In the 1950s, about 35% of jobs in the U.S. private sector were manufacturing positions. Today, there are 12.8 million manufacturing jobs in the U.S., accounting for 9.4% of private-sector jobs.

President Trump said that his comprehensive tariff policy aims to bring manufacturing back to the United States. Economists expressed skepticism, believing that tariffs cannot achieve this goal and worrying that the disadvantages outweigh the advantages.

To understand whether the U.S. could restore its manufacturing glory, it is first necessary to understand how the U.S. lost its status as a global manufacturing powerhouse.

In the early 20th century, the U.S. was the first to adopt general parts and organizational elements for mass production. Economist Susan Helper from Case Western Reserve University pointed out that World War II boosted American manufacturing capacity significantly while dealing a severe blow to competitors.

After the 1950s, the position of manufacturing in the U.S. economy began to decline. Part of the reason was that Americans became wealthier and spent more on services such as tourism, dining, and healthcare.

Jobs also shifted toward the service sector with consumption trends. Increasing numbers of people started working in industries like hotels, banks, law firms, and hospitals. Manufacturing employment fluctuated with economic recessions and recoveries. However, while service sector jobs continued to increase from the mid-1960s to the early 1980s, manufacturing employment remained relatively stable.

The production locations for many non-durable goods purchased by Americans (such as clothing) also changed. A large amount of production shifted to southern states where labor costs were lower.

During roughly the same period, some underdeveloped regions in the world, which had much lower labor costs, began developing non-durable goods manufacturing, such as Latin America and Asia. The U.S. started importing more of these products. Over time, similar situations occurred with light durable goods like blenders.

In the 1980s, changes began to take place. Non-durable goods manufacturers in the U.S. found it increasingly difficult to compete with countries having lower labor costs. This situation worsened further in the 1990s partly due to the North American Free Trade Agreement reducing tariffs on Mexican goods.

Economist Susan Houseman from the Upjohn Institute noted that after developing steel industries in developing countries like South Korea, global overcapacity in steel led to job losses in American steel enterprises.

However, compared to China's accession to the World Trade Organization in 2001, these changes in the 1980s and 1990s seem insignificant. After joining the WTO, China opened its domestic market to foreign investment and gained access to the global market.

Gordon Hanson, an economist at Harvard University, said, "Suddenly, we saw a massive production capacity in a low-wage country, which was a significant shift."

The U.S. had previously faced competition from imported goods from other countries but had never encountered rivals with a population far larger than that of the U.S. Moreover, China's rise was much faster than that of countries like Japan. In 1999, China's exports accounted for only about one-tenth of those of the U.S., even less than Sweden. By 2008, China surpassed the U.S. to become the world's largest exporter of goods.

As China produced more goods, the U.S. became more adept at providing services. In 2023, the U.S. exported $24 billion worth of advertising services.

The current service exports of the U.S. exceed $1 trillion, far surpassing any other country. Additionally, due to companies transferring intellectual property developed in the U.S. (such as patents and trademarks) overseas for tax purposes, U.S. service exports are underestimated.

A new study found that in 1980, manufacturing jobs accounted for 39% of high-paying jobs in the U.S. By 2021, this proportion had dropped to 20%. During the same period, the share of high-income jobs in finance, professional, and legal sectors rose from 8% to 26%.

For centuries, economists have consistently opposed the widespread use of tariffs. In their view, higher prices paid by consumers and businesses would ultimately lead to reduced spending on other goods and services, including domestically manufactured goods and services. This would offset any benefits brought about by increased domestic production and government revenue. Therefore, although some manufacturers may benefit, the living conditions of most Americans would deteriorate.

Hanson pointed out that even if manufacturing jobs increase by 30%, the proportion of manufacturing jobs in the private sector would only rise to around 12%, far below past levels.

Houseman believes that the U.S. should invest in increasing domestic production of certain products, although this would incur costs, it should be done in a more targeted way rather than through broad-based tariffs.

She said that increasing domestic production of high-tech products like semiconductors is an example, not only for creating jobs but also for economic and military security considerations. However, this perspective does not apply to many low-cost goods. "Do we really want to start producing T-shirts ourselves again? How important is that?" (Translated by Zhu Jie)

This article was originally published on the Wall Street Journal website on April 13, with the original title "How Did the U.S. Lose Its Status as a Global Manufacturing Powerhouse?" by Justin Rath.

At the 2023 North American International Auto Show held in Detroit, the "Motor City" of the U.S. (Xinhua News Agency).

Original source: https://www.toutiao.com/article/7493913162232660534/

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