Can We Bring Manufacturing Back to the USA?

Lately, I have found myself in an uncomfortable place when it comes to writing. I’m closing in on 3,000 articles over almost 20 years—there aren’t a lot of new areas of personal finance for me to cover. I get a lot of my inspiration from the news because that’s always evolving. However, when it comes to news and personal finance nowadays, the biggest story (really the only story) is tariffs.

I could write on tariffs, but covering them is like nailing Jell-O to a tree. They started and were paused. Then, the ones against China skyrocketed. I can’t keep track of which tariffs are going into effect when. It seems like they are coming and, in some cases, already here. It’ll take a little time to see how everything shakes out. It seems that businesses are reporting good sales numbers as people rush to buy before the tariffs kick in.

According to the White House, one of the main goals of tariffs is to bring back manufacturing to the US. The idea is that companies will make products in America because importing products will be too expensive. Any number of articles have pointed out why that won’t work. Here’s a small list:

Americans don’t want to screw together iPhones.
This example is everywhere. If you’ve read about the factory conditions in Foxconn, they aren’t great. I haven’t come across one person who wants to do that job. Ironically, migrant farmworkers do some of the jobs that Americans don’t want to do, but we are kicking them out of the country.
It’s also expensive to make products in America.
The average Foxconn worker in China makes $3/hr. While the federal minimum wage in the US is $7.25, many states have it higher. In my state, Rhode Island, it is $15. The cost of labor to have a factory here is 5x at a minimum. I would argue that you’d have to pay around $20-22/hr here to be competitive because other minimum-wage jobs are more attractive.
It takes years to make factories.
My kids often joke about how you should just copy/paste real world stuff. Unfortunately, you can’t just copy/paste a factory. As Kevin O’Leary on Shark Tank has said many, many times, companies fight tooth and nail to keep the cost of making a widget as low as possible to maximize profit margins. You can’t just repurpose any previously shut down factory to make the chips that go into almost every product we buy nowadays.

Companies can’t put in years to start building factories when one person changes tariffs like he changes underwear. The companies don’t know if they’ll be three years into the build just to have the new US President flip the switch on them again. If you want to do it right, it’s best to get a bipartisan group in Congress to collectively pass something like they did with the CHIPS Act in 2022. However, even bipartisan Acts aren’t reliable as the next administration may come in and tear it down. I think you really need a strong commitment from both parties where you get around 80% of the votes – a majority of Republicans and Democrats (in each party) to make it worth the investment.

In fewer than fifty years, AI will probably develop the plans for a specialized factory and send them to a 3D printer or a set of construction robots, but we aren’t there yet. When that happens, there won’t be any jobs in the factories anyway, so it won’t matter.

Table of Contents

How has bringing manufacturing back worked in the past?

I have not done a comprehensive study of manufacturing in the United States. However, I wanted to share a couple of attempts.

Foxconn in Wisconsin
Back in 2017, Foxconn announced it was coming to Wisconsin. The state put together a bunch of tax incentives and, relocated dozens of people and bulldozed their homes. It was supposed to be a $10 billion investment that would employ 13,000 people. Originally, they were going to make screens for televisions, but then it became phones. In 2020, it made a very reasonable pivot to making masks. As far as I can tell, that’s the only thing that’s ever been made there, but it seems that information is very secretive. It appears that they have around 1,100 employees of the 13,000 that were planned eight years ago.

If you want to read more, this Milwaukee Journal Sentinel gives a great summary of the project up through 2023. NPR also has a more recent article/podcast taking us through a couple of months ago with a focus on the tariffs.

In any case, I don’t think anyone can say that it has worked out as planned.
For the second case study, I’ll let Reuters do the heavy lifting for me: LVMH finds making its designer bags messy in Texas.
If you don’t care to read it, it’s been six year and the LVMH factory is one of its lowest performing. I have to admit that I learned it is a lot more difficult to make a designer handbag than I thought. I had always thought that people are paying for the status/prestige of owning it. Maybe that’s only 90% of it and 10% is the great quality?

Sorry, is that too snarky? I’ve never been a big fan of luxury fassion and have questioned whether selling knock-offs of design should be illegal.

Both of these were started with President Trump taking part in the ribbon-cutting opening ceremony. It seems like it might a be a good idea to work on fixing these situations before we try to encourage thousands of companies to invest trillions of dollars in manufacturing stuff here.

In fairness, I’m sure that I’m missing some success stories – it’s not like American are terrible at manufacturing everything. I’m not intentionally trying to cherry pick a couple of bad apples – it’s just what I’ve come across. Feel free to leave some of the large-scale success stories in the comments and I’ll be happy to update this article pointing to those.

Final Thoughts

One of the bugs/features of this White House is that it can be hard to figure out when they are just ignorant or lying. You can have cases where they’ll create the Springfield pet eating hoax or claiming that Ukraine started the war with Russia.

It’s impossible to trust an organization that has no respect for its credibility. If you own a company worth billions of dollars, why would you literrally bet your entire business on them – especially with the long odds that it will fail?

There might be a way to bring manufacturing back to America, but there has to be a lot more to any successful plan than tariffs.