Tariffs aren't enough to build domestic manufacturing

By Synnove Vandal

Everyone’s talking about the trade truce at the G20 summit.

The outcome may have taken the edge off tensions for businesses and manufacturers connected to China. But despite this progress, anxieties remain.

Tariff increases are stalled for now. But if there’s one constant of this trade war, it’s volatility.

Daily headlines tout company announcements of plans to move production out of China. And the pressure to manufacture in the U.S. is growing. President Trump wants a U.S. manufacturing renaissance, as many have been forced to reexamine supply chains.

But manufacturing in the U.S. isn’t all it’s cracked up to be. Labor, infrastructure and component sourcing present major hurdles for domestic production.

Working with a domestic factory may give you the right to label a product “Made in the U.S.” But what does that really mean and at what cost?

Domestic manufacturing isn’t wholly “American”

One of the arguments in favor of domestic manufacturing is that it’ll create jobs for American citizens.

According to Nichole MacDonald, who manufactures women’s handbags in India, this assumption is far from reality.

After receiving backlash for manufacturing overseas, MacDonald began to question if domestic manufacturing can actually “Make America Manufacture Again.”

MacDonald said it doesn’t matter if you manufacture in the U.S. or overseas:

I have manufactured in the United States, and the factories — and the people working in them — look exactly the same. The workers are from Korea, Mexico, China… it depends on where the factory owner is from.

The U.S. textile industry employs one of the largest shares of immigrants among all industries—36 percent of U.S. textile workers are immigrants.

And the machines, supplies and raw materials for domestic production are still usually sourced from China.

U.S. factories aren’t inherently the gold standard of ethical production either. Domestic factories have come under fire recently for cutting corners and underpaying workers to meet demand.

A 2016 U.S. Department of Labor investigation found that 77 Los Angeles garment factories paid workers as little as $4 and an average of $7 an hour for 10-hour days.

MacDonald finds it easier to pay a fair wage in India where the cost of living is lower:

The cost of hiring a factory in India to sew a leather handbag, for example, is a fraction of what it costs to hire a similar person in the U.S. who most likely would be an immigrant making a barely livable wage.

Plus, “Made in America” comes at a cost few consumers are willing to pay. Tariffs might force businesses to consider domestic production. But that doesn’t mean resources and labor will magically appear.

Follow the link below to read more about the challenges of U.S. production.

Large-Scale Manufacturing In US Not Very Practical – Nichole MacDonald, International Business Times

Synnove Vandal is a Client Manager at InTouch Manufacturing Services, a QC firm that performs product inspections and factory audits in Asia for clients in the US, EU and Australia.