US manufacturing return unlikely to become a reality

By Liang Yan in Washington Source:Global Times Published: 2019/7/23 15:52:04

Trump’s campaign promise to be an implausible outcome as costs rise and demand falls

US President Donald Trump examines a Lightspeed bicycle on display at the 3rd Annual Made in America Product Showcase at the White House on July 15. Photo: AFP

US President Donald Trump's drive to bring back outsourced, traditional manufacturing jobs may be facing a reality check, even as the country put on a show highlighting American manufacturing.

During Made in America Week, which concluded last week, Trump invited manufacturers from the country's 50 states to showcase their products, pushing forward his campaign promise to "buy American and hire American."

However, industry insiders told the Global Times that traditional industries will still be leaving the US despite efforts made by the Trump administration, due to factors such as higher US labor costs and supply chain constraints. Trump's efforts to revitalize US manufacturing are set to hit a snag.


On the South Lawn of the White House last week, the Global Times found a multitude of products being showcased, including the Terminal High Altitude Area Defense system developed by Maryland-based defense hardware maker Lockheed Martin, a COLBAIT BOAT yacht from Kansas, Nebraska's T-L irrigation system and the Litespeed Bicycles of Tennessee.

Trump spoke to and encouraged representatives from Litespeed, which sells high-end, titanium-body excursion bikes with prices ranging from $1,000 to over $10,000.

However, it may not have occurred to Trump that 99 percent of the bicycles sold in the US market are made in the Chinese mainland or the island of Taiwan.

Bicycles made in the US only number 500,000 units per year, while a total of 18 million units are sold there each year with total retail value of over $6 billion.

The 25 percent tariffs that the Trump administration slapped on Chinese imports in May have hit bicycle imports, pushing up the price of Made-in-China bicycles in the US market by at least tens of US dollars. 

While few people in the US use bicycles for their commutes, millions of US children and fitness enthusiasts love them. 

In the state of Maryland, each household typically has one or two bikes. Bikes occupy large shop floors inside supermarkets run by Walmart and Target. 

The US used to be a major bike-producing country, churning out 15 million bikes per year in the 1970s.

After Trump was sworn into office, New Jersey-based Kent International Inc vowed to revitalize US bike manufacturing. The company set up a plant in California and another in New Jersey, and obtained an annual production capacity of about a million units supported by orders from Walmart.

However, Trump's tariffs hit Kent International, as the company imports most of its bicycle parts from China. The company declared that after examining dozens of US suppliers, the parts made in the US could not compete with those imported from China, and that conclusion does not take into consideration logistics and warehousing costs.

Arnold Kamler, CEO of Kent International, described the new tariffs as "a punch in the gut" in an interview with Xinhua News Agency in June. 


Trump's fascination with US manufacturing exists for a reason. For most of the 20th century, manufacturing sectors such as steel and automotives formed the backbone of the US economy. Even today, a manufacturing job with an average annual wage of $80,000 is better paid than those generated by education, culture, leisure or catering.

Trump's ambition to bring manufacturing jobs back to the US was also a major trumpting factor for his 2016 election win.

A senior researcher at a major auto company in the US, who only gave his surname, Schott, said that bringing back automotive manufacturing jobs will be a key chapter in Trump's plan to make American manufacturing "great again". 

Data have shown that an automotive industry worker earns $80,000 a year, far higher than the US nationwide average wage of $50,000. Additionally, one car manufacturing job could generate a maximum of eight related jobs. 

Toyota touted its new Avalon as "the most American sedan," which means that all design and manufacturing work is completed within the US and 70 percent of the parts are procured within the US. Some have said that it is not American enough as Toyota is a Japanese brand.

Ford, on the other hand, is generally seen as the most American car-maker. The company also has more assembly lines in the US than any other brand. Despite this, data showed that about 50 percent of the parts of Ford's main models are procured from overseas. 

To bring back automotive jobs, the Trump administration used a series of polices including corporate tax cuts and the threat of taxes on cars imported from the EU, Japan and South Korea. It also signed the United States-Mexico-Canada Agreement, a trade deal to replace the North American Free Trade Agreement (NAFTA), which requires 75 percent of components to be manufactured in Mexico, the US, or Canada to qualify for zero tariffs. Under NAFTA, the requirement was 62.5 percent.

The new agreement also required 40 to 45 percent of automobile parts to be made by workers who earn at least $16 an hour by 2023.

Despite these policy efforts, Schott said that the potential for a significant increase in production capacity within the US remains slim, as major automotive brands have been setting up plants in the US, Canada and Mexico for years, earmarking their cars for the US market. 

When it comes to plants built by US car-makers in China, the chance of moving these plants back to the US is also small. Cars produced in these plants are bound for the Chinese market, the world's largest automotive market.

A 25 percent tariff on foreign automobiles and auto parts will cause 195,000 job losses in the US and will reduce output from the US car manufacturing industry by 1.5 percent, the Peterson Institute for International Economics said in a recent report.

Experts said the US market is truly globalized and sourced by suppliers from around the world, and US consumers tend to buy their favorite products provided they can afford them. They don't see the country of origin as an issue.

A recent poll by Reuters indicated that while 70 percent of the polled US consumers believe "buying American" is an important matter, only 37 percent are prepared to pay extra for this belief. 

Of those who are willing to pay more, only 21 percent are prepared to pay if the extra exceeds 10 percent. The poll also found that those who are most willing to pay extra for "buying American" have the least consumption power. 

Experts have said that the US economy actually fared better than its competitors with high-tech manufacturing, centered on the Silicon Valley and the financial services industry of Wall Street, in the last four decades.

Fred Bergsten, a senior fellow at the Peterson Institute for International Economics, told the Global Times that President Trump's obsession with bringing the manufacturing industry back to the US is just infeasible due to the high cost of labor and other factors. 

He suggested that the US economy has experienced an industry transformation over the last four decades, dominated by advanced manufacturing and service industries, and the days of "everything is made in America" are simply over.


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