Will More Domestic Manufacturing Resolve Supply Chain Issues?

At the beginning of the year, a survey revealed that 90% of executives said they were in the process of moving production out of China. 80% of those executives said they plan on bringing some of that production back to the states. In fact, the construction of new manufacturing facilities in the US has increased by 116% in the last year.

The pandemic and the war in Ukraine are both reasons why. China’s repeat lockdowns have wreaked havoc on shipping times and production. The war in Ukraine has interfered with global trade too, but has more importantly reminded executives that a similar situation could emerge between China and Taiwan.

Trump’s China tariffs are another reason. Some companies began making the transition even before COVID because President Trump pushed tariffs on Chinese products, incentivizing production at home.

Isn’t it more expensive to produce in the US? By eliminating overseas shipping, companies are finding that this outweighs the money spent on labor in the US. Also—the tariffs made it more expensive to produce in China.

We’re heading in the right direction, but Biden might change that. Willing to do anything it takes to lower inflation, Biden is considering scrapping aspects of Trump’s tariffs on China. Doing so would put the ball back in China’s court and again incentivize American companies to offshore their manufacturing.