China’s pivot from tariffs a lesson for U.S manufacturing

About half the manufacturers I ask support President Trump’s trade war. The perception seems to be that about half the outcomes have been positive and half not, intended or otherwise. Not a surprising symmetry.

For me, the bigger issue is where we go from here. If there’s a grand plan, I’m not aware of it, either from the administration, or from brands responding to a new cost reality or companies operating within OEM supply chains.

Compare this to influential parts of China’s manufacturing ecosystem, pivoting to a new global position in response to tariffs. Framed by the pro-manufacturing manifesto, Made in China 2025, the Wall Street Journal reports that Chinese companies are pushing away from low-cost, low value-add products to advanced manufacturing processes and outcomes. Michael Lu of LTS Group summarized his company’s moves. “‘The U.S. tariffs are pushing China toward making the higher-end stuff,’ Mr. Lu said as he walked past red-uniformed workers assembling table lamps in his Shenzhen factory. ‘It’s helping China be more competitive down the road.'”

Is there a silver lining for U.S. companies, a response that will endure beyond the trade war to enhance or sustain manufacturing? A pledge to double down on workforce programs, or generally, a push to make more products in the U.S. outside the pronouncements from the administration?

Most U.S. brands are hesitant to make this promise, largely because they can’t. Advanced manufacturing is enabling companies to reimagine processes and products, but technology alone is not the arbiter of growth for U.S. industry. Workforce and infrastructure are, and until brands and companies can lean on a more robust domestic manufacturing labor pool, powered by widespread adaptation of Industry 4.0, more domestic production is no more than a talking point for bellwether brands that today rely on Chinese factories and labor.

Yet as Chinese companies pivot to advanced manufacturing, U.S. industry should likewise embrace a strategy to compete long-term. And for U.S. firms, it’s more than working with education and economic development partners to train additional qualified workers.

A broader strategy would also expand support of growth industries that today struggle to compete with imports on price. Subsidies for farmers alone makes no sense. Ag support seems crucial, but a tariff “bailout” to one industry, among many others that would be benefit from price supports as domestic advanced manufacturing infrastructure develops, is incomplete. It’s not a strategy.

Where’s the plan? As much as the president deserves credit for energizing a national discussion on manufacturing, until the means point toward a cogent end, America’s competitors will gain. At the expense of domestic manufacturing.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.