Posted on 09/03/2019 9:24:11 AM PDT by SeekAndFind
President Trump and other mercantilists are hoping that his tariffs will drive U.S companies out of China, perhaps even back to the United States. They can keep hoping. It’s not likely to happen.
In a further escalation of his trade war, on August 23 Trump “ordered” U.S companies to leave China, or even return to the United States. This prompted a debate among legal scholars as to whether he even has the authority to do that. Regardless of whether he does or doesn’t, it is unlikely to have any impact.
A proviso is called for here. Some U.S companies are already leaving China - and started to before Trump became president. For one thing, wages in China have been climbing. Since 2008, the average wage in China has tripled. But rather than return to Ohio or Pennsylvania, companies are departing for Vietnam, India, Indonesia and Bangladesh, simply accelerating a move that was underway long before Trump launched his trade war.
Will the corporate exodus pick up? Likely not much. For one thing, companies would have to worry about whether the country they choose to go to would be the next target of protectionist wrath. That’s one of the problems with pursuing a protectionist trade policy - one never knows what country will get a target painted on its back next. Unable to decipher any hint of a long-term plan, U.S companies simply have to function on a day-by-day basis.
India is a good example of a future target. Trump has already removed zero-duty access on $6.3 billion of Indian goods. The Indian government has threatened tariff retaliation.
Vietnam is the most frequent country of choice for U.S companies departing China. Vietnam was already becoming the second Asian home of production for U.S manufactures long ago. Nike moved there in the 1990s, and Cannon copiers in 2012. But while the country is seen as a great place for textile firms, toy makers and footwear manufacturers, and even furniture makers, like most Asian countries it has neither the infrastructure nor the skilled workforce most companies need. Vietnam doesn’t even have the population. It is about a tenth the size of China. If a large number of U.S companies were to move their operations there, the country’s ability to serve as a supplier would be maxed out in a year.
In response to the import taxes on China, some countries have developed supply sources in other Asian countries - with the cooperation of the Beijing government and Chinese companies. Much of the raw materials are still sourced in China; Asian production capacity is simply widened.
While we will no doubt see some companies leave China, few will return to the United States. For one thing, there are simply not enough workers available in a mature economy with a low unemployment rate and a growing proportion of seniors. Domestic labor sources do not exist on the scale that would be needed - one of the reasons the Taiwanese firm Foxconn revamped its investment plans in Wisconsin. U.S consumers would have to build a whole new infrastructure - factories, domestic supplier chains, worker training - a task that would likely take decades. As it stands now, with hour a massive return of production facilities, The United States will soon need a half-million more skilled workers. Deloitte estimates it the country will require a couple of million by 2030.
For another thing, the United States no longer constitutes as big a market as it used to. By 2030, it will be accountable for only 7 percent of sales - less than a third as much as China.
Given comparative growth numbers like this, it is not surprising to see corporate executives salivate at the idea of increasing their Chinese footprint. Trump railed against GM for shifting some production to China - a week after China announced projected 25 tariffs on U.S-made automobiles. GM’s operations in China are actually aimed at the growing China market, where they can expect to sell more cars than in the United States. Last year, the company sold 3.6 million vehicles in China - compared to only 3 million in the United States. Despite the fact that it already faces punitive tariffs against its products from China, even Apple shifted production of the Mac Pro entirely to Shanghai. The United States simply doesn’t have the clout it once did.
The biggest problem the United States faces trying to repatriate companies is the fact that American wages are just too high. The average wage for Americans is about $60,000 per year, many times more than China, India or Vietnam.
If Washington tried to somehow force companies to repatriate their operations, domestic firms won’t be doing much hiring, at least not of American blue-collar workers. They will take a look at the cost of robotics, and realize that it’s a lot more efficient to shift to robots than pay increasingly scarce blue-collar workers $50 an hour. There would be more production in the United States - but no more jobs. That would be a boost for Silicon Valley firms that provide much of the AI software, but would just intensify the wage gap.
Of course, robots are not yet able to meet the needs of some companies, such as footwear makers, which require detailed, intricate work. If they are forced to compete from the Unites States, many of these companies will simply go out of business. Would Nike be able to compete with a European or Asian firm if it was yoked to U.S wage rates? More likely, they would look at Asian growth rates, and move more operations there. Again, the only result would be fewer jobs in the United States, and more in Asia.
Anyone hoping that blue-collar jobs will magically return to the United States can stop hoping for any such thing. Those jobs are gone. There is no point in crying over spilled milk.
Realist? Is that what we call traitors now a days?
Economics aside I still think there are valid reasons to keep the fight against China:
1) It is more ethical arguably to import products from Vietnam India and Bangladesh than a Christian persecuting prison labor using China.
2) A trade war is a way the US can respond to Chinese atrocities against Hong Kong without military intervention
This is a Garbage Article by the same globalists usual suspects...
Here’s the reality...
Study after Study has shown that labor costs, while certainly lower in other places, do not remotely impact the end price of products as much as the globalists folks like to claim they do.
If you have a very, very labor intensive manufacturing process, then yes, labor costs are a large part of your end cost per item... however, very very very few things have huge human involvement in them anymore.... Most manufacturing is automated, and human involvement in the manufacturing process is very small per item produced.
When you factor in that US Worker productivity is among the best in the world, the cost of labor as part of your overall product is generally not that much different. Is it different? Is it a major difference in most indutstries and products, no.
Remember, this is the same crap that Obama and Hillary and their minions were telling you in 2008-2016, just get used to it those jobs aren’t coming back....
Yet we lost over 300k manufacturing jobs under OBama’s 8 years, and gained over 300k in just 2.5 years under Trump.
Don’t fall for this CRAP... We no longer live in a world where manufacturing is human involvement through the entire process... at least not in MOST industries.
Labor costs are an ever decreasing percentage of the cost of a product, no matter where they are manufactured or assembled... We are a far cry from the 1950s.
Agree completely.
And if what the writer says is true, then the whole argument “tariffs are taxes on Americans” falls apart. Instead production just shifts to other low wage countries.
My eyebrows also went up on the claim that wages have tripled since 2008 in China. Is that a loose fact? That just doesn’t pass the smell test for me.
Wages also are not everything. Not sure how many Americans know their history but production moved from Europe and England to America in the 1800s despite the fact Americas had HIGHER wages.
I have had the pleasure of witnessing several manufacturing job’s return to the US. Using new robotics, i have seen several young entrepreneurs start to supply custom , performance enhanced car parts from their 3D robotic printers. Those jobs are coming back, but not to factories like they used to be in. Most of them i have seen are small businesses using cutting edge technology.
The USA had protective tariffs which also funded the US Government. win - win.
I was not aware of that. How good of a deal do they get? Is that part of the war of words between Bezos and Trump? I do know that shipping is back ended on products marketed through Amazon. Meaning “free shipping” just means the third party seller ate the shipping costs on their product.
Was thinking about that the other day. How it would take Russia decades if it was wanting to try, to rebuild its military state of war it had in the early 1980s. Not a single person, maybe not even Reagan, could have imagined that the USA would have 10 times the military budget or Russia now.
Using those 30 foot wide stalls in business parks?
When I lived in Seattle I worked with a few parts vendors for Boeing. Some of them worked out of their garages or those business park spaces. A lot of manufacturing goes on like that - to this day.
The only problem is that every single employee needed will come from the right side of the Bell Curve.
Traitor is what communists call anyone who doesn't go along with their mindless agenda. Realists recognize the truth for what it is and work to mitigate the problem by finding solutions. Most agent provocateurs, traitors to a cause, hold communist views since rarely do freedom loving, independently minded people resort to such radical name calling.
Something we’ve heard before, I think.
Vietnam, India, Indonesia and Bangladesh
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That is still preferable to China.
China is an enemy.
How 'bout a counter argument based on reason instead of just being one yourself?
I am no fan of ObaMao, but I do recollect it was either the Clinton or Bush II administration which got China awarded with most favored nation status under the idiotic globalist theory that more trade would encourage them to be more peaceful.
.I hope companies understand that the USA is leaving the Postal Union on 10/17/2019
Following the Trump letter to the Postal Union on 10/17/2018 giving a 1 year notice
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That’s freaking huge.
Good points. So, what are the real reasons manufacturing has and is still declining in America?
Some mentioned:
Needed tort reform
Lack of skilled labor
One not mentioned, which Trump is working to improve, is burdensome regulation.
Another, IMO, is the above makes it difficult for small business to compete with large established conglomerates. This is where Trump needs to concentrate a lot of his effort.
Newer technologies means we don't really need as many mega factories. For just one small example, my 3d printer allows me to produce models and even parts for the ideas and prototypes I'm working on.
Small business and entrepreneurs need a level playing field in order to compete with mega-corps and government who write the laws in their favor. Same as Chinese mom and pop enterprises and others around the world.
A simple thing would be for governments to remove all tariffs for those involved in small business with annual gross incomes below a certain amount.
This alone would cause small business worldwide to flourish. They would in turn hire and train more workers to meet their needs. This is well within Trump's authority to implement. It's what I mean by using the methods available to him in a thoughtful manner.
“I can not see who will win this one”
I really doubt we will win the big war with China. China is a very united country. A high percentage of our native born population believes the US is unjust and evil. How many of the illegals will pick up arms and defend the US? Heck they would not even try to make their own countries successful.
The Greatest Generation we now longer have.
I suspect China has chips with back door virus in all our important military equipment.
WWIII will make Pearl Harbor looks like childs play and trust me China wants to be the top dog. Our allies are worthless they don’t care. None of them are supporting Trump and his fight against the Chinese.
OSHA, the EPA, and tort can be pretty good though.
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