Biden can avoid repeating Trump’s failures on reshoring. Here’s his difficult path
Reshoring is the topic of the day in manufacturing, and for good reason. Bringing back five million jobs to the U.S. — a goal of President Biden’s — would “balance the U.S. $800 billion/year goods trade deficit,” says Harry Moser, founder of the Reshoring Initiative.
Balancing the trade deficit would be just one benefit of many. We’d have also addressed financial and public-policy challenges that, according to Moser, simply make it too expensive for many companies to manufacture in the U.S. “If their cost is too high versus offshore, they will eventually fail,” he says. “Do all the things we need to do, and the work will come back because it will be profitable to make the product here.”
In a just-published analysis, “Review of Trump’s Results and Critique of Biden’s Reshoring Plans,” Moser expands on his prescription for reshoring success through the lens of policies enacted by President Trump and those proposed by President Biden. His conclusion is sobering: U.S. competitiveness starts by reducing U.S. costs by 20 percent vs. offshore competition; requires a lower U.S. dollar; and needs more students choosing a manufacturing apprenticeship or engineering degree instead of a liberal arts degree. Unless he takes action to achieve these outcomes, Moser believes, “Biden will repeat Trump’s failure.”
Moser’s review of Donald Trump’s reshoring legacy notes his fast start. “The number of reshoring and FDI [foreign direct investment] jobs announced coming to the U.S. surged from 75,000 in 2015 to 115,000 in 2016 and 193,000 in 2017,” driven largely by “reductions in corporate tax rates and regulations, and a generally business-friendly environment.”
But Trump’s confusing tariffs and narrow view of China-U.S. trade slowed progress. “Tariffing steel but not steel products put U.S. manufacturing, other than steel producers, at a competitive disadvantage,” notes Moser. “Tariffing China caused work to shift to other Southeast Asian countries.”
A growing trade deficit — from $679 billion in 2016 to $854 billion in 2019 — was “clearly not a successful result,” adds Moser. Trump’s inattention to the value of the U.S. dollar proved a “strong headwind.” Through 2019, “The Broad Dollar Index averaged 10 percent to 15 percent higher than during the Obama terms,” Moser explains.
His conclusion: “President Trump successfully alerted the nation to the dangers of a huge and growing trade deficit and China’s economic threat, but failed to attack the root cause of the problem — uncompetitive U.S. manufacturing costs — because of an overvalued dollar and inadequate skilled workforce.”
Lost in the racket surrounding President Biden’s first few weeks has been his focus on manufacturing, more perhaps, than any incoming president the past 50 years. As a result, there’s plenty to critique. Moser hones in on workforce training and wellbeing, like strengthening the Affordable Care Act, and targeted tariffs and tax incentives, including a new Made in America tax credit, as positive aspects in Biden’s new plan.
He also doesn’t lose sight of his main thesis — lowering the cost of manufacturing in the U.S. — in criticizing other Biden proposals, like a minimum wage hike, raising the corporate tax rate from 21 to 28 percent, and the push for a strong U.S. dollar, a stated goal of new U.S. Secretary of the Treasury Janet Yellen.
Moser also pushes back on a list of policy proposals that, however well intended, make the task of developing a new 21st century manufacturing workforce that much harder. Lowering the eligibility for Medicare to 60, “will cause more workers to retire early,” he asserts, even as making college free for families with annual incomes under $125,000 “will shift more smart students from skills training and engineering to liberal arts degrees,” undermining U.S. competitiveness.
Moser’s lasting contribution to the reshoring dialogue may well be his sustained focus on total cost of ownership — simply doing the math for individual companies looking to bring work home and U.S. policymakers at large. Lasting momentum requires cost equity at home.
At the same time, it seems unlikely the standalone pieces will come together, as Moser suggests, without a true national industrial policy guiding their implementation. President Biden is adding pieces to a plan that his predecessor began. Biden’s manufacturing legacy may pivot on his ability to elevate reshoring and U.S. manufacturing into a moonshot-like strategy — a national imperative.
The ROI to America’s lasting economic health would be worth the effort.
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.
Watch Harry Moser, with Bart Taylor, explore total cost of ownership trends and other supply chain and reshoring issues Thursday, February 18, 10 a.m. – 11 a.m. MST, at CompanyWeek’s Need to Know: Supply Chain Reality Check webinar. With supply-chain experts Sarah Rathke and John Boner.
No fees to register.