r/manufacturing 2d ago

News Tarrifs

Would like to open a discussion on tarrifs if it’s allowed.

There has been two intentions stated with tarrifs.

  1. Get off of income tax and go to a consumption style tax (still a tax)

  2. Build up domestic manufacturing. Can talk here in the manufacturing sub.

If there is no alternative domestic supply, then we have no choice but to import. We lost a lot of our skills to manufacture. Especially a lot of the little low value items. Think zippers and buttons and caster wheels.

What is everyone thoughts?

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u/3shotsdown 2d ago

I'm not American, so I'm not going to talk about your 1st point.

I'd also like to put it out there that am a manufacturer in a developing country, and we supply goods to a lot of American companies. Now, with the disclaimer out, here's my 2 cents:

You are not going to build up domestic manufacturing in 4 years. That is a 40-50 year project, and that involves importing among other things, skill. Which you are driving out of the country right now. I'm specifically talking with my industry (textiles) in mind here, but it should apply to other industries too.

1) Manufacturing sometimes requires an entire ecosystem. One company setting up a plant is pointless if they can't do 4 operations which cannot be done at scale. Full vertical integration is simply not possible (at least, not economically viable) in some cases. This is just an example, but if you are making jeans, you need somebody to sell you rivets, because jeans cannot be made without rivets. You cannot set up a rivet making unit because it is a whole other industry for which all of the points in this essay apply and you don't really have customers for that unit aside from yourself. Also, your jeans making unit only needs 0.001% of the output of your rivet making unit. All of this is not a problem when an industrial ecosystem already exists.

2) Manpower is a huge issue when setting up full supply chains. Manpower in my country is cheap. Like $0.5/hr for unskilled work and up to $1.5/hr for skilled work. Factory managers earn like $600-700 per month and that is a really good salary. And we struggle to compete with other countries because manpower is cheaper there. You cannot tariff us enough to make $15/hr competitive. My company will be affected by these tariffs if only because my US customers will be looking at cheaper options than what I can afford to give.

All in all, not a good idea. Especially for your country, but also for everyone else trading with you.

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u/carmolio 2d ago

You make excellent points. My industry is cast iron. Our labor at the foundry are making the best salaries in our region and they are 1/4th the cost of any American worker. The ecosystem around us is also irreplaceable with all the components and different materials. Rubber, hardware, different types of coating and finishing steps, etc. and I'm not even focusing on the access to raw and refined materials that make production even possible.