Why Trump's vision to bring home all U.S. manufacturing is 'almost impossible' | About That

00:11:29
https://www.youtube.com/watch?v=TIzYtZNqVwM

Summary

TLDRThe video examines the trade relationship between the U.S. and China, particularly focusing on the apparel industry. It highlights how the U.S. imports a significant amount of clothing from China, leading to a trade imbalance and a decline in American manufacturing jobs. The video discusses the reasons for offshoring, including lower production costs in China, and explores the potential for bringing manufacturing back to the U.S. It emphasizes the challenges, such as higher labor costs and the need for advanced technology, and concludes that while some industries may benefit from reshoring, apparel manufacturing is unlikely to return to the U.S. at a feasible cost.

Takeaways

  • πŸ‡ΊπŸ‡Έ The U.S. has a significant trade deficit with China, especially in apparel.
  • πŸ“‰ Offshoring has led to a decline in American manufacturing jobs.
  • πŸ’° Apparel prices in the U.S. have decreased due to low-cost imports from China.
  • πŸ€– Robotics and AI could help improve U.S. manufacturing efficiency.
  • πŸ’΅ Producing apparel in the U.S. could cost 3-4 times more than in Asia.
  • πŸ“Š 82% of Americans prefer buying made-in-America products if available.
  • 🏭 Reshoring may be feasible for industries like weapons and pharmaceuticals.
  • 🚫 The consensus is that apparel manufacturing is unlikely to return to the U.S. at competitive prices.

Timeline

  • 00:00:00 - 00:05:00

    The discussion begins with Donald Trump's criticism of the US trade deficit with China, highlighting that a significant portion of American clothing is imported from China. The narrative explains how the offshoring of apparel manufacturing has led to a decline in American jobs in this sector, with a call to revive American manufacturing to restore economic stability. A survey indicates that a majority of Americans prefer domestically made products, but the reality of cheaper imports complicates this desire, as clothing prices have decreased significantly due to offshoring.

  • 00:05:00 - 00:11:29

    The analysis shifts to the economics of shoe manufacturing, using Nike as a case study. It breaks down the costs associated with producing a pair of shoes, revealing that while production costs are low in Asia, the overall retail price is influenced by various factors including shipping, marketing, and retailer margins. The discussion then raises the question of whether American manufacturing can compete with these low costs, considering the higher wages in the US and the potential for automation to bridge the gap. However, the challenges of establishing a competitive manufacturing base in the US are highlighted, including the need for significant investment and the reality that domestic production would likely result in much higher consumer prices.

Mind Map

Video Q&A

  • Why did the U.S. offshoring apparel manufacturing to China?

    The U.S. offshored apparel manufacturing to China primarily due to lower production costs and the ability to provide low-cost apparel at a mass quantity.

  • What is the average wage for manufacturing workers in the U.S. compared to China?

    As of mid-2024, the average manufacturing worker in the U.S. earns close to $30 an hour, while in China, it is under $7 an hour.

  • Can robotics help bring apparel manufacturing back to the U.S.?

    Yes, the Trump administration suggested that robotics and American technology could improve efficiency and reduce costs in U.S. manufacturing.

  • What are the challenges of reshoring apparel manufacturing?

    Challenges include high labor costs, the need for significant investment in infrastructure, and the reliance on materials often sourced from abroad.

  • Is it feasible for the U.S. to produce apparel at competitive prices?

    Experts agree that producing apparel in the U.S. would likely cost three to four times more than in Asia, making it unfeasible for consumers.

  • What industries might benefit from reshoring?

    Industries like weapons manufacturing and pharmaceuticals may benefit from reshoring due to national security concerns.

  • What is the public opinion on buying American-made products?

    A survey showed that 82% of Americans would buy more made-in-America products if they were more widely available.

  • What happened to Nike's attempt to automate production in Mexico?

    Nike's attempt to create a highly automated factory in Mexico failed due to high costs and productivity issues.

  • What is the price difference between U.S. and Chinese-made apparel?

    Producing apparel in the U.S. could cost three to four times more than in China.

  • What is the overall consensus on bringing apparel manufacturing back to the U.S.?

    The consensus is that it is unlikely for the U.S. to regain a significant number of apparel manufacturing jobs due to economic realities.

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  • 00:00:00
    When Donald Trump makes a trade enemy of
  • 00:00:02
    China, arguing the US buys way too much
  • 00:00:05
    from them. Last year, China made uh $1
  • 00:00:08
    trillion off trade with the United
  • 00:00:10
    States. That's not right. You have to
  • 00:00:12
    consider how much of that is Americans
  • 00:00:15
    buying clothing made in China. Estimates
  • 00:00:17
    are about 30 to 40%. But this wasn't
  • 00:00:20
    always the case. Apparel used to be
  • 00:00:22
    produced in factories in Canada or in
  • 00:00:25
    the United States. much of that was then
  • 00:00:28
    offshored especially when China joined
  • 00:00:30
    the uh world economic council. You know
  • 00:00:33
    they became part of that uh supply chain
  • 00:00:37
    and that meant pretty quickly the US got
  • 00:00:39
    cut out. Just take a look at how many
  • 00:00:41
    fewer Americans have jobs making clothes
  • 00:00:44
    today compared to 30 years ago. The
  • 00:00:46
    Trump administration's goal of course is
  • 00:00:48
    to bring that golden age of American
  • 00:00:50
    manufacturing back and to put that money
  • 00:00:53
    back into the pockets of Americans. If
  • 00:00:56
    we do not protect our nation's
  • 00:00:58
    manufacturers, we lose a fundamental
  • 00:01:00
    part of who we are as a people. And it
  • 00:01:03
    is a popular idea. Americans by and
  • 00:01:06
    large would rather buy stuff that's made
  • 00:01:08
    at home. One survey showed 82% of people
  • 00:01:12
    said they would buy more made in America
  • 00:01:14
    products if they were sold more widely.
  • 00:01:17
    But of course, to use clothing as an
  • 00:01:19
    example once again, there's a reason.
  • 00:01:21
    The US now imports a majority of what
  • 00:01:24
    Americans wear from Asia. The price of
  • 00:01:26
    clothing has gone down dramatically and
  • 00:01:29
    that was primarily due to the offshoring
  • 00:01:32
    of production. Yeah, it's just cheaper.
  • 00:01:34
    Consider this. Say you bought a big old
  • 00:01:36
    box of anything in 1970 and it cost you
  • 00:01:39
    $75.
  • 00:01:41
    Doesn't really matter what you bought
  • 00:01:42
    because if we take average US inflation
  • 00:01:44
    into account, buying that same box of
  • 00:01:47
    whatever would cost you more than 600
  • 00:01:50
    bucks in today's dollars. So unfair,
  • 00:01:53
    right? But now, let's say we're talking
  • 00:01:55
    about a 1970s coat. Same price, but 50
  • 00:01:59
    years later, inflation in the apparel
  • 00:02:01
    industry is tiny compared to how much
  • 00:02:04
    more expensive everything else has
  • 00:02:05
    gotten. That same coat in today's
  • 00:02:07
    dollars will cost you around 167 bucks
  • 00:02:11
    today. That essentially speaks to
  • 00:02:13
    China's overall price suppression effect
  • 00:02:17
    by being able to provide to us lowcost
  • 00:02:20
    apparel at a mass quantity. So we wanted
  • 00:02:23
    to know can the US bring something like
  • 00:02:26
    apparel manufacturing back to America
  • 00:02:28
    without forcing every American to break
  • 00:02:31
    the bank? Let's go through it.
  • 00:02:35
    [Music]
  • 00:02:37
    So, let's talk about shoes. How much it
  • 00:02:39
    costs to make a pair and how much you
  • 00:02:41
    can reasonably sell that pair for. What
  • 00:02:43
    will the market bear? And we'll use a
  • 00:02:46
    pair of Nikes made in Asia as an
  • 00:02:47
    example. Retail price 100 bucks. A few
  • 00:02:51
    years ago, the head of Nike's footwear
  • 00:02:52
    sourcing program said on average on that
  • 00:02:55
    $100 pair of shoes, figure 25 of those
  • 00:02:58
    dollars is the cost of actually making
  • 00:03:01
    the shoe in the factory. which makes it
  • 00:03:03
    sound like Nike is making 75 bucks
  • 00:03:05
    profit on every pair of $100 shoes,
  • 00:03:07
    which is insane. But of course, we're
  • 00:03:09
    not done. That $25 production cost is
  • 00:03:12
    really just the Asian factory. The
  • 00:03:15
    material, the labor, all of it. But
  • 00:03:17
    that's a long way from the shoe being on
  • 00:03:19
    your foot, right? You got to send those
  • 00:03:21
    things across a whole ocean. Shipping
  • 00:03:23
    and add another dollar onto the total
  • 00:03:26
    cost. And US duties, which was
  • 00:03:28
    pre-tariffs, about
  • 00:03:31
    $2.50. So now we're up to around 28.50
  • 00:03:34
    to bring those Asian-made shoes into the
  • 00:03:37
    United States. But then Nike has to tell
  • 00:03:40
    people that it's got some cool new
  • 00:03:42
    shoes, right? There's marketing paying
  • 00:03:44
    for operations here in North America,
  • 00:03:46
    labor, so on and so forth. And that's a
  • 00:03:49
    big expense, another $15 on this
  • 00:03:52
    particular pair of shoes. There's also
  • 00:03:54
    taxes because of course there's taxes.
  • 00:03:58
    And we're now basically at just over
  • 00:04:00
    $45. But you're still not wearing the
  • 00:04:03
    shoes because it's not like Nike makes
  • 00:04:05
    most of its money selling direct to
  • 00:04:07
    consumer. It sells mainly through stores
  • 00:04:10
    like Foot Locker or Sports Experts. And
  • 00:04:12
    they're going to want their cut as well.
  • 00:04:15
    According to Nike, a retail store might
  • 00:04:17
    pay them around $50 for the shoes. And
  • 00:04:21
    this is where Nike takes the money and
  • 00:04:23
    exits the transaction, pocketing a
  • 00:04:25
    relatively small profit of
  • 00:04:27
    $4.50. But now this shoe is the
  • 00:04:30
    retailer's problem. They've got to
  • 00:04:32
    recoup the $50 they just paid Nike and
  • 00:04:35
    all of their other operating costs, too.
  • 00:04:37
    So that's why they're setting the price
  • 00:04:39
    to you, the customer, at $100. But
  • 00:04:43
    here's the kicker. According to Foot
  • 00:04:45
    Locker's financial statements, they
  • 00:04:46
    don't tend to sell $100 shoes for $100.
  • 00:04:50
    they might sell that pair for closer to
  • 00:04:52
    60 because of all the discounts that
  • 00:04:55
    they have to offer to actually move
  • 00:04:57
    product before the end of the season.
  • 00:04:59
    Unfortunately, there's a lot of stuff
  • 00:05:01
    that bombs. It hits the shelf, it
  • 00:05:03
    doesn't sell. So now it has to go on
  • 00:05:05
    sale. When retailers, they set up the
  • 00:05:07
    initial price, they will already factor
  • 00:05:10
    in, you know, how much discount they
  • 00:05:12
    plan to offer in the future. So all of a
  • 00:05:14
    sudden you've sold a $50 shoe for $60
  • 00:05:18
    for a measly $10 margin and that's got
  • 00:05:20
    to pay for your own marketing, your
  • 00:05:23
    employees overhead costs and ideally you
  • 00:05:26
    make some kind of profit. Otherwise, why
  • 00:05:28
    did you bother buying and selling the
  • 00:05:30
    shoe in the first place? Apparel is is
  • 00:05:32
    generally low margin. There just isn't a
  • 00:05:34
    lot of wiggle room at all. This, ladies
  • 00:05:37
    and gentlemen, is what the market will
  • 00:05:39
    bear. This is the low cost and the
  • 00:05:43
    equilibrium that this one slice of the
  • 00:05:45
    apparel industry has reached. So now
  • 00:05:47
    let's ask Trump's question. Can all of
  • 00:05:50
    that start and finish in America? And if
  • 00:05:54
    so, how much more is it going to cost
  • 00:06:01
    you? If we look at apparel manufacturing
  • 00:06:04
    today, there are a couple of big things
  • 00:06:05
    that China has that the US doesn't. The
  • 00:06:09
    first is cheap labor. If there's
  • 00:06:11
    something very complicated like a ski
  • 00:06:13
    jacket that has many complicated steps,
  • 00:06:15
    that is so labor intensive that at times
  • 00:06:17
    it's just not possible in the US to
  • 00:06:19
    produce such a thing and be affordable
  • 00:06:21
    at the retail level. Yeah. Because
  • 00:06:23
    American workers are just paid more. And
  • 00:06:25
    that's true not just in clothing, but
  • 00:06:26
    across all manufacturing. As of mid2024,
  • 00:06:29
    the average manufacturing worker in the
  • 00:06:32
    United States earned close to $30 an
  • 00:06:34
    hour. Compare that to under $7 an hour
  • 00:06:37
    in China. Some of that we can attribute
  • 00:06:40
    to much harsher and by western standards
  • 00:06:43
    unethical labor practices. But China
  • 00:06:46
    also has a much bigger population and a
  • 00:06:49
    massive pool of workers ready and
  • 00:06:51
    willing to do this kind of work for $7
  • 00:06:54
    an hour, which we should say does go
  • 00:06:57
    further than $7 would here in Canada or
  • 00:07:00
    the United States. On average, cost of
  • 00:07:02
    living in China is similar to the labor
  • 00:07:05
    discount. Anywhere from a quarter up to
  • 00:07:08
    half of what it cost to live here in the
  • 00:07:11
    United States. It's a huge population.
  • 00:07:14
    Especially the industry has been going
  • 00:07:16
    further and further into the the back
  • 00:07:18
    country of China where there are
  • 00:07:20
    millions of people who you know they
  • 00:07:22
    work in rice fields and they're being
  • 00:07:24
    given jobs in factories. They may not
  • 00:07:26
    have many economic you know
  • 00:07:28
    opportunities. So working in a garment
  • 00:07:30
    in factories can be a great choice or a
  • 00:07:33
    very attractive choice to many people
  • 00:07:35
    living there. So how would a factory in
  • 00:07:37
    America even begin to close that gap?
  • 00:07:40
    Well, the Trump administration has an
  • 00:07:42
    idea. How can we compete with that uh
  • 00:07:44
    labor? The answer is robotics are going
  • 00:07:47
    to do it better and cheaper. And the key
  • 00:07:50
    to robotics is going to be American AI
  • 00:07:53
    and American intuition and the American
  • 00:07:55
    technology. The idea here being if you
  • 00:07:58
    can delegate some of the more mechanical
  • 00:08:00
    work to robots like Tesla's Optimus,
  • 00:08:03
    that could improve efficiency and reduce
  • 00:08:05
    costs, right? And according to Trump's
  • 00:08:08
    team, this could also create new, higher
  • 00:08:11
    paying jobs for Americans running those
  • 00:08:14
    robot factories. You're going to see the
  • 00:08:16
    greatest surge in training for what we
  • 00:08:19
    call trade craft, teaching people how to
  • 00:08:22
    be robotics mechanics, engineers, uh,
  • 00:08:26
    and electricians for high-tech
  • 00:08:29
    factories. Except this, too, has a cost,
  • 00:08:32
    a big upfront cost, because they're not
  • 00:08:34
    just talking about moving factories to
  • 00:08:37
    the United States. They're talking about
  • 00:08:39
    creating something better and more
  • 00:08:41
    efficient than what China already has
  • 00:08:44
    and doing it from the ground up. That's
  • 00:08:46
    not easy. The Chinese government invests
  • 00:08:49
    significantly in different industries.
  • 00:08:51
    So when you look at the equipment they
  • 00:08:53
    have there, which is, you know, the the
  • 00:08:55
    spinning, weaving, bleaching, you know,
  • 00:08:58
    the cut and sew operation, it's all
  • 00:09:00
    highly automated. So they have some very
  • 00:09:03
    efficient processes. They're very good
  • 00:09:06
    at producing large volumes at low cost.
  • 00:09:09
    In fact, in 2015, Nike actually tried to
  • 00:09:12
    create a highly automated factory in
  • 00:09:15
    Mexico. The goal being pretty similar,
  • 00:09:18
    to get robots to put together the tops
  • 00:09:20
    of its sneakers in 50 to 75 seconds, a
  • 00:09:23
    job that would normally take a human
  • 00:09:25
    well over 10 minutes. But less than
  • 00:09:28
    three years later, it all fell apart. It
  • 00:09:30
    just didn't work. the costs of uh
  • 00:09:33
    automation. They were trying to automate
  • 00:09:35
    the process, the cost of labor, the
  • 00:09:38
    learning curve, the productivity levels
  • 00:09:40
    were not able to justify the cost of
  • 00:09:43
    producing that shoe versus the price
  • 00:09:45
    that they could get for it. And even if
  • 00:09:47
    you could get a whole slate of brand new
  • 00:09:50
    US factories filled with robots doing
  • 00:09:53
    all the work, experts agree they still
  • 00:09:56
    need the materials to work with. If I
  • 00:09:58
    try to keep everything USmade, um, it's
  • 00:10:01
    almost impossible. At some level, I have
  • 00:10:03
    to still use the thread, I still have to
  • 00:10:05
    use the buttons or something that is
  • 00:10:08
    produced in China. In order for the
  • 00:10:10
    United States manufacturing to catch up,
  • 00:10:12
    we would have to invest in lots and lots
  • 00:10:15
    of infrastructure uh, in the entire
  • 00:10:17
    apparel supply chain. In short, it's
  • 00:10:19
    going to take billions and billions, if
  • 00:10:22
    not tens or even hundreds of billions of
  • 00:10:24
    dollars. They could probably produce
  • 00:10:26
    apparel in the in the United States or
  • 00:10:28
    Canada, but it would be at least
  • 00:10:30
    probably triple or quadruple the cost of
  • 00:10:32
    what they can produce in Asia. And
  • 00:10:34
    that's where Trump's plan crashes into
  • 00:10:36
    this wall of reality because are you
  • 00:10:39
    willing to pay $400 for a $100 pair of
  • 00:10:43
    shoes? Now, let me take one step back
  • 00:10:45
    because everyone we spoke to did agree
  • 00:10:48
    there are some industries where it could
  • 00:10:51
    make sense for the US to invest in
  • 00:10:53
    reshoring building weapons or making
  • 00:10:56
    pharmaceuticals for example. These are
  • 00:10:58
    very arguably issues of national
  • 00:11:01
    security. But not every industry is like
  • 00:11:03
    that. And the example of clothes a
  • 00:11:06
    source of major domestic manufacturing
  • 00:11:08
    loss in the United States. It is simply
  • 00:11:11
    not feasible for America to get a lot of
  • 00:11:15
    these jobs back. Personally, I do not
  • 00:11:17
    think this is a reality. It just doesn't
  • 00:11:20
    make sense. The consensus is pretty
  • 00:11:23
    clear.
  • 00:11:24
    [Music]
Tags
  • Trump
  • China
  • Apparel Manufacturing
  • Trade Imbalance
  • Offshoring
  • Robotics
  • American Jobs
  • Cost of Living
  • Consumer Prices
  • Reshoring