April 2024 Reshoring Initiative E-News: Reclaiming U.S. Manufacturing
Factory construction is booming. German manufacturers, among the most competitive in the world, are building U.S. factories. U.S. youth are starting to see the benefits of skills training. Next, we need long-term industrial policy that makes U.S. manufacturing more cost competitive. Reclamation of U.S. manufacturing helps create the future we want to live in – economically intelligent and robust at the community level.
“The key is to support small and medium-sized manufacturers across the nation, representing more than 98% of all manufacturing businesses. They are the backbone of the manufacturing industry but have limited resources.” RI observes: The best way to support these companies is to level the cost playing field so they can develop needed resources via a skilled workforce and a lower USD.
Re:Build Manufacturing has secured the capital, skills and technology that many lack. They have bought about nine small to medium manufacturers so far and are building a large, new facility that will model a new era for U.S.-based manufacturing. Harry Moser worked with Re:Build founder, Miles Arnone and is confident Miles and his visionary team will demonstrate how to rebuild the U.S. industrial backbone. We plan to report periodically on their progress.
De minimis imports, which have reached 4 million packages/day, avoid duty and tariffs and are rarely inspected. These shipments pose a major threat to U.S. manufacturers, retailers, and free trade partners and serve as a de facto free trade agreement for products under $800 with no reciprocity and no standards. In comparison, China’s de minimis level is $7 and Canada’s is $20. Much of the illegal fentanyl enters via these packages. RI is a member of the Coalition. We encourage others to support this effort.
Miles Free, Carli Kistler-Miller, and David Wynn from PMPA give their collective take on opportunities in domestic manufacturing and reshoring, including the all-time high in construction of manufacturing facilities and an upward trend in manufacturing jobs (projected to increase by 4 million in the next decade).
Robert D. Atkinson confronts CATO Institute analyst Colin Grabow’s claims, showing that U.S. manufacturing requires policymakers get real with the statistics. Grabow claims, “The United States remains a manufacturing powerhouse, accounting for a larger share of global output than Japan, Germany, and South Korea combined.” Atkinson debunks with, “I would hope so, because the U.S. economy is 80 percent larger than those three economies combined. Despite that size advantage, U.S. manufacturing value added is just 13 percent larger than theirs. No legitimate economist compares factors between economies without controlling for size.” Atkinson opposes Grabow’s 9 claims with factors that show the U.S. economy requires industrial policy to strengthen and sustain U.S. manufacturing.
“Another month, another record high for US manufacturing construction! Electronics manufacturing set a new record high in the wake of CHIPS Act incentives for semiconductor fabricators, and transportation manufacturing hit the highest level in 7 years amidst IRA EV incentives.” @JosephPolitano
By 2026, 96% plan to invest in the U.S., with over 40% investing more than $5 million and 30% over $10 million.
40% have U.S. manufacturing facilities, and 12% plan to build one within three years.
19% plan to build their first in the next three years
RI observes: For decades Germany has been the competitive manufacturing leader of Europe and, really, the developed world. High wages but huge trade surpluses. Nevertheless, they now choose to manufacture more in the U.S.
"Forging the Future: Manufacturing Growth and Its Effects On North American Industrial Markets predicts that reshoring could increase the size of the U.S. manufacturing base by 6 to 13 percent over 10 years. The scale of this trend is undeniable. The new report references a September study from Newmark, which documented announcements of more than 300 major manufacturing facilities across the country since 2020. These represent about $400 billion in anticipated project investment and at minimum 210,000 proposed new jobs.” RI observes: Newmark’s study is consistent with our data. We also include smaller facilities and supply chain jobs.
Many colleges and universities failed to adjust and meet digital era labor market demands. Recognizing the limited applicability of higher education, more companies are dropping college degree requirements and shifting to skills-based hiring and apprenticeship options. Not every American high-school student needs to go to college. Here’s what they should do instead: “The U.S. Department of Labor certifies employer-sponsored apprenticeship programs in a wide range of blue- and white-collar occupations. These programs pay young workers while they learn. Most of the students completing one of these programs earn more than the average college graduate.”
“Navigating this complex landscape requires addressing all stakeholders’ concerns. Streamlining communication and planning, adhering to regulations, and swiftly resolving labor disputes are crucial for regaining trust and expediting construction. The U.S. government must ensure timely funding and create a regulatory environment fostering collaboration and innovation. Only through such concerted efforts can the CHIPS Act fulfill its potential and contribute to a secure and robust U.S. chip industry.” RI observes: Chips factories are slow to get going because of too much regulation, union inflexibility and delay. Higher construction costs and delays will further increase the “burden” included in manufacturing costs. It’s time for the government and the construction industry to set an example of competitiveness for manufacturing.
@RepDebDingell and @RepRoKhanna have introduced a bill that acknowledges we get a great ROI for the U.S. economy when consumers #BuyAmerican and #MadeInAmerica. “The Made in the USA Tax Credit Act, as it's known, seeks to revitalize American manufacturing by providing up to $2,500 in tax credits to individuals and $5,000 for couples purchasing goods that meet the Federal Trade Commission's (FTC) Made in the USA standards, which require that a product must be "all or virtually all" made in the U.S., according to the FTC's website.” RI observes: We like the gesture but disagree with the method. Could cost $100 billion (about $310 per person in the US)/year. The paperwork for taxpayers would be huge. Fraud would be rampant. Far better to reduce the value of the USD so consumers choose to buy U.S. products without subsidies.
Fast growth in clean energy and EVs boosts cost estimates by $428 billion (about $1,300 per person in the US). “President Biden’s 2022 climate law is driving faster-than-expected growth in electric-vehicle purchases and clean-energy projects, doubling the projected cost to taxpayers while potentially accelerating emissions reductions.” RI observes: While there are some clear benefits, Bidenomics picks winners and losers. The cost is turning out to be much higher than forecast. Again, we think it is far better to level the cost playing field and let the market pick the winners and losers.
Nobel Laureate Paul Romer warns that the living standards of high school graduates continue to decline due to decades of unfettered globalization. In line with RI recommendations, Romer calls for pursuing foreign investment and trade policies that support U.S. manufacturing, including export controls, subsidies, and tariffs. RI observes: It is refreshing to have one of the world’s top academic economists aggressively aligned with our objectives. Most of his colleagues are too tied to their economic models to understand that balancing trade is both feasible and desirable.
Harry Moser’s analysis of U.S.-Mexico cross-border trade flows, Chinese Foreign Direct Investment in Mexico, and geopolitical risk reveals imports from China are still larger than from Mexico, and the U.S. is still too dependent on China.
Red Sea issues are not going away. Repairing the Panama Canal is projected to take 8 years. Former defense secretary warns on global shipping risks: "There are going to be global tensions ... and I think global dangers, at a level we haven't seen since the end of World War II," US Defense Secretary Robert Gates. RI observes: It’s time for companies to reshore as insurance against these risks. View our Geopolitical Risk map and analysis.
“A political decision has been made in China to pile investment capital into manufacturing over domestic consumption to meet the country’s growth targets. The likely result is the ratcheting up of trade tensions, as the rest of the world must de-industrialize to absorb China’s excess industrial capacity.” The World Is in for Another China Shock. “Beijing is seeking to engineer an economic turnaround by plowing money into factories, especially for semiconductors, aerospace, cars and renewable-energy equipment, and selling the resulting surplus abroad.” RI observes: When China floods foreign markets with still cheaper goods, U.S. manufacturers lose share here or abroad.
China’s share of global exports has soared in the last 30 years.
This article points to the need to confront entrenched trade imbalances by bringing deficit countries (U.S., UK, Australia and Canada) together in resistance to surplus nations (China, Taiwan, South Korea and Germany) that are imposing their economic choices on the rest of the world. RI observes: We do not have “free trade.” Unless we choose to become competitive, we are captive to the mercantilist decisions of other countries.
“The global footprint of criminal groups from China has expanded along with China’s economic and geopolitical presence. North America’s fentanyl crisis has thrust these international criminal networks to the policy forefront in the United States, but the scope of organized crime from China extends far beyond drug trafficking and money laundering. Chinese criminal groups engage in poaching and wildlife trafficking, cybercrime, elaborate fraud and scams, and human trafficking and enslavement. Long experienced in illegally bringing people to the United States and Canada, criminal networks from China have intensified activities at the U.S.-Mexico border. Because of their linkages to the Chinese government and their own entrepreneurial skills, China-linked criminal networks are likely to expand their geographic reach and deep role in various illegal economies in 2024.”
Reshoring Tips of the Month
Consumers prefer and some will pay more for reusable products and more environmentally sustainable products, Accenture Survey Finds.
Sourcing locally reduces environmental impacts. The ultimate in sourcing locally is offering Made in USA products.
Call to action: Reshore and promote products that are Made-in-USA and environmentally friendly.
Upcoming Events
Apply for the Seventh National Metalworking Reshoring Award. Open for applications now through June 30. Find Eligibility and Award Criteria here. OEMs and job shops are both eligible. Bring attention to your reshoring success.
Why Reshore Reshoring is an efficient way to increase corporate profits, reduce imports and regain manufacturing jobs in the United States. It's also the fastest and most efficient way to strengthen the U.S. economy.
