One of the stated goals of America’s trade policy is to increase domestic manufacturing. Since the 1980s, U.S. companies have been outsourcing much of their production to low-wage countries. But now, with the new tariffs offsetting some of the cost advantage, the tide is starting to turn.
Many would be surprised to learn that even with much of our production outsourced to other countries, the U.S. is still the world’s second-largest manufacturing nation, ranking only behind China. We produce about $3 trillion of manufactured goods annually, and the sector employs just under 13 million workers. While that’s an impressive statistic, it’s still a far cry from 1979, when there were 19.5 million Americans working in our nation’s factories. Because of low birth rates and current immigration policy, we likely will never have enough workers to reach those lofty levels again.
So, besides the current tariff-induced push, what will it take to restore America’s manufacturing prowess?
First, we should look at what we do well and what products are most important to make domestically. Certainly, we should look at critical goods and those we may not want to outsource for security reasons. The nation has already taken steps to assure a domestically produced supply of items like semiconductors, but that’s not enough. We also need to make sure we can quickly ramp 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 nations not high on the administration’s Christmas card list. We need to develop additional sources for these ingredients and boost domestic production of critical medications.
Yet even with these steps, the manufacturing jobs of yesterday will not be coming back, largely because of the U.S.’s high labor costs. Instead, tomorrow’s factories will need to be highly automated. Trouble is, we don’t have enough workers trained to operate and maintain today’s complex manufacturing equipment. Those tasks require trained machinists, toolmakers, industrial engineers, and the like, all of which are in short supply right now. If we are to expand our manufacturing base, we need to revamp our training and education systems.
In the end, it will take a combination of government and business working together to build up our domestic manufacturing capabilities. It will require incentives and significant investment to make American manufacturing competitive with the rest of the world and still remain profitable.
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