One of the stated goals of US trade policy is to increase domestic manufacturing. Since the 1980s, American companies have outsourced much of their production to low-wage countries. But now, with new tariffs offsetting some of the cost advantages, the tide is turning.
Many may be surprised to learn that even with a large portion of our production being transferred to other countries, the United States still ranks second among the world’s largest industrialized nations, trailing only China. We produce about $3 trillion worth of manufactured goods annually, and just under 13 million workers work in this sector. While this is an impressive statistic, it is still a far cry from 1979, when there were 19.5 million Americans working in our nation’s factories. Due to low birth rates and current immigration policy, we will likely never have enough workers to reach these lofty levels again.
So, beyond the current push from tariffs, what would it take to restore America’s manufacturing prowess?
First, we must look at what we do well and what products are most important to manufacture locally. Certainly we should look at which commodities are important and which ones we may not want to outsource for security reasons. The country has already taken steps to ensure locally produced supplies of items such as semiconductors, but this is not enough. We also need to ensure that we can quickly scale up production of heavy equipment and technology needed for defense purposes.
It’s a similar story with medications. Most of the world’s supply of pharmaceutical ingredients comes from India and China, two countries that are not at the top of the administration’s Christmas card list. We need to develop additional sources of these ingredients and enhance local production of biopharmaceuticals.
But even with these steps, the manufacturing jobs of yesterday will not return, largely because of rising labor costs in the United States. Instead, tomorrow’s factories will need to be highly automated. The problem is that we do not have enough workers trained to operate and maintain today’s complex manufacturing equipment. These tasks require trained mechanics, tool makers, industrial engineers, etc., all of which are currently unavailable.. If we want to expand our industrial base, we must revamp our training and education systems.
Ultimately, it will take a mix of government and business working together to build our local manufacturing capabilities. It will take significant incentives and investments to make American manufacturing competitive with the rest of the world and remain profitable at the same time.
