Think what you will of President Trump’s chaotic-seeming tariff policies. The ostensible goal — the revitalisation of US manufacturing — is of decisive importance for the success of the nation. Or put another way, America is unlikely to maintain global primacy with finance, services, and high-tech alone. All the capital, nice hotels, and mind-bending apps in the world can’t replace factories. While tariffs may prove a good start toward this goal, they are hardly sufficient.
Tariffs are hardly a MAGA invention, of course. On the contrary, the United States has levied protective tariffs almost from its origins as a nation. Tariffs and import substitution formed one of the central pillars of Alexander Hamilton’s political economy.
Today, Europe screams about Trumpian tariffs, but the Continent has been reluctant to lower its own historically high protective barriers, most of them based on non-tariff regulatory policies. Canada, too, has been very protectionist and for a long time. Now, after decades in which Washington put global integration over its own workers and industry, America is playing the same game.
The benefits of Trump’s tariffs will take time to become apparent. Already, they have spurred companies like Eli Lilly to recommit to domestic production, forced Honda to scrap plans for shifting production of new models to Mexico in favor of Indiana, and prompted chipmaker Taiwan Semiconductor and Samsung to build new plants in Arizona and Texas, respectively. Likewise, Nvidia, a company that long offshored its production to Taiwan, has committed to multibillion-dollar development projects.
Still, job recovery is gradual. US manufacturing revival has been a bipartisan goal, pursued in fits and starts, since the Great Recession. As the Reshoring Initiative notes, the country has managed to claw back approximately 1.7 million jobs in an effort to bring manufacturing to or nearer the US homeland. This could just be the beginning. By some estimates, as China rises up the value chain and production costs there increase, up to a third of all Chinese capacity will move away from the Middle Kingdom in the near future.
This shift gets an unintended boost from the increasingly hostile atmosphere in China, which confronts even big, established firms like the appliance giant Whirlpool, General Electric, Caterpillar, Goodyear, General Motors, and Polaris. Most recently, Chinese exports to America dropped to the lowest level since the pandemic, driving the trade deficit to $280 billion this year, down from $500 billion under President Joe Biden.
Yet the road from here is by no means easy. One key concern is that firms will merely shift production from China to other third countries. This would be a plus in terms of weakening Beijing as a rival, but only domestic production in key industries can guarantee US economic preeminence and, with it, US geopolitical primacy.
Like any trend that enriches some, reshoring faces strong opposition from those who benefit from the offshoring trend. You can start with the greens, whose anti-growth ideology and embrace of “net zero” are simply incompatible with industry-led economic growth. Their view boils down to letting the Chinese and their satraps do the dirty work, while America and the West purchase the products from the world’s No. 1 polluter.
Read the rest of this piece at: UnHerd.
Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.
Photo credit: Mark Cleghorn; Roy Bearden performs flux cored arc welding on a M1 tank. Public Domain.
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