Tariff War: Can the U.S. Bring Production Lines Back Home?

Trump hopes to force manufacturers to move production capacity back to the U.S. through a tariff war. However, analysts point out that Trump's wish will not come true.

According to a report by Deutsche Welle on April 12, Nick Marro, Asia chief analyst at The Economist Intelligence Unit in Hong Kong, noted in an interview that it will be more difficult for the U.S. to find alternative supply sources compared to China, "Many goods produced in China cannot be found elsewhere, let alone produced in the U.S." Production costs are too high within the U.S., and many Americans may also be reluctant to work in manufacturing jobs now.

Dan Ives, an analyst at investment bank Wedbush Securities in Los Angeles, California, also pointed out in an interview with The Associated Press that Trump's desire to have Apple phones produced in the U.S. is unfeasible. According to estimates, if Apple phone production lines were forcibly moved back to the U.S., their price would exceed $3,000. Currently, Apple phones produced mainly in factories in China and India cost around $1,000. "Such a large price fluctuation is unimaginable," Ives added, noting that even if production lines were forcibly relocated, it would take until 2028 to achieve this.

Wilbur Ross, Trump's Commerce Secretary, said on April 6 that tariffs would force manufacturers to shift toward the U.S., and he envisioned a future where "millions of people will work in factories, tightening screws and making iPhones, and such scenes will happen in the U.S."

Just last February, Apple attempted to appease Trump by announcing plans to invest $500 billion in the U.S. by 2028 and hire 20,000 employees. However, these employees will not be engaged in the mobile phone production that Trump hopes for, but rather set up an AI computing data center in Houston.

Comment: From a cost perspective, it is an undeniable fact that production costs are higher in the U.S. The average annual salary of American manufacturing workers exceeds $70,000, far higher than about $13,000 in China and $2,300 in India. Such a huge gap in labor costs significantly increases the expenses for enterprises producing goods in the U.S. In terms of supply chains, industrial-grade supply chains in the U.S., especially electronic components, are severely insufficient. For example, Apple phones rely heavily on Asian factories for screens, casings, and electronic components. Even with increased tariffs, purchasing from Asia remains cheaper and more efficient than rebuilding supply chains in the U.S. Rebuilding a complete supply chain system in the U.S. requires not only massive financial investment but also a long time, during which companies face enormous risks and cannot achieve stable supply in the short term. This means that without a steady supply of parts, even high tariffs cannot bring manufacturing back, and companies ultimately still need to rely on imports. Additionally, America's infrastructure cannot support a large-scale return of manufacturing. If manufacturing were to be restarted on a large scale, the power grid, highways, and ports would face immense pressure, and America's current infrastructure cannot meet this transformational demand. Since the year 2000, per capita electricity generation in the U.S. has stagnated, while in China, it has grown by 400%, showing a significant gap.

On the other hand, American workers' productivity and discipline compared to workers in major manufacturing countries like China have gaps, and many Americans are reluctant to work in manufacturing jobs. Chinese labor not only has relatively lower costs but also has solid professional qualities. While there are many countries with lower labor costs than China, China's craftsmanship ingrained in its culture, its core professional capabilities, the national belief in hard work leading to prosperity, and top-notch infrastructure make it the world's leading manufacturing powerhouse.

Original Source: https://www.toutiao.com/article/1829201562899459/

Disclaimer: The article solely represents the author's personal views.