will pay higher prices, and renegotiating across the supply chain will take time. Oh, and that implies that assembly plants will all have to close until that’s finished, because just-in-time efficiencies mean there’s not much inventory in the system.
Videos of Xiaomi’s newest car factory have been floating around since their cars went on sale, well before the tariffs rollout…..not a human in sight.
compare/contrast when CNBC “file footage” video of a Tesla plant–which is essentially no difference from a plant from 1985, except that with some more automation and the product is electric.
Makes me want to beat the Trump sons’ heads against a foam wall—-and tell them, you all need to make your father save him and us….2025 is not “Turbo America” from Christmas Day 1945.
https://www.youtube.com/watch?v=yezR-mH12xs
https://www.youtube.com/watch?v=mr9kK0_7x08&t=310
PS, a 3% universal tariffs to nudge production and decrease the negative externalities of long supply chains (my love of Chilean fruit in the dead of winter) is good—-with maybe a 7% temporary negotiable surcharge on the most egregious trade offenders is good.
This rollout is a self-defeating dumpster fire for everyone…..and of course after all this settles or parties change, the pendulum will swing the other way to Turbo-NAFTA and the Davos Crowd won’t hesitate to press their advantage.
Thanks for finding up those videos. I was thinking of car manufacturers, especially Tesla, as Trump is obsessed over them. Tesla cars are notorious for problems such as bits falling off, rust, etc. and the Tesla Cybertruck has even worse problems. It’s not even road-legal in countries like Oz and the UK. I suspect that the Chinese cars would have far fewer problems. Had a thought a minute ago. Suppose that Trump was convinced that the US had to go with dark factories to build the new generation of American cars and he gives the nod. But what happens next? Would those dark factories be in competition for energy with data centers dedicated to AI and ChatGPT? I could see that happening.
These are all very impressive videos and factories, and in many ways more advanced than most American production, but they’ve been shot and edited to only show certain automated parts of the assembly process. They rarely if ever show wiring or interior installation, which is overwhelmingly still done by humans. In the first video you link, the hood emblem is installed by a human, even though a robot could in theory do it.
I fundamentally disagree with the premise of this article, which infers that Trump has an agenda to actually accomplish something with the economy. I think his agenda is to amass power and have his ego fed by world leaders coming and groveling. He has a history of this, has been doing it in other areas, etc. And, there is no actual evidence that he cares about the middle class, nor has he at any point in his life.
‘I think his agenda is to amass power and have his ego fed by world leaders coming and groveling.’
He actually said, and I quote –
‘I’m telling you, these countries are calling us up, kissing my a**. They are dying to make a deal: ‘Please, please sir, make a deal. I’ll do anything, I’ll do anything sir.’
https://www.rt.com/news/615421-trump-tariffs-kissing-deal/
Did they say it with tears in their eyes?
Yes I think some version of this is closer to the truth.
When was the last time Trump drove himself? Or bought food, or cooked? Isn’t it amazing to think someone who’s never worked with his hands misses manufacturing?
As I watch and listen to the republican sycophants support Trump, I’m reminded of the democratic sycophants during the last 1-2 yrs of Biden, he’s fine he’s sharper than ever…
The idea that manufacturing is coming back in any level of quantity is laughable. The must read article is a solid piece, better than anything you’ll see or read in the MSM.
As someone who follows the renewable energy industry, this will stop almost all new projects that don’t already have product in hand. The vast majority of the us solar manufacturing that started under Biden is just assembling foriegn made parts, all of which will be subject to the tariffs.
The list of industries and businesses destroyed is going to be staggering.
Almost all bicycle components are from China, doubling the price?
Meanwhile have anyone heard from the dems with anything close to a plan even a idea or how about a thought?
“As I watch and listen to the republican sycophants support Trump, I’m reminded of the democratic sycophants during the last 1-2 yrs of Biden, he’s fine he’s sharper than ever… “
The discipline is exerted by the parties’ voting bases, who are jacked up by media, alternative and MSM. The electeds and apointeds live in fear of being caught out opposing their hyper-ideological voters, the MAGA men among the Rs, the PMC ideologues among the Ds. Just ask Chuck Schumer.
Not saying much can be done about this right now, other than to understand.
I agree with you here. Trump is someone who is politically savvy and has found a large, aggrieved base of people that will support him through a firestorm that he can exploit for his own petty ends, whatever those might actually be. It’s the same kind of scam that American politics seems to revolve around (eg: see Democrats “fighting for you” style politics while only ever delivering for the donor class). It’s just that this time the donor class has seemingly had the hand grenade go off in their own faces as Trump detonates their ‘free trade’ system, while the aggrieved base seemingly doesn’t care or even looks forward to blowing it all up.
Are they paying attention now?
This is elite snobbisme. Trump massively lied during his campaign about his plans, like being a president of peace, versus escalating on multiple fronts while still also backing Ukraine. Vets who were on his side have turned on him due to what he is doing to the VA. So have in large measure the black men who voted for Trump in a big deviation from historical patterns. He already had negative approval ratings before the tariff shock. Give this a few weeks and his support will plunge. You can’t hide price increases and shortages and they will become evident pronto.
Until Republicans in the House start fretting about midterm elections to the point of voting against the White House, what happens to “opinion” doesn’t matter. So far I have not heard of any Republicans in the House publicly breaking with Trump on tariffs, or anything else for that matter. Even then, until they get behind a specific piece of legislation to rein in Presidential discretion on tariffs, with a veto-proof set of backers in the Senate, a public break doesn’t matter. The House only has to shift by a few votes, but since Trump would veto any such bill, a few defections isn’t sufficient.
Unfortunately, trade law has escape valves deliberately legislated in. I seem to get 1-2 White House press releases on tariffs in my Google News feed daily, they all carefully cite Fentanyl in the title. To my knowledge no court has taken up whether that constitutes an emergency in line with whatever was discussed decades back when trade legislation was last redone. Somewhere I may have an old edition of Douglass Irwin’s history of US trade policy, while likely discusses safety valves. I’ve been directly involved only with one, antidumping, where industries can file a complaint that gets taken to the ITC (historically, no economist was ever appointed as a commissioner – but I don’t know if that’s changed the past 10 years).
(Aside: I have a substack article here on why border controls are doomed to failure. My 7 most recent ones are all on the auto industry.)
1. Republicans have long had vastly stronger party discipline than Democrats.
2. Trump is fabulously vengeful. If you step out of the R herd, you are running the risk Trump will go after your district in some way and blame it on you.
3. Linking to your own posts is a violation of our site Policies. Please do not do so again if you want to retain your comment privileges here.
Apologies about the link, I likely have never read the site policy.
Yes, Trump is vengeful, and Musk has promised to throw money into an opponent for anyone disloyal. (Trump to my knowledge has never spent a penny of his own money on election campaigns, including his own and not just in support of fellow travelers.)
My local congressman has a strong farm constituency, and his latest newsletters talk about working to increase farm subsidies. His phrasing is nervous. I’m not sure why – he had 65% of the vote this last election, though that is down from 70% in the previous one. I doubt Musk could find someone who could unseat him – but a split vote might give a Democratic candidate a chance.
I am not hopeful.
It reminds of the stories about Andrew Johnson after the Civil War. He was far more interested in having the old plantation owners and state governors kissing his ring rather than in prosecuting the traitors who led America into Civil War, which basically set America up for decades of KKK terrorism, Black Codes, Jim Crow, and the Southern Strategy, which in turn led to Bush/Cheney, and now Trump/Vance.
A petty, vindictiveness rules Trump, and Trump in turn rules the presidency much to the USA’s ruin.
Re “The effects of tariffs are also doubled-edged. They will probably shift some manufacturing back to the US – but this could be self-defeating. More US steel production is good for workers, but the higher cost of US steel feeds through to higher prices for the products manufactured with it.”
Is the assumption that higher US wages/benefits are always going to make our products more expensive? Why is it that offshoring jobs to lower wage states created larger profits but bringing them back must be paid for by workers? Why not bringing them back be paid for by lesser profits? (Stifle your laughter, please.) A simple tax on off-shored profits would suffice to “level the playing field.”
Germany is a high wage/benefit state with a robust manufacturing sector and they can do it but we cannot?
>>>>Germany is a high wage/benefit state with a robust manufacturing sector and they can do it but we cannot?
Germany *WAS* ….30 years of gutting domestic worker protections, pay. Merkel pivoting to open migration.
accelerated by German outsourcing to Eastern Europe, Mexico. Then the coup de grace was the energy sanctions on Russia
And German manufacturing skewed to the high-end of non-commodity consumer and induatrial goods.
German companies and citizens enjoy public healthcare, lowering overhead for companies and expenses for workers.
Germany also has a loser pays legal system with a much more streamlined and lower cost legal system For the last 20 years they have consistently underfunded the public health care system and allowed a private US style system to grow causing an explosion in costs. Law, healthcare political bribery and real estate are major components of manufacturing and employment efficiency and ones the US will continue to fail on. China has tried to follow the lower corruption Lee Kwan Yew model
Yes, Steve Ruis, I notice no one seems to mention all those profits the multi-national corporations that off-shored factories in order to break US unions and exploit desperate workers in the Developed World – in addition to polluting at will – have enjoyed. Not to mention all those share holders who have been getting great dividends for decades while the working class has degenerated. I, too, wonder why this isn’t often discussed in the Trump Tariff hatefest. It seems the prevailing narrative which supports keeping things the way they are serves to keep those who profit from “free” trade still on the gravy train. The arguement that if we reshore, all those cheap items, that are clogging up our homes and landfills, will become more expensive holds little water with the working poor. It is likely products made in the US WILL become more expensive. But the complaints I am hearing from the working class are not about not having the money to buy more stuff, they are about the rising cost of groceries, utilities and rent.
I don’t like Trump and I don’t like that he is blaming other countries for the trade deficits that are caused more by the greed of our multinational corporations than the workers of poorer countries wanting to better their lot in life. I also think he seems to have this fairy tale idea that factories and supply chains can be built in a few months. But at least, Trump is making an effort to remedy the deindustrialisation that has gutted our economy and our nation. Which is more than his predecessors have done. And the truth is, it is “free” trade – the exporting of factory work and then the ability for corporations to bring the finished products back to the states without paying any penalty or price for the privilege of entering our markets – that is the problem. Without tariffs to level the playing field, reindustrialisation will never happen.
Have you seen evidence of this? Who is advising?
Well said, Valerie. I couldn’t agree with you more!
BINGO!
Thank you. What is needed is a comprehensive plan rather than just tweaking one parameter in the economy and hoping for the best. Products could become more expensive through tariffs, but if we had a national healthcare system and free higher education, fiscal and monetary policies that weren’t designed to primarily benefit the already wealthy, increased wages for workers, and an upper class that was OK with millions rather than squillions, it would go a long way toward reproducing the more equitable society we did have for 40 years or so in the 20th century.
Unfortunately, no such actual plan is on offer, and it hasn’t been since the neoliberals started trashing the New Deal. But that doesn’t mean it’s not possible – we have done this before.
“The main cause of manufacturing’s decline is rising productivity. ”
On which planet? Upstate NY is quintessential rustbelt. I worked at the railroad 74-82 and had a front seat view of the early decline. By the time I was laid off (thanks to Carter’s deregulation) many plants served by 30+ local switching crews were already closed. What was left in the 80s was decimated by NAFTA and WTO in the 90s and 00s. Virtually every manufacturing plant served by the railroad closed by either offshoring or foreign competition. Huge plants like Carrier (9000 jobs), New Process Gear (4500), Fisher Body (2000), Syracuse China (1000) and a host of others in the 500-1500 range were closed in this era. They are all gone, wiped out by free trade, lack of investment, financialization and the high cost of doing business in the US. The impact on the city and older suburbs is stark; what had been a solid middle income working class community is now a rotten shell with some of the highest poverty rates in the country. But the democrats have a “not Trump” plan to save us!
Biggest corporate employers in Rochester are supermarket chain Wegmans and software Paychex. Biggest manufacturing is defense contractor L3Harris. Of course no amount of tariffs is going to bring back Kodak Park.
I am not very confident that on-shored manufacturing facilities will be immediately highly automated. As with every other facet of cutting-edge technology (EVs, hypersonic missiles, missile defense etc.), the US feels to be a bit behind China in this field.
My impressions are mostly based on insights gained from a nephew that runs a (struggling but getting there) startup in robotics. He has talked to over 200 industry participants in the past two years and says that:
– Almost all hardware like actuators etc. is still supplied from China, the only bulk suppliers around
– Despite the optimism of LLM/AI+robotics etc., the main challenge remains that of coding up algorithms to get a robot arm to reliably and quickly repeat the tasks it is needed for. Not a solved problem in US manufacturing at this point.
– China seems to be the only place where these ‘dark factories’ have been built at some scale. It is logical that they would be ahead since that is where the bulk of all manufacturing happens and so has tons of opportunities to gather the data needed.
This leaves us with awkward questions to answer: Why would China ship robot arms or parts in bulk to the US? Where else would US manufacturers source ‘dark factories’? No one is going to give away their golden goose. I think a ramp up of automation is not a done deal, especially in the scope and time scale Trump seems to desire. More chaos from ill-thought-out policies.
bingo. which is why it’s looking like this is October 1914 (trade war wise) given China’s stoic, tit-for-tat response
I commented the other day that a worker powered resurgence of US manufacturing will be transitory at best because nothing focuses the minds of oligarchs like eliminating labour as a cost centre. You’re right, Chinese industrial robots are well clear of anything the US can field at the moment because of the dexterity enabled by a combination of superior computer vision AI and actuator control software. Although Revenant took a different view, i’m still convinced US techbros will throw capital and engineering talent at the problem until they “get it right” (meaning just good enough to churn out crappy products). There’ll likely be a bump in factory jobs in the beginning allowing Trump to declare himself the hero of working class Americans (assuming Americans want factory jobs to begin with as I’ve been hearing they may not necessarily be interested), then the robots will begin their march onto the factory floor but he will have moved on to other demolition projects by then.
I happen to work in that space right now, programming robots to help with machine tending, as well as programming automated quality control inspection of articles.
Not all hardware for robotics comes from China, a good number of suppliers for robotic hardware come from the EU and Korea/Japan, both areas that have become more expensive as a result of the new tariff regime.
Training/setting up a robot arm to repeat tasks is also not a difficult problem to solve, at least in the tending side of things. American pharmaceutical companies have been using robots to automate transporting, preparing, and testing chemical samples for drug research since the 90s. A good bit of the computer vision algorithms used by SMT and electronic board manufacturing with AOI machines (Automated Optical Inspection), can also be leveraged for precision screwing/fastening/application robots.
The problem with re-shoring, is that everything I described is only competitively profitable against FIRE schemes at the end-product stage, and not with intermediary products or widgets that get assembled into the things we make. For example, camera lenses, heat sinks, some specialized fasteners, circuit-board components, other machined parts, are mostly imported from China, Mexico, or other SE Asian countries, because there’s either no existing fully-US supply chain for those things, or none that can deliver at the volumes we need.
This means that there’s been, and will continue to be, chronic under-investment for intermediary production in the United States. Many of the machine shops, plastic molders, etc. in the US are run by men in their 50s and 60s who inherited the shop/factory from their father or grandfather who built them between the end of WW II and Vietnam. Many of them that bought CNC machines in the 70s and 80s that were cutting edge then haven’t bothered to replace them or otherwise update their methods to improve productivity in their own shops for the last forty years.
We knew something was wrong when the housing prototypes we 3d printed in-house for one of our products ended up being higher quality than the mold-based mass produced housings we got, and forced us to more thoroughly investigate the US-sourced side of our own supply chain. Unfortunately, investing in updating a machine shop to add computer based visual inspection/quality control or visually guide their milling machine isn’t as sexy as investing in AI, or as lucrative as buying up housing or selling people’s data.
China has no problem giving us robots or other parts because they know they’re not the exclusive supplier for these things, so better to get some money for something the US will acquire anyway. But also that even if they sell us those things, we’re not going to immediately be able to re-shore the whole supply chain with those things. And if we (the US) decide to get uppity and try to blanket tariff those intermediate parts, we shoot ourselves in the foot because it makes those final products more expensive and less competitive.
Unless the cost of living is brought down, and by extension FIRE doesn’t provide a better ROI then mundane middle–of-supply-chain manufacturing, the US will still have to rely on Mexico, China, Vietnam, Singapore, Korea, Thailand, and Indonesia to provide those parts. Otherwise it will make no sense for private investment to try and re-shore those things here. (Industrial planning and government investment would also help, but any administration that wanted to do that would have already put FIRE out as a part of that planning)
If they aren’t highly automated, they won’t be cost competitive. Your line of argument effectively says there won’t be reshoring.
And it’s not just machine tools, reshoring means finding experienced industrial engineers, plant managers, quality control people, purchasing and logistics managers, and of course workers able and willing to stay on their feet for 8 hours. All when thousand of factories are all trying to do the same, and in an economy where we still (mid-April) have low unemployment.
Even were there the will, there is no way.
Imagine a company going to there bank.
– How much will it cost? … “we don’t know, we can’t get engineers to redesign our Mexican plant for the site we’ve picked out, and we don’t know how much it will cost to get the machinery because we’ll be bidding against 350 other firms that are after the same basic equipment, and the Korean suppliers of our specialized equipment won’t quote us a price until we are ready to place a deposit on an order”
– What is your timeline? … “we don’t know, we can’t find construction workers and electricians to build a specialized facility”
– What is your profit margin? … “well, we don’t know how many of our suppliers will relocate to the US and what they will charge us so we can’t be sure of our costs”
– What of price and volume? … “price we know: 25% higher to match imported products.”
– And volume at a 25% higher price? … “well, uh, we hope we can sell as much as our Mexican plant currently produces”
– Can I talk to your plant manager? … “well, uh, we’ve not yet been able to onboard a person with the right experience”
– Well, how many candidates have you found? … “uh, we’re still looking”
– Well, how many applicants do you have with any experience? … “uh, we have one retiree who will come back to work at double his previous salary. for a year.”
The oligarchs were all giddy when Trump telegraphed his intention to swap out tax for tariffs as the principal value capturing mechanism of the US government. He came bearing the gifts of a libertarian’s wildest dream, tax cuts, deregulation and slashing the size of the federal government, the future looked brighter than a millon suns. The working class would be thrown the red meat by promising a return to the glory days of US manufacturing before Japan had Detroit for lunch. The story went something like this: Trump would help the oligarchs slay the tax monster while pulling their businesses out from under the oppressive weight of regulation, the masses would be put to work in factories, and international leaders would beat a path to Maralago to come and grovel for access to the valuable US consumer, and just like that America would be great again. Well, it’s not quite turning out that way and some oligarchs are popping their heads out of the MAGA echo chamber and realising that their portfolios are dropping fast and they’ll probably be fielding margin calls very soon if the wrecking ball that is the Orange Emperor and his ego aren’t stopped.
Ian Welsh makes the point that a nation having manufacturing plants is key to being a top nation in science & technology. China becoming the top manufacturing nation likely contributed to China leading in 80% of 42 science/techology fields according to the recent Australian think tank report.
In my view, the science & technology issue alone could be reason enough to retain high-tech manufacturing, even if the employment benefit become low due to robotics/automation.
Yes, this is a great point that he makes often: “innovation happens on the factory floor”. There are a lot of ancillary benefits of having a more robust manufacturing sector. It seems like the economists are only ever focused on the ‘jobs’ part, and not all the rest. They talk about how we need to dominate the high end of manufacturing (so planes, jet engines, cars, etc) but no questioning if that is even possible long term if your society allows the rest of the manufacturing ecosystem to wither.
“Look over there! A tariff! We’re rebuilding the Arsenal of Democracy!”
This is typical Trumpian misdirection. The entire “crisis” has been manufactured with a single goal in mind: massive tax cuts for the wealthy. This is the only “manufacturing” that is ever happening as a result of Trump’s trade war.
Trump rants on about the Gilded Age which he pegs as ending in 1913. Why 1913, you might ask? Because that was the year that the Sixteenth Amendment was ratified and the Federal Income Tax was substituted for tariffs as the primary source of revenue for the federal government. The Federal Estate Tax followed in 1916.
It’s not enough that the effective tax rate of Our Billionaire Overlords is a fraction of the rates imposed on the rest of us. As it is they only spend favorably-taxed capital gains and borrow against assets to fund their gluttonous consumption. Their intent is to ram through congress the elimination of taxes on capital gains and on passing on their estates to their indolent heirs.
They will pretend that eliminating capital gains taxes will benefit manufacturing but it only benefits those living off their accumulated wealth. Manufacturing reinvests profits and benefits from asset depreciation, not capital gains. Never let a good crisis go to waste.
A financialized economy is produces paper or “ones” and “zeroes” digitally. Neither can be eaten. Neither can clothe you. Neither keeps off the rain. Such an economy is in a real sense a fiction. Why else speak of the real economy? The economy of things that provide food, clothing and shelter. Suppose you were to strip away mobile phones, computers, television, food delivery services, fast food chains, door bell cameras, sundry robots, and so on. You would be back in the world in which I was born and in which I became an adult. Was it as instantly gratifying? No. Do I care if it is instantly gratifying? No. But most had jobs that were more or less satisfying that permitted lives that were more or less fulfilling and their children went to schools that actually provided a basic education and opened pathways to more. All that was lost in the rush by greed to China and elsewhere so it could shed those high priced employees and destroy those pesky unions and return the world to one in which they could dominate if not tyrannize their underlings. skip forward not too many years and ask yourself this question. What do the oligarchs, plutocrats, fat cats … call them what you will … and their PMC servants do when the “Underlings” have been reduced to such desperation that they have nothing, even death, to fear? That is the trajectory the US is on. What then?
Heard it once in a film and have never forgotten it-
‘Never cheat a man with nothing to lose.’
The view from 2019 (Trump 1.0)
https://cluborlov.wordpress.com/2019/08/27/resurrecting-the-american-economy/
But perhaps most importantly, it must be understood that repatriating production to the US and redeveloping the industrial base will not be a profitable venture, at least not initially. At the outset, and for at least the duration of the first Five-Year Plan, it will definitely lose money. Borrowing it is a bad idea; the federal government is already $21 trillion in debt. Instead, this money needs to be confiscated from the top 1% of the population which owns close to 40% of the country’s wealth. Doing so will yield roughly $50 trillion—more than enough to fund this project. This is best done as part of a Cultural Revolution: round up the one-percenters, make them wear dunce caps and march them through the streets while pelting them with fruits and vegetables and heaping verbal abuse on them. Oh, and take away all of their money and sentence them to a lifetime of free public service.
The legal and health care system force corporations to fork over billions which would be minimal in most other countries…only a total fool would build in the US….
World War III is all it takes to make America great again.
The White House has just announced a 90 day pause. That’s scant reassurance, since Trump has paused before. He didn’t announce that he’s firing Peter Navarro, or Howard Lutnick, or any of the others who actively supported his tariffs, and he’s still full steam ahead with China tariffs, so it’s clearly not a change in principles, evidenced by a change in advisors.
But the pause may give me enough time to find another car to replace my wife’s 11-year-old SUV. 😊 I bought a small pickup Monday, replacing an 11-year-old sedan and 20-year-old full-sized pickup. I am taking “pause” as the operative term, a tactical delay not a real change in heart.
Somebody blinked, and it wasn’t China:
Dow surges 2,700 points for biggest rally in 5 years after Trump pauses some tariffs: Live updates
https://www.cnbc.com/2025/04/08/stock-market-today-live-updates-.html
And as Chris N states above, there cannot be a re-shoring of manufacturing in America until the industrial policy set by the FIRE sector which uses parasitic, rentier, and strip mining of Americans and America’s assets is reformed in some manner.
As I said on another post, I had told a few people that if Trump did not back off the tariffs in at most a month, there would be a coup in at the very most three months
Wonder who was front-running that announcement…
Ka-ching!
That’s all it was, wasn’t it? A gift to his insider buddies, after a two-day market massacre.
The other day, Yves offered up a nugget of wisdom that our MBA (or government, or corporations for that matter) are not very good in managing retreat/downsized market. This applies to “making/ building things” as well. We are cultured now to be good in rent seeking. It would take an entire generation to be good at making things again. In the meantime, any tariff will simply be a transfer of wealth from consumers to TPTB. If that brings in deflation ( a non zero possibility), God help us, we are not very good at managing that.
News just in: sorry to be off-topic, but Trump’s been bush-wacked by the US billionaire/million Class: back off of your Tariff Threats for 90 days. Done and dusted.
Now we know who Trump’s masters really are. :)
Well if you remember his swearing in, he had a whole line of billionaires sitting front and center and in front of elected Congress people. He was telling us all what he was about right there.
Be interesting to hear from labor leaders during the steel crisis on what the was sacrificed to allow EU to dump steel into the American market. If memory serves, Europeans agreed to not dump, but in fact keep dumping. Tariffs in this case would not have been a double edged sword, but only one edge. That edge would have been to help a critical industry and its workers against unfair trade practices. Unless of course one believes that unfair trade practices are okay if prices are lowered.
Some argued that American steel companies were not picking up better practices. BS. In the mill I worked they had up and running BOFs.