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As a result, manufacturers of low-tech items such as furniture and small household appliances had a tough time of it and ultimately left the US.
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But that does not mean US manufacturing reached its apex by other measures, such as employment or share of the economy. More on that in just a bit.
Why do I bring all this up? Rather obviously, because the root driver of the Trump tariff madness is bringing manufacturing back to the United States. Trump appears to want a trade surplus in goods with every country on the planet.
The salient question: how did we get here?
Two weeks ago, Wall Street Journal reporter Justin Lahart authored an outstanding summary of how US manufacturing was lost. Let’s look at the highlights.
Coming out of World War II, the US ruled the roost, with surging domestic demand for goods of all types and with a huge production base partially freed from making war-related products.
Lahart notes that in the 1950s, about 35% of private-sector jobs in the US were in manufacturing. Today, there are 12.8 million manufacturing jobs, an amount equal to just 9.4% of those private-sector jobs.
In the post-war period, Lahart notes that many of the goods in demand “were high tech for the time, such as dishwashers, televisions and jets, often brought about by the host of innovations developed during the war. Making them in America, as opposed to some other country, made sense because staying on the leading edge required research and development teams working closely with the factory floor.”
But in the 1960s, a critical change took place. With growing affluence and possessing lots of things, consumer spend increasingly went to service, not goods (see interesting chart on this below).
What’s more, Lahart says around this time there were also shifts in where many of the nondurable goods Americans bought, such as clothing, were made. A lot of production shifted to states in the South, where labor costs were lower.
“Around this time, less developed parts of the world, where labor costs were much lower, began dialing up manufacturing of nondurable goods in Latin America and Asia,” Lahart writes, adding that “The US started importing more and more of those items. Over time, the same thing happened with light durable items, such as blenders.”
Then in the 1980s, Lahart says there was another critical change. American manufacturers of nondurable goods had an increasingly difficult time competing with countries where labor costs were lower. That intensified in the 1990s, in part as a result of the North American Free Trade Agreement lowering duties on Mexican goods.
Then the biggest change of all. In 2001, China joined the World Trade Organization (WTO), opening its country to foreign investment and gaining access to global markets.
“All of a sudden we have substantial production capacity in a low-wage country, and that was a major shift,” Harvard University economist Gordon Hanson told Lahart.
Lahart notes that “the US had faced import competition from other countries before, but never one that dwarfed its population.”
As a result, manufacturers of low-tech items such as furniture and small household appliances had a tough time of it and ultimately left the US. Many towns across the country of course were left desolate as their local factories were shuttered en masse.
Can the Trump tariffs fix any of this? Lahart notes efforts to return to US shores critical items such as semiconductors and medicines, among others.
But Lahart quotes one expert as asking this question: “Do we want to start producing our own T-shirts again?”
Good question.
Can - and should - US manufacturing be saved? I have asked that question many times on these pages, and will today answer “in part” to both today.
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