Welcome home: Manufacturers are near‑shoring again under Trump
Monday, March 20, 2017
In recent years, it looked like inversion would become the new law of the land for many industries throughout the United States. The trend was led in part by the high-profile case of U.S.-based Burger King buying Canada-based Tim Hortons to "relocate" and dodge domestic taxes.
With its heavy dependence on inexpensive foreign-made components and products, manufacturing has certainly been at the forefront of many moves to leave the U.S. — that is, until election day arrived in November. Whether it's political pressure, smart cost moves, better control or something else entirely, companies are beginning to return overseas production to the United States.
A stormy overseas outlook
With increasing scrutiny on the exact relationships of overseas supply chains, some manufacturers are electing to come back home rather than face the uncertainty of potential penalties later on.
In a recent article for The Wall Street Journal in late 2016, Ted Mann, Damian Paletta and Andrew Tangel noted that then-President-elect Donald Trump warned of unspecified "consequences" for practices like inversion, as well as companies attempting to shift jobs overseas while remaining headquartered domestically.
"Companies are not going to leave the United States anymore without consequences," Trump said. "Not gonna happen. It's not gonna happen."
Bloomberg's Jing Cao recently explained that electronics giant Samsung was spurred to expand its U.S. facilities by the same language. The language in question encompasses both the encouraging tone of a pro-business climate in America and the doubtful future of imported goods and labor, which seem to be in the crosshairs for tariffs and similar chilling regulations.
Betting on speculation
There's no uncertainty about it — a lot of promising jobs data has flooded in since the Oval Office welcomed its new occupant. While some of it may have roots in the prior administration's work, Trump's willingness to unabashedly discuss the less encouraging points of the job market and openly advocate for growth has made a measurable impact.
Companies that were on the fence about moving operations or jobs across the borders, or expanding on existing international plants and partnerships have now been given a lot to consider. Near-shoring is typically a large expense in the short term, but recent discussions about rolling back employer obligations vis-a-vis the Affordable Care Act have the potential to soften the blow of hiring on American employees and keeping jobs in the country.
If overall cost was a deciding factor for employers, the seeming loss of momentum behind a higher minimum wage — championed on the campaign trail by Trump's then-competitor Bernie Sanders — is another major tipping point. While several of these decisions aren't well-received by the employees who will be directly affected, they have a cushioning effect on financial burdens that employers have traditionally been compelled to bear when operating domestically.
How many companies will return to operate under the familiar red, white and blue? Only time will tell.
Even if the political climate merely slows job migration and inversion, however, the overall effect on the U.S. economy will be noticeable. If tariffs, fees, taxes or fines find their way into the red tape that separates borders? Well, put it this way: Expect to see a lot less of those tiny gold "Made in _______" stickers on the bottom of your merchandise in the years to come.
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