President Donald Trump has claimed that the escalating trade war the White House launched this year with Canada, Mexico and China will spur companies to forgo foreign goods and return manufacturing to American shores. But data suggests that the U.S. economy is not ready for a wholesale shift to manufacturing and that it would take years to ramp up production capabilities.
Data shows a fraction of people in the United States are employed by farms and factories compared with decades past, according to data from the Bureau of Labor Statistics, with most now in service jobs such as software, finance and health care. And experts say focusing on domestic goods production could cost consumers while undermining America’s growing advantage in the knowledge economy.
Sector shrink
In the 1970s, 1 in 5 U.S. workers worked in manufacturing. Today, it’s closer to 1 in 12.
Even with unlimited funding and political will, it takes years to reskill a labor force and rebuild infrastructure. Formal trade apprenticeships typically require four years, according to the Bureau of Labor Statistics. And Intel estimates building semiconductor fabrication plants takes three to four years to complete.
Policy uncertainty is another major barrier. Companies hesitate to make long-term investments when trade policies could change within months or less.
Companies “won’t even start trying to hire and train people until they are convinced that there are permanent tariffs,” said Richard Mansfield, an economist at the University of Colorado Boulder. Instead of boosting domestic production, he said, it is likelier that companies will raise prices, find alternative suppliers — Vietnam, Chile — or both.
That played out during Trump’s first term when, under the threat of tariffs, companies moved production from China to Mexico.
Dennis Hoffman, an economist at Arizona State University, framed the tariff impact more bluntly: “You end up hurting consumers across the entire United States.”
Service strength
Meanwhile, a focus on producing goods overlooks another reality: America holds a global advantage in exports of services driven by business, travel and intellectual property.
The United States’ $25.2 billion services surplus is often hidden by its $156.7 billion goods deficit.
Tariffs ignore that economic reality, leaving consumers with higher prices for basic goods and less to spend in the areas in which our economy excels, Hoffman said: Cheap goods mean “more money to save, to invest, to allocate elsewhere — we’re far better off because of access to international trade.”
Deficits are not necessarily negative. “If you run a trade deficit, you’re not a loser,” Hoffman said. “We run trade deficits because we consume — our appetite for consumption is greater than our capacity to produce.”
Path of progress
As countries progress and grow wealthier, manufacturing tends to represent less of their economies, Hoffman said.
Data from Our World in Data shows that while the manufacturing output of lower-income nations around the world increased from 2004 to 2020, higher-income countries went in the opposite direction.
From cutting-edge software development to innovative financial products, knowledge economy work often offers better wages and working conditions than traditional manufacturing.
Hoffman, who grew up in Michigan and witnessed manufacturing’s 1970s heyday, said that while such factory jobs were good for “their time,” they were dirty, dangerous and physically demanding.
Today’s service economy, he said, creates different but superior opportunities: “It’s less wear and tear on the body, you’re able to work longer, you’re able to earn a good living.”