President Donald Trump’s tariffs have already had a global impact, but will they eventually manifest his goal of bringing manufacturing back to the U.S.? An expert joined Audacy this week to break down what that would look like.
“It’s going to depend on the sector, right?” said Willy Shih, professor of management practice at Harvard Business School, when WWL’s Tommy Tucker asked him what sort of timeline we are looking at for manufacturing to return to the country. Shih used manufacturing of semiconductors used in electronics as an example, noting that they have been an area of focus for Trump.
“To get enough capacity to meet American demand for semiconductors, my view that would probably take 10 years and you know $500 billion,” the professor said.
Other sectors, such as agriculture, might have a shorter timeline, Shih added. However, he said that “when we have this level of uncertainty nobody’s making any decisions,” such as investing in factories. Instead, we should expect businesses to wait until they know for certain whether tariffs will last – Trump has already announced and paused tariffs multiple times since January.
Tucker and Shih also pulled back to get a look at how manufacturing moved out of the U.S. in the first place. Shih said that the first wave of offshoring actually happened way back in 1959, when a temporary shutdown of steel companies in the U.S. opened the door for imports from Germany and Japan. Then, importing from China started to ramp up in the late 1990s.
“Then, when the minimum wage in the U.S. was around $7 an hour – but you know, a good manufacturing job might be $20 an hour – you could pay somebody 50 cents an hour in China,” Shih said. Around that time, textile manufacturing moved from the U.S., as well as much of the electronics manufacturing that was taking place in the states, as well as some auto parts manufacturing.
After the Sept. 11, 2001 terrorist attacks on the U.S., a recession here also spurred more offshore production, Shih explained.
“We saw big waves of stuff,” he said. “That’s when like a lot of pharmaceutical manufacturing moved offshore.” Today, some of the largest importers are household names in the U.S.: Walmart, Target, Home Depot, Lowe’s and Ashley Furniture.
As of this week, Trump has announced a 125% tariff rate on China, and that country has retaliated with its own moves on imports from the U.S. At this point, Shih said that the initial rollout of Trump’s “Liberation Day” tariffs last week included tariffs “on a lot of countries who export stuff that we never made.”
Trump paused many of those tariffs this week for a 90-day period. What happens if that pause ends and Trump still implements the tariffs?
“You know, now the question is, what kinds of things can come back to the U.S.? Okay… and I would argue it’s things where, you know, the amount of labor content in making that product is either relatively low or we’re going do something to juice up the productivity of our workers so that we can compete with a low-cost country,” Shih explained.
He noted that the U.S. pays $15 to $50 an hour for a manufacturing labor jobs, while some other countries pay $2 to $8 an hour. It looks like bringing back manufacturing jobs to the U.S. will cause prices to go up for U.S. consumers.
“I’m very grateful that I’m in a position that I can buy American, but a lot of people can’t,” he said. A lot of my neighbors where I live can’t, right? And so, you know. I don’t want to judge that, right, because they’re living paycheck to paycheck.”
There is at least one thing that might mitigate price disruptions caused by moving manufacturing back to the U.S.: automation. TIME magazine reported this week on how the ongoing tariff war might result in increased automation here in the U.S.
“Rather than enticing companies to create new jobs in the U.S., economists say, the new tariffs – bolstered by recent advancements in artificial intelligence and robotics – could instead increase incentives for companies to automate human labor entirely,” said the outlet.
Shih too mentioned automation as a factors that could make America’s push for more domestic manufacturing more economically feasible.
“Unless we do some nifty things with automation and stuff to get our labor productivity up, uh it’s probably going to cost more,” he said.