Look this up: in 2015, Nike spent about $40 million building a factory in Guadalajara, Mexico. Nike wanted to try manufacturing shoes much closer to the US instead of building them all in Asia. The wage rates were higher than Asia but much lower than the US. 4 years later the project was abandoned because it was impossible to meet the cost and quality goals that Nike demanded. Under Armor and Adidas have tried making shoes in the US with highly automated factories. Both those efforts failed.
Trump believes a trade deficit is indicative of cheating. He believes China is stealing our jobs and harming us. This is patently untrue. He doesn’t know what he’s doing. International trade is good for both countries.
As someone who makes my living consulting for some of the best manufacturers in the world, the tariffs can absolutely bring back American manufacturing jobs.
But here’s the thing: these operations were offshored for a reason and that reason is lower labor costs, along with a casual disregard for the environment and public safety. All of those cost advantages disappear when on-shored.
The DAILY labor cost in the Philippines, a place where I’ve worked as a consultant, is the minimum wage that is between $7.42 to $11 USD, plus a buck or two in benefits such as lunch and uniforms. Typical US labor factory costs (not to be confused with wages) in the US with FICA and benefits roll up to around $50 an HOUR. US based manufacturers do have a couple of advantages. Transportation costs and access to automation are the key ones. But these are still not enough to offset the labor cost advantage.
So when these products are brought back to the US, one of three things have to happen:
* Raise prices dramatically (inflation)
* Cut wages to far below the poverty line, or…
* More likely, automate those jobs out of existence.
That’s the reality. I suspect that the only thing that Trump knows about tariffs is that when we relied on tariffs for revenue people like him didn’t have to pay taxes. Didn’t even have to bother with tax evasion. Of course, that was in the age of the robber barons, and poverty was widespread in this country. The cost was borne by the consuming public, then as in now. And right or left, none of those outcomes are good for OUR country.
