Listen to the full episode, here.
Key Points
- John, Sam & David question whether the goal of onshoring manufacturing jobs is truly beneficial, as many of these jobs may be low-wage and undesirable for American workers. [11:13]
- They argue that in a global economy, it may not be realistic or desirable to try to bring back all manufacturing jobs that have been outsourced, as this could have negative consequences for corporate profits and employment.
- The speakers suggest that instead of imposing tariffs, the government should focus on reducing regulatory and other barriers to make it more cost-effective for companies to manufacture in the U.S. [11:36]
- They emphasize the importance of preparing the U.S. workforce for the jobs of the future, rather than trying to revive outdated industries.
Do We Even Want All These Manufacturing Jobs?
John Norris (00:30):
Well, hello again, everybody. This is John at Trading Perspectives. As always, we have our good friend Sam Clement with us—but today, we also have another good friend, Dave McGrath, from our office down in Lower Alabama, also known as Mobile. Guys, how are y’all?
Sam Clement:
Doing great.
David McGrath:
Doing wonderful.
John Norris:
Glad to hear it. Guys, we’re going to talk about a bit of a touchy subject today. Obviously, the markets, the economy, and the global press have all been roiled by tariffs and trade wars, largely driven by U.S. President Donald Trump. I think—at least part of the goal—is to onshore more manufacturing jobs here in the U.S. That’s what he says, anyway. I don’t know if that’s the only endgame or what success looks like to him.
Intuitively, it might make sense that producing more domestically is better than producing less. But do we really want to onshore all the manufacturing jobs the president seems to think we do? I’m not so sure.
Sam Clement (01:40):
I don’t think so—at least not broadly speaking. It depends on what we’re talking about. If we’re bringing back sensitive, defense-related production from places like Taiwan, that makes sense. But if we’re talking about t-shirts, shoes, and similar products, I don’t think we want to bring those jobs back.
That trend has been happening for over 70 years—long before NAFTA or the WTO. Those may have accelerated the shift, but the reality is we’ve grown faster than other countries, which naturally leads to trade deficits.
John Norris (02:22):
David, I know you’ll remember this. There’s someone we’ve both met—Nancy Lazar, who used to be with ISI and then Evercore. I’m not sure where she is now.
I remember having dinner with her during our time at another firm, and she said something that stuck with me. This was early in the 2000s—makes me sound old, and I guess I am compared to you, Sam. She said, “It doesn’t matter if we produce a single item in this country, as long as we have money flowing back through the capital account.”
In other words, we can export as many dollars as we want, and as long as that money comes back into our financial system, we’re fine. If we’re importing goods, we’re exporting dollars. They have to balance out. If they don’t, the currency collapses—and then it doesn’t matter how much we produce.
Sam Clement (03:06):
Right.
John Norris (03:07):
So, if we export dollars and they return to us through Treasury International Capital (TIC) flows or other capital inflows, we essentially get to keep the goods and the dollars come back. As one of my grad school professors put it—Barry Brownstein—this is “the greatest scam the U.S. has ever pulled off.” He said we send over paper money backed by nothing, and they send us VCRs. Where’s the downside?
Sam Clement (04:08):
I’ve heard someone say Nike makes shoes in Vietnam for $10 and sells them here for $200. That’s a pretty good setup.
David McGrath (04:19):
Yeah. And I do think there’s value in maintaining some manufacturing capability. COVID proved that. We need to have good relationships with our suppliers, and we can’t be too dependent on any one country—those relationships can change over time.
So maybe it’s not about bringing everything back, but about not losing everything either. Maybe we bring back key industries—like chips or car assembly—things with higher margins or more intellectual property. But we’re never going to bring back low-cost manufacturing jobs from China or Taiwan. Shipping is too efficient, and wages there are a fraction of what we pay here.
John Norris (05:41):
Absolutely. It’s nice to have the capability, but the real question is: do we want those old jobs back?
Here in Alabama, we used to produce a lot of steel, paper, and textiles. Many of those jobs are gone—some replaced by automation, some by outsourcing.
But how many of us really want our kids working in textile or steel mills? I mean, US Steel used to pay well, sure. But many families worked those jobs to give their kids a shot at something better—living in places like Vestavia or Mountain Brook instead of the industrial towns.
Sam Clement (06:46):
Right.
John Norris (06:46):
We wax nostalgic about manufacturing’s golden age, but I doubt many people truly want to return to it.
I grew up in Birmingham in the ’70s and ’80s, and back when US Steel was a major employer, the smog was so bad we sometimes weren’t allowed to go outside for recess.
So yes, self-sufficiency is appealing. But total economic autarky? Not realistic. Still, I do think the Pentagon should ensure we can source critical raw materials without relying on foreign nations.
Sam Clement (08:23):
Yeah—and you made a good point earlier. Polls show people like the idea of bringing manufacturing back, but when asked if they’d want one of those jobs themselves, the answer is usually no.
John Norris (08:40):
Exactly—”Manufacturing for thee, but not for me.”
Sam Clement (08:43):
Right. And one of the unintended consequences of these tariffs is that companies are now choosing to keep their goods entirely out of the U.S.
If you’re a global business, it may be cheaper to manufacture and ship products outside of the U.S. altogether, avoiding tariffs and streamlining distribution.
David McGrath (09:28):
And let’s not forget—unemployment is still at 4.3%. Where are we going to find the labor to fill these jobs?
John Norris (09:41):
You’d have to pay people significantly more—and that undermines the cost advantage.
David McGrath (09:50):
Exactly. That cuts into profit margins, which pressures corporate earnings and stock prices.
Sam Clement (10:00):
And when that happens, companies cut jobs. They’re not going to accept permanently lower margins. Look at BMW—they have plants in Mexico that they built in 2019. They’re not just going to shut those down.
John Norris (10:23):
Right.
Sam Clement (10:25):
If production costs go up, the cost of a car like an X3 might jump from $45K to $60K. They’re not going to eat that cost.
David McGrath (10:38):
No—they won’t accept lower margins.
Sam Clement (10:40):
Exactly. They’ll either pass the cost on to consumers or cut jobs.
John Norris (10:44):
Or just produce fewer vehicles.
Sam Clement (10:47):
That’s how it works. No one’s saying, “Oh shucks, we’ll just make less money.”
John Norris (10:52):
“You got me!”
Sam Clement (10:54):
“We’ll take the hit.” No, they won’t.
John Norris (10:56):
And that’s what I think many people don’t understand. When an American company chooses to produce overseas—say, in a maquiladora on the Mexican border or in Canada—they’re doing it for a reason.
First, they’re selling into those markets as well. And second, the cost savings are real. So if the goal is to reduce the trade deficit and bring manufacturing back, slapping tariffs on imports doesn’t really help.
Ultimately, it’s the American importers and consumers who bear the cost—not the foreign manufacturers or governments.
Sam Clement (11:35):
Right. If the aim is to bring production back, wouldn’t it make more sense to figure out how to lower domestic production costs—rather than making foreign goods more expensive?
John Norris (11:45):
Exactly. Why not conduct studies to identify what’s driving up unit labor costs here? Is it OSHA? Is it the EPA? Are there zoning laws or taxes that make it harder to manufacture in the U.S.?
That kind of analysis would be more productive than just throwing tariffs around.
Sam Clement (12:22):
Yeah, I’d love to see a case study: try starting a toaster company in the U.S. versus Vietnam. Look at the red tape, regulations, and time it takes here compared to over there. It’s a huge difference—and a big reason why companies don’t even try.
David McGrath (12:47):
And realistically, that’s not going to change in the next two or three years.
John Norris (12:54):
Nope.
David McGrath (12:54):
So what’s a realistic goal for reshoring manufacturing? Maybe 30 plants under construction across the U.S. over the next couple of decades?
John Norris (13:09):
Right. Take Nvidia, for example—they’re trying to increase chip production in the U.S. That’s great, but how many chips? And at what cost? Is that investment worth the loss in market cap from all the uncertainty these policies cause?
The point is: building manufacturing capacity takes time and capital. You can’t just flip a switch. Companies aren’t going to dust off old factories and start spinning machines again. That infrastructure is gone. It takes billions to rebuild it.
Sam Clement (14:11):
And more time than the president has left in his current term.
John Norris (14:13):
Right. So then the question becomes: is it a better use of American capital to invest billions in low-margin manufacturing—or in new technology and medical breakthroughs?
If you answer anything but the latter, I’m not sure why you’re listening to this podcast.
Sam Clement (14:49):
Honestly, Apple’s playbook with the administration might be the best model—spinning investments they were already planning as “new” to get political wins and incentives.
Big corporations can do that. Small businesses can’t. But that seems to be the current playbook.
John Norris (15:52):
Exactly. And modern manufacturing is highly automated. For every three jobs lost in Mexico, we might only gain half a job here.
So again, what are we doing? Why do countries like Germany, Ireland, Japan, or South Korea—places with high wages—still run trade surpluses with us?
We should study that. My guess is those governments help drive down production costs for exporters—unlike what we do here.
Sam Clement (17:07):
And let’s not forget—the U.S. is a massive consumer economy. That alone explains a lot of our trade deficit. We simply buy more stuff.
John Norris (17:19):
Exactly. Everything our government does seems designed to push consumption.
Sam Clement (17:23):
And we’re good at it! We love to consume. But the reality is, someone has to run a trade surplus, and someone has to run a deficit. It’s just math.
David McGrath (17:41):
Honestly, the American consumer is our greatest natural resource. Everyone wants access to this market. But we can’t produce enough to meet our own demand—at least not realistically.
So no, we can’t bring back all the jobs—but we can keep the innovation, the design, and the high-skill components here.
John Norris (18:33):
The challenge is, not everyone can be a designer, coder, or engineer. People have different skill sets—and not all of them are suited for creative or tech-driven work.
Instead of trying to recreate an economy that no longer exists, we should be preparing the next generation for the economy that does and will exist.
Sam Clement (19:31):
I’ve always appreciated the German model—where students are split into either trade schools or college tracks. It’s totally normal to go the trade route.
That’s something we should take seriously here. Not everyone needs—or wants—to go to college.
David McGrath (19:59):
Exactly. I live in Mobile, and I’ll pay anything if my air conditioner goes out. And believe me—it does.
Jobs like HVAC techs, welders—those are needed jobs. If someone can come out of high school, go into a trade, and make a great living—they don’t need to be making socks or tennis shoes.
John Norris (20:49):
I agree completely. And on that note, I want to close with something a little unusual.
You guys are going to think I’ve lost it—but bear with me. Ready?
“Whan that Aprille with his shoures soote…”
That’s the opening of The Canterbury Tales. I memorized it in high school—thank you, Mrs. York. But do you know how many jobs or accounts that’s gotten me? Zero.
Now, how much money do you think I’ve made knowing how to use Word, Excel, PowerPoint? Way more.
My point: learning real-world skills will earn you more in your career than memorizing Chaucer. That’s fun mental exercise—but it doesn’t pay the bills.
So Sam, I’m with you. Not everyone needs college prep. We need masons, welders, electricians—and we’re not producing enough of them. We should be focusing on preparing young people for that economy instead of trying to recreate one that’s gone.
Sam Clement (23:10):
Hard to argue with that.
John Norris:
Mic drop! That wraps it up for today’s episode of Trading Perspectives. Thanks so much for listening.
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Alright, David, Sam—anything else to add?
Sam Clement:
That’s it.
David McGrath:
I’m good.
John Norris:
Thanks, everyone. Take care.