The challenges of decoupling manufacturing from China

All the above areas are well connected to ports and logistical systems.

Products made in the above locations were not only cheaper than what Europe or the United States could manufacture, but OEMs could be flexible in the designs and specifications they provide customers. This alleviated the need of many companies embarking on their own research and development divisions, leading to even more cost savings. R&D and new product development could cost a company up to 10 percent of its revenue per annum to keep up with changing markets. Mass retailers like Walmart set up their own buying offices in China, cutting out wholesaler/importers, thus lowering costs even further for consumers, while making even greater margins.

Some logistic chains were developed, so as to go straight from OEM manufacturers in China to retailers and online marketing companies across the world. These companies could come out with completely new ranges every three months. The new logistic systems and product flexibility created new form competitive advantages that allowed the online product industry to grow massively over the last 5 years. Consumer e-markets are estimated to be valued at US $4.5 trillion in 2024.

Can American manufacturing be revitalised?

Any industry that requires major human input during the manufacturing and assembly processes may find an insurmountable task to relocate back to the United States. These industries would include apparel, footwear, toys, and other miscellaneous products with very short life cycles that need aesthetic adjustment in a periodic manner, i.e., Christmas decorations.

Raw material procurement will be a major barrier for American companies returning from China, as many of the supplier clusters, once relied upon by manufacturers no longer exist. Other services, such as metal foundries, engineering shops, and machine manufacturers may have closed down long ago. Returning US companies are leaving behind a cluster of suppliers that kept their operations with the materials and parts required to manufacture and assemble.

Environmental and occupational health regulation standards in the US may be very stringent for manufacturers to meet, after the relative laxity of Chinese regulations. These are the issues that were part of the decision criteria to move from the US in the first place. There might be some hostile state government towards industry returning to their jurisdictions.

With the focus on renewable energies like solar and wind power, energy costs will be extremely high. These are also questions about some parts of the United States like California, whether there will be enough energy available to service industry relocation.

The work ethic of American s is now very different from 30 years ago. Many may not want to work within an industrial environment. Productivity could become a major issue, particularly in the apparel industries. In mass production scenarios, high automation will be required. So, the question is whether there will be enough skilled manufacturing engineers with the experience and skills needed to assist in the setting up of manufacturing facilities and shopfloors. The company towns that once supported these American corporations just don't exist anymore. Finding and attracting back the engineers they need may be almost impossible.

There is the risk that the relocation of American companies back to the United States will force a two-tiered labour market, where immigrants are used as cheap labour.

The prime aim of the Trump tariffs is to cajole American companies to return to the United States. This is an inspiring goal, but the challenges are immense. The cost base of American companies on the ground in the United States could be two or three times that these corporations once enjoyed in China. On the other side, remaining in China may leave US corporations dealing with a hostile tariff regime in their home market – the United States.

Corporations are now undertaking feasibility studies on relocating back to the United States. They will find themselves with a massive headache. In many, if not most cases, relocation of American manufacturing back to the United States may not be feasible without financial assistance. With US public debt currently at US $ 36 trillion, that's an impossibility.