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I worked in corporate America during the outsourcing boom of the 1990’s and early 2000’s. None of the companies I worked for rolled back prices to the consumer when they outsourced production. They enjoyed the benefits of higher margins for a few years. Much of the margin siphoned off by Wall Street in stock buybacks or overpriced acquisitions that later resulted in write downs of excess goodwill.

As an aside the true projected savings from outsourcing were never realized. Costs in the foreign country were higher than projected due to inefficient management of labor, graft, and corruption. Oil prices escalated, making energy an increasing cost of the product. More on site inspectors and auditors were required to ensure quality and monitor production than originally anticipated. Plus theft of intellectual capital resulted in shorter periods of exclusivity for new products. In most instance, the 50% or better savings projected turned out to be 10-12%. Most of the real 10-12% savings could have been realized domestically by making a similar investment in the modernizing the assets and processes of the domestic operation. However, from Wall Street’s perspective a big advantage of outsourcing was reducing the capital investment in the business to free up funds for financial speculation.

We also forget the subsidies the developing export nations provide exporting factories. In my business the Chinese government rebated 15% of the value of exported goods to the factory, a direct subsidy. It also loaned money for capital investment in the industry at 0% with lengthy repayment terms. Finally, it manipulated its currency to artificially hold down the cost of exports. Tariffs are legitimate response to these unfair trade practices. Tariffs also help the taxpayer recoup some of the costs not paid by importers for maintaing roads, bridges, ports, and other government services (Coast Guard, Customs).

I wouldn't necessarily expect a reduction in direct labor costs to be accompanied by a reduction in prices for the consumer on a one-for-one basis. How much of the "outsourcing" that was done by corporate American in the last few decades resulted in a reduction of direct labor costs that was offset for higher costs related to a company's bottom line for those employees who remained on the payroll? In other words, how many jobs did GM or Ford export to foreign countries in order to keep tens of thousands of highly-paid UAW workers on the payroll here in the U.S.? Add in the pension costs and the cost of maintaining medical coverage for retirees who were no longer contributing anything to the company's bottom line, and you can see how this all works.

You last point is a good one because it illustrates the idiocy of many forms of "protectionism" we see in these foreign countries. For all intents and purposes, China has basically been functioning as a slave colony of the U.S. for years ... with their own government propping up industries that produced consumer products almost exclusively for consumption in the U.S. That was the whole point of pegging the yuan to the doller at an artificially low value, wasn't it?