No, the U.S. Industrial Base Is Not Collapsing

“U.S. manufacturing output, even adjusted for inflation, is near all-time highs. While about 5 percent below its December 2007 peak, it’s up 177 percent compared with 1975, the year America last ran an annual trade surplus. Industrial production—manufacturing, mining, and utilities combined—is higher than ever. That’s hardly a collapse.

A principal source of confusion is the difference between jobs and output. Yes, the number of workers in manufacturing has declined dramatically—from around 19 million in 1980 to about 13 million today. But that didn’t happen because America stopped making things. It happened because we got incredibly good at making things.

Productivity in manufacturing has surged thanks to automation, technology, and global supply chains. Just as we now produce more food than ever with just over 1 percent of Americans working in agriculture (down from around 75 percent in 1800), we produce more manufactured goods with far fewer workers. That’s not economic decline; it’s progress.

Also fueling the perception of decline are regional factors. Shuttered factories in Detroit or Youngstown, Ohio, bring concentrated pain and struggle for affected workers. No one denies this. But manufacturing didn’t disappear; it relocated and upgraded.”

https://reason.com/2025/03/27/no-the-u-s-industrial-base-is-not-collapsing/

Trump’s New Tariffs on Steel, Aluminum Won’t Help American Manufacturing

“These tariffs will protect American steelmakers and aluminum manufacturers from competition but at the expense of other American manufacturers that buy steel and aluminum to produce finished goods.
Unfortunately, there are a lot more jobs in the latter camp than in the former.”

“The Peterson Institute for International Economics calculated that the costs of Trump’s 2018 steel tariffs totaled about $650,000 per job created. If this is an economic development scheme for American manufacturing, it’s a pretty terrible one.

Farther downstream, consumers will be hurt too. When Trump hiked tariffs on steel and aluminum imports during his first term, those import duties translated into price increases of 2.4 percent for steel and 1.6 percent for aluminum, according to a 2023 study by the U.S. International Trade Commission.

That might not sound like a lot, but there are several reasons to expect a more significant hit this time around.

For one, Trump is now raising tariffs on both metals to 25 percent. His first-term tariffs were 25 percent on steel but only 10 percent on aluminum.

The impact of the steel and aluminum tariffs imposed during Trump’s first term was also blunted by the wide variety of carve-outs and loopholes that the administration created. Companies affected by the tariffs could apply for exemptions—and the process for deciding who got those breaks was, unsurprisingly, opaque and political.”

https://reason.com/2025/02/11/trumps-new-tariffs-on-steel-aluminum-wont-help-american-manufacturing/

Sunk Cost: The US. Navy’s Shipbuilding Crisis

The U.S. is facing ship-building delay after ship-building delay, and they need these ships soon for China’s expected invasion of Taiwan.

The industry has a conflict of interest between their obligations to the Navy and their shareholders.

Congressmen care more about announcing orders for their reelections rather than making sure they are carried through efficiently.

https://www.youtube.com/watch?v=msGcQT_WJMo

Why Wall Street found Trump’s first day reassuring

“On the campaign trail, Trump pledged to put a tariff of between 10 percent and 20 percent on all imports to the United States, along with a 60 percent tariff on Chinese goods and a 25 percent import surcharge on Canadian and Mexican wares — at least, until our neighbors choke off the flow of all migrants and drugs across America’s northern and southern borders.
This protectionist agenda is far more radical than anything Trump attempted during his first term. It threatens to hamper American tech companies by increasing the cost of semiconductors, depress stock valuations by reducing economic growth and fueling a global trade war, and disrupt the US auto industry, whose supply chains were built around the presumption of duty-free trade with Mexico.

Thus, American investors, executives, and entrepreneurs watched Trump’s first day in office with bated breath: Would his inaugural address and initial executive orders prioritize corporate America’s financial interest in relatively free global exchange — or his own ideological fixation on trade deficits?

Trump’s Day 1 actions did not fully clarify his priorities on this front. In his inaugural speech, the president reiterated his broad commitment to protectionism. Meanwhile, his administration prepared to launch federal investigations into America’s trade deficit in general, as well as the trade practices of China, Mexico, and Canada in particular.

Nevertheless, Trump did not actually establish any new tariffs on his first day in office, as his administration’s arch-protectionists had hoped that he would.

Investors interpreted Trump’s caution as a sign that he would be heeding his advisers’ push for a more limited and incremental tariff policy; stocks rose Monday while the US dollar fell (stiff tariffs would increase the value of America’s currency).

Wall Street’s relief may be premature. Trump appears as ideologically perturbed by America’s trade deficit as ever.”

“Imposing even a 10 percent tariff on all imported goods would not only harm various business interests, but would also likely increase costs for consumers. Thus, such a duty would harm both Trump’s donors and voters.

If Trump’s first term is any guide, his universal tariff would not even redound to the benefit of American manufacturers, who would be vulnerable to higher costs and retaliatory tariffs from foreign nations. Generally speaking, presidents seek to avoid enacting policies that harm the bulk of their coalition, to the benefit of a narrow band of ideologues. And this is what implementing Trump’s grandest visions for trade policy would likely entail.

Second, the imposition of a universal tariff would roil stock markets. During Trump’s first term in office, he monitored the markets’ performance obsessively, tweeting about it incessantly and suggesting that stock values were a barometer of sound policy, warning in 2018, “If Democrats take over Congress, the stock market will plummet.”

Finally, Trump has recently shown some sensitivity to the interests of his newfound friends in tech, even when those interests conflict with the tenets of rightwing nationalism. Over the holidays, Elon Musk feuded with their co-partisans over the desirability of high-skill immigration and the H-1B visa, which help American tech companies to hire foreign talent. Trump ultimately expressed support for Musk’s position.”

https://www.vox.com/politics/395829/trump-tariffs-executive-orders-inauguration-stocks-trade-policy

Why Industrial Policy Is (Almost) Always a Bad Idea (with Scott Sumner) 12/9/24

Trade and new efficient technology work in similar ways. They both directly and noticeably eliminate certain jobs, but, produce more economic growth and jobs total.

https://youtu.be/TWs-B6soIYg?si=wCMkmSawRqBcqund

Weak shipbuilding could be the US Navy’s Achilles’ heel in a war with China

“The US shipbuilding industry is a shadow of what it was in the final years of the Cold War. The Navy is reliant on only a handful of major shipbuilders that design and construct different ship classes: Huntington Ingalls Industries (aircraft carriers, submarines, amphibious ships, destroyers), General Dynamics (submarines, destroyers, support ships), and Fincantieri Marinette Marine Corporation (frigates). Higher production rates would require infrastructure costs and a larger workforce. Repair and maintenance are likewise constrained by the few public yards available.

A Department of the Navy review earlier this year found that top US Navy shipbuilding projects, from new submarines to surface ships, are delayed by years and facing ballooning costs.

The longest project delays, expected to be at least three years, are for the coming Block IV Virginia-class attack submarines and the Constellation-class guided-missile frigate. The Navy’s first Columbia-class ballistic missile submarine, a priority for the Pentagon, isn’t expected to arrive until 12 to 16 months after its planned delivery, potentially leaving a hole in readiness plans for the nation’s nuclear forces. And the Navy’s next Ford-class carrier, USS Enterprise, faces a delay of 18 to 26 months.”

“the US needs to make significant investments in rejuvenating its military shipbuilding capabilities and capacity, ramp up production, and streamline its design process. A clearer strategy for industry and establishing stable supply chains, as well as hiring and keeping talented workers, is critical, too. Larger investments and drastic changes may be needed to build and maintain a force beyond 300 ships.”

https://www.yahoo.com/news/weak-shipbuilding-could-us-navys-090002658.html

J.D. Vance Is Wrong About Toasters—and Global Manufacturing

“The nationalist conservative obsession with blue-collar manufacturing jobs often ignores the interests of workers and the will of consumers. Sen. J.D. Vance (R–Ohio) provided a perfect illustration in an early August campaign speech in Nevada on “the American dream.”
In it, Donald Trump’s protectionist running mate declared that “a million cheap, knockoff toasters aren’t worth the price of a single American manufacturing job.”

On its face, that’s just rhetorical silliness. Common sense says anyone should be willing to make that trade: Affordable and abundant appliances are part of the reason that 21st century America is the best place to live in the history of the human race. Jobs are abundant too—there were 7.6 million unfilled jobs in August, per the Department of Labor—and the loss of a few should not worry vice presidential candidates.

But when right-wing populists such as Vance make this argument, they mean something less literal: that America would be better off if the nation manufactured more and imported less, and Americans would be better off working in metaphorical toaster factories than doing whatever job they have now.

Both ideas are wrong.

The supposed decline of American manufacturing is wildly overstated by politicians such as Trump and Vance (and across the aisle by President Joe Biden). Yes, a lot of low-level manufacturing has been outsourced via global trade, but American manufacturing output is running at near-record highs these days. Instead of making toasters, America makes BMWs and designs the components in, and apps on, your iPhone.

That’s a good tradeoff, especially for workers. You earn more building fancy cars than you do piecing together basic kitchen appliances. The average wage for manufacturing workers (excluding managers) has doubled since 1999, outpacing inflation.

Vance and his nationalist conservative allies think that’s a problem, one they wish to solve with more tariffs and other trade barriers that they hope will incentivize low-paying toaster-making jobs to return to the United States.”

“When Biden expanded Trump’s tariffs on imported steel and aluminum earlier this year, one of the many objections came from the North American Association of Food Equipment Manufacturers (NAFEM). In a June letter to the U.S. Trade Representative, the trade association pointed out that higher tariffs on the raw materials needed to manufacture appliances would, predictably, harm American companies.

“Even in instances of growing sales, the costs of tariffs grow with business,” NAFEM wrote. Member companies would thus be forced to “reallocate the funds that would be used for wage increases and additional employees to pay for the increased tariff costs.”

The nationalist conservatives also misunderstand Americans’ willingness to accept Vance’s deal—even if many prefer the idea of boosting domestic manufacturing.

Earlier this year, the Cato Institute polled consumers to ask if they’d support a tariff on imported blue jeans in order to increase blue jeans manufacturing jobs in America. About 62 percent of respondents said yes.

But hold on. When told that the tariff would make jeans just $10 more expensive at the store, support for that policy flipped: Now, 66 percent opposed it. And if the tariff would make jeans $25 more expensive, an overwhelming 88 percent said no.”

“How many Americans living in the year 2024 aspire to work—or see their children and grandchildren work—in a toaster factory?

The answer is pretty close to none. That’s great. We should prefer a country where young men and women aspire to be scientists, AI developers, and tech entrepreneurs over one where the dream job is a 40-hour-per-week gig at the local toaster plant.

Vance, and his nationalist conservative allies, are selling a vision of America that’s long out of date. It’s a backward-looking economic message that assumes people would be happier if they were less materially wealthy and had fewer prospects. Most Americans seem unwilling to go along when you show them the bill.”

https://reason.com/2024/10/03/the-brave-little-american-toaster/

Europe’s manufacturing slump shows no signs of ending

“European industry — and Germany first and foremost — was battered by the surge in energy prices following Russia’s invasion of Ukraine. The bloc rode out the immediate emergency better than expected, finding alternatives to Russian gas, for example, through imports of U.S. liquefied natural gas.
But the hope that European industry would swiftly recover has faded, even as the eurozone economy in the aggregate returns to growth.

Eurostat’s industrial production index for the eurozone remains below its 2021 level, and is trending lower. And policymakers are starting to realize that the turnaround they had expected is not materializing.”

“The numbers underline the challenge of maintaining Europe’s competitiveness — and relevance — as China and the U.S. race to reshape the global economy within the context of an increasingly acute geopolitical rivalry.”

https://www.politico.eu/article/europe-manufacturing-industry-slump-weakened-eurozone-economy-energy/

Why China is winning the EV war

“The Biden administration has a climate goal that 50 percent of all new car sales in the US will be electric by 2030. Meanwhile, China already reached that milestone this year, in 2024. Over the past decade, China has pulled numerous levers to scale up its electric vehicle industry, and key to that strategy has been the development of the most globally competitive EV battery. Their efforts have spawned the world’s biggest battery companies, like CATL and BYD.
The Biden administration wants to keep Chinese cars and batteries out of the country — but that could be counter to our own electric vehicle ambitions in the short term.”

https://www.vox.com/videos/354382/china-electric-vehicles-video

American Manufacturers Need Tax and Regulatory Reform, Not Tariffs

“In a recent paper titled “Industrial Headwinds: Reducing the Burden of Regulations on U.S. Manufacturers,” published in the May 2024 Club for Growth Policy Handbook, economist Daniel Ikenson writes, “For manufacturing firms, the cost of federal regulations in 2022 was roughly $350 billion, or 13.5% of the sector’s GDP—a burden 26% greater than the inflation-adjusted cost of regulatory compliance in 2012.”

He adds that while the average U.S. company pays a regulatory compliance price of $13,000 per employee, large manufacturers shoulder a cost more than twice as much—$29,100. However, even some small-sized manufacturers face annual compliance costs of $50,100 per employee. This helps explain why manufacturing automation is so popular and why our fastest-growing companies are in service-sector tech, not manufacturing.”

https://reason.com/2024/05/23/american-manufacturers-need-tax-and-regulatory-reform-not-tariffs/