It’s going to take much more than tariffs to restore America’s industrial base or solve the long-running trade deficit issue. What’s needed, some industry observers say, is a comprehensive, well-thought-out strategy that focuses on recruiting, rebuilding and re-establishing a robust manufacturing workforce while creating an environment favorable to meaningful investment over the long term.
That’s the position of Harry Moser, founder of the Reshoring Initiative, a nonprofit organization focused on helping manufacturers realize that local production—in some cases—reduces their total cost of ownership of purchased parts and tooling. The firm also trains suppliers how to effectively meet the needs of their local customers, giving the suppliers the tools to sell against lower-priced, offshore competitors.
FCNews recently caught up with Moser to get his take on the tariff wars as well as his observations and recommendations on rebuilding manufacturing in the U.S. Following are key takeaways from the interview:
Holding pattern amid uncertainty
Moser has gleaned valuable insights from his decades of experience in working with U.S. companies to persuade them to bring back “meaningful” manufacturing jobs to America. While he’s generally encouraged by the uptick in jobs reshored over the past decade—combined with foreign direct investment in the U.S.—he said he is concerned about the nature in which the current tariffs are being implemented. While many U.S.-based companies with manufacturing partnerships outside the country are aware of the benefits of bringing those jobs back to America, many executives are hesitant to make the necessary investment in the face of uncertainty.
“Many of the companies we’re working with express a desire to move production back to the U.S. as a result of the tariffs, but they said they will only do it if the tariffs are firm, if they’re solid and if they’re going to last for five or 10 years so they can get a return on investment on any new factory they might build,” Moser explained. “But right now the problem is it’s so unstable and there’s so much pressure politically, even within the Republican Party, in the media and many other countries that it’s hard to estimate whether Trump will be able to hold to his program. There’s the risk that he’s going to get all the pain and none of the gain because of everything that’s going on right now. And if he folds in a month or two months or three months, then it’s all pain but no gain.”
What would make more sense, according to Moser, is a more palatable tariff structure implemented on a small scale. “What Trump should have done was a much smaller tariff, like 15%, on everything from everywhere,” he said. “Something simple, direct and reasonable, and then giving countries two months to get together and come up with a solution. And if they come up with a solution, then no tariffs, or less tariffs, or more tariffs conceivably. But at least you wouldn’t have had this horrible stock market activity, all the media screaming about a recession—essentially all the negatives. I agree 100% with Trump’s objective of bringing back manufacturing; that’s obviously what we do. However, his approach to it is too extreme.”
Keep elements of IRA intact
Leading up to the election, then-candidate Trump expressed his intentions to repeal many of Biden’s economic executive orders and signature economic policies, including the Inflation Reduction Act. Embedded with that act were incentives to not only encourage companies to build computer chips and EV batteries here in the U.S., but also enticements to get consumers to purchase more electric cars. Moser’s research showed The CHIPs Act resulted in plant ground breakings in the U.S. along with additional commitments to employ American workers to build and run those plants—many of which are based in Red States. Talk of repealing elements of the IRA, according to Moser, could derail that progress.
“During the election, my comment was that if Trump was elected, that he would not try to cancel those projects because they are in the Red States—it’s his people, it’s his workers, it’s his manufacturing,” Moser stated. “We have a contract, how do you break that contract? And billions of dollars wasted digging holes in the ground. So, my view was that he will not cancel them. He talks about canceling, but it just seems stupid. It was stupid to give away so much money under Biden’s plan, but now it’s even more stupid to try and take it back. I think (and hope) they will continue.”
No guarantees
ITR Economics, known for its accuracy in predicting recessions/ economic depressions, is not of the mindset that a U.S. recession is likely to happen soon, although it acknowledges the tariff wars are having a significant impact on global economic markets. The firm is also not convinced that tariffs will have the effect intended by the new administration. In a briefing ITR writes: “We deem it unlikely that a rapid increase in the flow of foreign direct investment into the U.S. will result from these tariffs. A lot of capital has already been spent in Mexico and elsewhere as part of near-shoring or supply chain resiliency. It is doubtful that companies can simply decide to replicate that effort in a short period of time. Furthermore, U.S. rules and regulations may be easing, but hurdles remain.”
Moser estimates that some foreign direct investment will instead move to Mexico. “The actual investment in Mexico is much more than in the past, but it seems to come in surges,” he said. “It’s still not so big relative to the U.S. Yes, some of these companies that have said they’re going to build in the U.S. have said they’re going to do it instead of a planned factory in Mexico. And why is that? Because if you look at the cars made in or assembled in Mexico, I think about 70% of them or so are sold in the U.S.
“So, the U.S. is the prize, the U.S. is the market that everybody wants, and it’s more economical to make them here than it is to make them in Mexico and have a 25% tariff on them. So, I think if you wind up with a 25% tariff on cars coming out of Mexico, there will be more U.S. automotive factories. But I’ll be surprised if Trump can hold that position. I suspect he’s going to have to cave. They’re going to give him border protection from fentanyl, illegal immigration—all these other things he wants. And he’s going to say, ‘OK, forget the tariffs,’ or minimize the tariffs because he has other things that he wants seemingly as much as manufacturing.”
Want more U.S. plants?
While most support a strong U.S. manufacturing base, it’s only a part of the solution, according to Moser. Once enough capital, incentives, etc., are generated to build new facilities or expand existing ones in the U.S., the next challenge lies in finding, training and employing skilled workers to run those operations. According to Moser, it’s much easier said than done. “It can take years to develop the workforce,” Moser said. “Apprentice programs are three or four years long. But the problem for the new administration is, in two years, we’regoing to have the midterm elections.”
In short, time is not on Trump’s side. “He wants to get rid of the trade deficit, which would be about a 40% increase in manufacturing, maybe a 30% increase in labor/people—which we definitely don’t have,” Moser said. “So, if we do not come up with those workers, then he can have all the tariffs he wants, he can do anything he wants but nothing’s going to happen because there’s nobody to do the work. At the Reshoring Initiative, we think he should put at least as much priority on apprenticeship programs, engineers, training the workforce that we actually need to manage and work the factory. We believe the biggest flaw in his program is the lack of an effort to have the workforce we need to implement it.”
Harry Moser holds a Bachelor’s of Science degree and a Master’s in Engineering from MIT, and an MBA from the University of Chicago. He also spent decades in machine tool manufacturing. Moser has also participated actively in the Obama administration’s insourcing forum and testified at the Senate Commission hearing on U.S. supply chains in China.
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