President-elect Donald Trump wants to rebuild domestic manufacturing. The United States has actually doubled its manufacturing output in the past three decades, though it’s also shed 5 million manufacturing jobs from 2000 to 2015. At the turn of millennium, 17.3 million Americans worked in manufacturing, but today only 12.3 million Americans do. Employment in the manufacturing sector still has not returned its pre-Great Recession level of 13 million workers.
Recently, the incoming Trump administration made a big deal out of saving around 800 jobs at the Carrier plants in Indiana that were set to be relocated to Mexico. Many hope that this will be the beginning of a manufacturing renaissance in the United States.
But Carrier just made another announcement, one that shows the cost of Trump’s actions. From The Hill:
United Technologies Corp., which owns Carrier, will raise prices for residential and commercial HVAC equipment as much as 5 percent starting next year, according to Business Insider.
The price change was first announced Nov. 23, according to the report. The company said the decision was unrelated to the deal with Trump.
The reason why companies have outsourced their manufacturing to other countries is because it has become too expensive to do business in the United States. For starters, the U.S. has the world’s highest corporate tax rate. In addition, wages overseas are lower than in America. It’s cheaper to hire foreigners than Americans.
There are also many ways that outsourcing and free trade actually help the American economy. They make goods cheaper and that gives Americans more disposable income. Today, 41 million jobs depend on free trade. These jobs are in everything from transportation to services, and are reliant on exports to other countries.
In order to gain access to these important foreign markets, the U.S. has supported low tariffs. Some, like President-elect Trump, would like to impose tariffs of up to 35 percent on companies that outsource their operations overseas. But adopting this sort of economic nationalism will only make Americans poorer because many of our trading partners will retaliate by raising tariffs on American products, thus harming our access to exports.
There is good news for those who want to employ more Americans in manufacturing. Increasing evidence suggests that manufacturing jobs are set to return to the United States. A 2014 report calls the United States a rising manufacturing power, thanks to our low energy costs and the high productivity of American workers.
There’s even evidence that some manufacturers are looking to build in the U.S. over China. One of them is New York-based Trans-Lux, which makes LCD and LED screens. In the wake of Trump’s election victory, they have decided to shut down their manufacturing operations in China and relocate them to the United States. The biggest reason they decided to return is because the costs of foreigners doing business in China is rising.
Trans-Lux CEO J.M. Allain has suggested to CNN Money that this process could be expedited by getting rid of cumbersome taxes and regulations. Then, maybe even the Chinese would invest further in American manufacturing.