Americas Manufacturing Future: An Update Closer To The Election

This is an update of a past article titled, “What Happened To American Manufacturing And How To Recover”. If you want a more general reflection on the totality of America's history as a manufacturer and longer-term potential, check out that article. 

During his tenure, President Joe Biden has largely been a strong advocate for domestic manufacturing. Under his leadership, America has added hundreds of thousands of manufacturing jobs, and spending on both public and private manufacturing construction has nearly doubled. The same is true concerning the construction of infrastructure supporting manufacturing, including transportation. At a time when other advanced international economies are slowing in both their total economic output and manufacturing, America is surging ahead at a pace far faster than our most comparable competitors. The largest impacts of these pieces of legislation won’t be fully felt until these new factories and pieces of infrastructure are operational. Nevertheless, even the short-term effects are impressive. 

                With that in mind, the nation now sits at a manufacturing crossroads. On one side, we have what will likely be a continuation of Biden’s already fairly effective agenda consisting of direct economic stimulus through bills like the Inflation Reduction Act and the CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act. The only major addition Vice President Kamala Harris adds to his agenda on this specific issue is a minor increase in tariffs; beyond that, Harris intends to pass policies in line with the precedents set by Biden’s plans. This set of policies has utilized targeted government spending and well-structured incentives to encourage companies to manufacture in America and buy American-manufactured products. This along with good economic management by the Federal Reserve and an influx of government spending surrounding building and expanding infrastructure allowed the American economy to recover from a recession incredibly quickly. These policies also increased jobs, delivering America’s manufacturing from a slowly receding sector to a boldly expanding one. On this side, we have optimistic manufacturers and a broadly positive market that will hopefully bring down prices for all American businesses and citizens. 

                 On the other hand, we have former President Donald Trump’s manufacturing policy. Trump's strategy amounts to raising tariffs and corporate tax cuts. Essentially, his plan is less about actually competing with our manufacturing rivals to produce low-cost quality goods for our citizens and more about bludgeoning the American consumer with higher prices until they’re forced to buy American. Then, once there’s a stronger demand for American goods, Trump wants to allow businesses to rapidly expand their capacity by providing tax deductions on the equipment required for expansion. This could theoretically work, but in a still-recovering economy, it could also plunge the cost of living crisis into even more dire straits. Harris and Biden still believe in tariffs, but likely significantly less extreme tariffs that will not lead to as gruesome an immediate economic cost. The tax deductions from this plan would also decrease government revenues, which would likely marginally increase the deficit, though these specific taxes aren’t the largest revenue sources. Beyond these tariffs, Trump also swore to take “other countries’s jobs”, but failed to really specify how he would do so beyond the aforementioned tariffs.

                 In Trump’s first term (2016 - 2020), a collective of similar policies were completely ineffective in preserving American manufacturing. This was partially due to the COVID-19 pandemic and the complete failure of his trade policy, which essentially amounted to the beginning of a trade war with China, leading to an increased cost of many of the goods that manufacturers need to function. Overall, by the end of his administration, his economic record was mixed, but his manufacturing record had only continued its slow decline with no real lasting growth. The only major reason voters perceive Trump as good for the economy is because Biden felt the worst of the economic difficulties from the COVID-19 pandemic while dealing with the war in Ukraine. These both ended up being inflationary events that caused wage growth to slightly be outpaced by inflation for the first couple of years of Biden's presidency, though that trend has since reversed and recession due to these events has been mostly avoided. 

                  A vote for Trump is at best a vote for slow manufacturing growth and significantly declining confidence from manufacturing interests. At worst, it’s a vote for economic death (due to the 20 percent import tariff imposing a direct cost of living increase on the American consumer) and a significant reduction in industrial gains. A vote for Harris, on the other hand, is one for a stronger, more innovative manufacturing sector with the capacity to rapidly grow over the course of the next couple of years.