April 24/May 1, 2017: Volume 31, Issue 23
By Reginald Tucker
Lower corporate tax rates coupled with a slightly weaker dollar, less regulation on business and renegotiation/restructuring of historically lopsided trade deals. These are the key measures that Harry Moser—president of the Reshoring Initiative and one of the foremost authorities on all things related to onshoring—believes will give U.S. manufacturing a much-needed shot in the arm. “If President Trump gets those things passed, I see millions of manufacturing jobs coming back to the U.S. over the next 10 years.”
Following the election of President Trump, leaders of the Reshoring Initiative —a non-profit advisory group focused on bringing American jobs back home after they were outsourced to other countries—recommended a robust national strategy to achieve then President-elect Trump’s goal of returning millions of U.S. manufacturing jobs. During the campaign, Moser said, candidate Trump focused on seemingly uncomplicated actions such as imposing 35% to 45% tariffs on Mexican and Chinese goods, renegotiating trade agreements such as NAFTA and cutting the corporate tax rate to 15%. President Trump, he noted, will need to utilize a broader portfolio of actions, especially those that are proven and can be unilaterally implemented by the U.S. and passed by Congress.
“The country has a unique opportunity to address a broad range of economic and social issues,” Moser said. “Reshoring’s success bringing back hundreds of thousands of jobs in the last six years despite the headwinds faced by U.S. manufacturing is proof that millions can, and will, be brought back when the headwinds are eliminated.”
That movement may have already begun, Moser said. By his count, the rate of reshoring announcements has doubled in November and remained at that level. One prominent example is the Carrier Corp. case—the commercial refrigeration company that was persuaded by then Presidential candidate Trump to scale back jobs it had planned to outsource to Mexico.
At the same time, there are critics of Trump’s economic policies who argue that his proposed tax cuts—which would, theoretically, fuel investment, hiring and economic development—would actually result in $6 trillion in lost revenue over the next decade (“Donald Trump’s Economic Plan, Up Close, Doesn’t Add Up,” The Wall Street Journal).
Trend or anomaly?
The reshoring phenomenon is not a passing fad, according to Moser. If you look at the balance of flow of jobs going back, say, 15 years ago, the U.S. was losing about 200,000 manufacturing positions a year to offshoring. But by 2016, he said, we were—net—bringing in 20,000-30,000. “That’s a reversal of about 250,000 per year. We’ve gone from a huge net loss to a moderate gain.”
Moser is primarily seeing more manufacturing positions crop up in industries such as transportation (automotive, specifically), machining, electronics and, surprisingly, apparel. The regions generating the most investment, he said, are the Southeast U.S., Texas, Michigan and Ohio. “GM and Ford have brought back work from Mexico especially, and we’ve had Toyota as well as the German car companies investing billions and hiring thousands of people.”
In the home furnishings category, Moser also reports big names such as Ethan Allen, Emerald Home Furnishings, LaZ-Boy, among others, have also increased domestic production in recent years.
Reasons to return
In the past, U.S. manufacturing companies looking to save on production costs merely looked at one variable in making their case to move more production offshore: the flat cost of labor. But with wages in China rising about 12-15% per year, there is no longer a clear-cut advantage. “The cost difference in China has shrunk to the point where other factors become significant enough to offset that remaining difference,” Moser stated.
Other factors supporting U.S. manufacturing: higher productivity, lower electricity costs and lower capital equipment costs.