We will *never* have balance in trade, until we insist.
Insist.
That will only happen with a trade war. Negotiations by blockade, if necessary. That is exactly what I am saying.
We are not it seems, in fundamental disagreement, you and I. Though we are in different universes about how that balance you mention can be attained.
In my (not so uninformed) view, the only way we will have balance, is with a real, knock down trade war.
Not one bit less.
A lot of “American” companies which sold their souls, will be demolished in the process. They would do well to start correcting their mistakes and do their own rebalancing immediately. Cut their losses. Disaster recovery mode - because China will not let them leave.
Repatriating factories and jobs, to start.
The choice is rapidly approaching. America, or companies with no loyalty to America.
That’s not a difficult choice for anyone.
If they choose wrong, let them. Time to choose.
What drives "balance in trade" is selling as much as you buy. We buy a LOT more than we sell - thus the trade deficit and our massive national debt.
The problem is we consume much more than we produce. It's not a matter of where it's produced, it's that the US - as a people and as a Government - are addicted to spending and borrowing as a means to pay for that spending.
You can own an entire factory of people, and make 100% of the world's production of widgets, but if you end up buying even more dollar's worth of product from a competitor - you go bankrupt. Out of cash.
That's the problem. It's not where it's built, it's that we insist on buying it in the first place.
As far as where things are made, it's because it's cheaper to make them overseas. Not from labor, but from taxes. Typical labor costs in the US aren't much higher than in China, on an actual per-dollar-value created (that's what productivity brings you - lots of output for little wage input).
Where the big difference is, is that we tax the crap out of earnings. We start with 39.6% of profits for the corporate income tax. Then we add another 25% capital gains tax when those profits are handed out to the owners.
Compare that with the rest of the OECD that is at 22% for corporate income tax, and 12% for capital gains. Or places like Hong Kong and China and Malaysia that are between 0% and 10% for corporate income tax. Or even a place like Germany with 0% capital gains taxes on equities held for more than 1 year.
So which would you rather do - pay ~60% of your profits back out as tax, or pay 10%? Pretty simple choice - and easy to see where the costs are involved, and why a company would choose to relocate overseas.
It's not just manufacturing in China. There's a reason the bulk of Microsoft's profits worldwide go to their Irish operations (12% income tax). Why Google's vast earnings are predominantly made in the Cayman Islands (10% income tax). Why Apple keeps the majority of its earnings in Hong Kong (0%).
Labor costs are a small portion of the entire cost of doing business, and as tsowellfan points out - the bulk of these costs are because of the US Government and its redistributionist, anti-GDP-growth policies.
You want jobs back in the US? Here's a real easy way to get them back in a hurry - not just jobs lost, but actually gain even more by having companies who never had a presence in the US suddenly rush here:
1. Eliminate the corporate income tax - take it to zero.
2. Eliminate the capital gains tax - take it to zero.
3. Roll back every business regulation implemented since 2000.
4. Mandate that an foreign company operating in the US (foreign company being defined as a company with more than 10% foreign ownership) must have 50% of its US work force consists of US citizens and legal residents.
That's it. Businesses would flood back because of the tax structure, easier regulatory regime, and they would repatriate literally TRILLIONS of dollars back to the US for investment here.
Additionally we'd see a massive rush of foreign investment and corporate formation here in the US as companies look to shelter their own income. And because they have to employ at least 50% US citizens and legal residents, there would be an even larger spike in hiring.
The boon from income and social security/FICA taxes from the greatly increased work force would easily offset any losses from the corporate income tax and capital gains tax (about $180 billion total).
Or, we could start a trade war, watch inflation spike up a solid 30%, watch more companies say 'screw it' and leave the US market for the markets that are actually growing (in particular SE Asia, South America, and Africa), and watch our unemployment continue to climb ever-higher...