Comment by baq
15 hours ago
The thing is, minimum wage there pays for 10 people on the floor in Asia and the cost of the factory is approximately the same. There’s no economic sense to build a factory in the states… which is where all the government subsidies enter the stage, but the budget is already running a war time deficit. It’s going to be so much worse for those small used-to-be-factory cities until the printer starts for real, and then there’s no guarantee it’s going to be any better after.
> There’s no economic sense to build a factory in the states…
That isn't how it works. Details matter.
A local factory can save a ton of money because it can be more just in time - you don't have to build excess because of shipping times. (shipping costs can also save a lot of money for a local factory).
The states have lots of cheap reliable power (not perfectly reliable, but close enough). If your production line is mostly automated (or could be) the states are cheaper - there isn't much labor anyway.
Production close to engineering makes for a lot of savings because when a part is designed you can get a prototype to testing faster.
there are lots of other factors, and most are not in the favor of local production but there are several that are. Where you fall is an optimization problem and there is no one right answer for everything.
> The states have lots of cheap reliable power (not perfectly reliable, but close enough).
Industrial electricity rates are pretty much the same in China and the US, from 8-9c/kWh. In both countries, however, electricity is going to face upward price pressure from AI datacenters.
> Production close to engineering makes for a lot of savings because when a part is designed you can get a prototype to testing faster.
This already exists in the US. In California, for example, there are many specialty prototype manufacturing companies that focus on this problem specifically. They are adjacent to the r&d firms designing the products.
That's not the type of manufacturing that the recent debate over reshoring is about. It's about production scale manufacturing - creating an American Shenzen with an equivalent amount of jobs - and very soon. But any such capability will be heavily automated, so it won't produce the equivalent jobs.
Tariffs are used all over the world for this exact reason, which is what is being attempted now. It will take time for it to pay off, more time than the current administration has, which is likely why business will drag their feet.
I think economic benefit goes beyond just having the lowest price. Having good jobs for people in the country means they have money to spend. If people make next to nothing, all they can afford is Temu quality. This is bad for the citizens, bad for US businesses, and bad for the environment. The only winner is China.
But there is a good jobs in the country. His brother has to travel 100 miles to work it.
Tariffs won't resolve this issue. Either the goods becomes too expensive to import and are made here or the aren't.
In the case that they're made here then some other good will no longer be produced (if you could magically make both then you would've in the first place). And so your citizens are worse off because they produce the same amount (or less) and pay more for it.
In the case that they're not made here then you just pay more in tariffs and are worse off.
The problem with global trade is that when you trade 10 apples for 10 bananas it doesn't need to be distributed to your citizens equally. So if you go from an economy producing 5 apples and 5 bananas where everybody gets one of each to one where 3 people get 8 apples and 10 bananas the other 2 get 2 apples the GDP still grew from 10 to 20 but people are worse off. Throwing in tariffs to get back to the 5 apples 5 bananas will cause a recession.
The better solution is to increase the top tax rate and redistribute 2 additional apples and bananas to the bottom 2 and then everybody is still better off.
I leave it as an exercise for the reader to figure out why Trump & Republicans want tariffs as opposed to a higher tax rate.
If you're building a new factory and the factory needs steel, they'll have to wait for the steel plant to be built before they can start construction. Trump has imposed tariffs on steel imports.
> minimum wage there pays for 10 people
More like 2-4 at this point, if we're talking about China.
Something that I hadn't considered before I heard it being discussed by someone who studied the phenomenon of factory off shoring is that a huge factor in the off shoring has nothing to do with labor, it has everything to do with ramp up time.
Compare the build time between Tesla's battery factories in the US and China and consider how many batteries they can sell during the time difference.
Building a factory loses money until the factory starts making products. Good or bad, regulations that cost _time_ are the biggest issue. Labor costs matter but they affect the margins that can be somewhat compensated for by products not needing overseas shipping. A company, especially a new one, can go out of business in the years it takes to build a factory in the US.
Asian factories particularly China are deploying robots at a rate that puts the rest of the world in the shadows