Factories not coming back to US
Those leaving China pick Southeast Asia, Mexico
The tariffs that President Trump has slapped on Chinese imports haven’t sparked the widespread return of manufacturers to the U.S. that Trump envisioned.
About 41% of American companies are considering moving factories from China because of the trade war, or have already done so, but fewer than 6% are heading to the U.S., the American Chamber of Commerce in China said in a recent survey. Companies are largely eyeing Southeast Asia and Mexico.
Steve Madden, the footwear and handbag maker, shifted its production to Cambodia. GoPro, the mobile camera maker, has its sights on Mexico. Gap, the clothing and accessories retailer, has started up new factories in Indonesia, Vietnam and Bangladesh. Brooks Running, a running shoes and clothes maker, said it will move 8,000 jobs from China to Vietnam by the end of the year.
The White House was not immediately available for comment.
President Trump tweeted Friday morning that “Companies will relocate to U.S.” and “If the Tariffs went to at the higher level, they would all come back, and fast.”
Manufacturing added 28,000 jobs the first half of the year, the fewest during that period since President Trump took office promising a manufacturing renaissance.
So why aren’t U.S. manufacturers bringing jobs back to the U.S.?
“There are no viable alternative manufacturers located in the United States,” James Osgood, CEO and president of Klean Kanteen, a maker of stainless steel water bottles, said at a hearing late last month on Trump’s proposed tariffs on $300 billion in Chinese imports that have since been put on hold.
“It would likely take five to seven years to build the capital-intensive infrastructure, develop and train personnel ... and implement such domestic production capability,” Osgood said. “Klean Kanteen does not have the working capital or profitability to cover losses for that amount of time.”
Various companies testified that there is an entire supply chain in China to support their production, but no equivalent network in the U.S.
American job gains have increasingly been concentrated in service-providing industries instead of manufacturing, the Peterson Institute for International Economics said in a recent report.
While the gap between U.S. and Chinese factory wages has narrowed in recent years, pay for American manufacturing workers has risen faster than gains in productivity, or output per worker, according to a recent report by Boston Consulting Group. That means the U.S. is still relatively expensive.
And the strength of the dollar “has made U.S. goods more expensive abroad, and imports cheaper” in the U.S., the study said.
For low-cost manufacturing, Southeast Asian countries and Mexico are cheaper. The average monthly factory wage in the U.S. is more than $3,200, compared to $237 in Vietnam, $188 in Indonesia, $425 in Thailand and about $400 in Mexico, according to the data by Trading Economics.