Trump's impact on reshoring unclear

Despite his calls for broad tariffs, President-elect Donald Trump's unpredictability on policy makes it hard to tell what impact his second term will have on reshoring manufacturing jobs to the United States.

At least that's according to Harry Moser, the head of the Reshoring Initiative, a group that monitors reshoring and foreign direct investment trends in the United States and advises companies on returning production to the U.S.

While Trump campaigned on adding tariffs of up to 60 percent on Chinese goods and 20 percent on imports from other countries, Moser said during a Nov. 12 webinar that it's difficult to say what Trump's second term will mean for reshoring and foreign investment, which he said resulted in a little less than 300,000 new jobs in the U.S. last year.

"Trump is so unpredictable that it's hard to know what he'll do," Moser told a webinar "Election Implications for Reshoring: Tariffs, Trump, Taxes and Training," organized by the investment fund Tema. "Clearly doing something is important."

Jobs from reshoring and foreign direct investment during Trump's first term peaked at 179,000 in 2017 before falling to 98,000 in 2019, according to data from Moser's group.

Since then, reshoring and FDI-related jobs have jumped, hitting 343,000 in 2022 in President Joe Biden's term, before falling to 287,000 last year, Moser's group said.

Without some major change in policy that the Trump administration could bring—as well as a critically needed boost to job training programs—Moser predicted that added jobs from reshoring and FDI could plateau at around 250,000 a year.

"I believe that unless he does something really important, like either getting currency down or a value added tax or something broad like a 10 percent tax on everything, if he doesn't do one of those things, I predict we're going to be down to the 250,000-a-year rate of jobs being announced," he said.

Adding 250,000 reshoring jobs a year is "as many as we can handle unless somebody does something dramatic about apprenticeships and training," Moser said.

He said reshoring has been growing steadily in the U.S. from a tiny 10,000 jobs added in 2010 when his group started tracking them.

While the business community waits for details of Trump's tariff plans—and who he plans to name to key economic posts—Moser said he's "more in favor of tariffs than most economists" and that very broad tariffs could be good for reshoring.

"If you're going to do tariffs, it has to be universal on all products, on all countries, forever," Moser said. "If it's forever, companies will look and say, 'Well, if it's forever, I better put a factory in the U.S. because that's the biggest market.'"

But he said poorly designed tariffs, while helping some companies, can hurt the overall economy.

"The tariffs that we've done have not been well designed," Moser said. "For example, Trump put tariffs on steel and that helped our steel industry. But every company that uses steel, that makes cars and makes mechanical components and things, they're less competitive with foreign competitors who can buy steel for 10 or 20 percent less."

"I think we probably lost more jobs [from] the steel users than we gained in the steel makers," said Moser, who also advocated for a value-added tax on imports.

Moser said that labor shortages, and the large deportations Trump has promised, could act as a brake on reshoring.

"There's a shortage of workers in almost every industry, it used to be only manufacturing had shortages but now everybody has shortages," Moser said, adding that deporting millions of people would shrink the labor pool and raise prices generally.

Instead, he said the government should have avenues for immigrants who have not committed crimes to become citizens.

"We need workers so badly, especially skilled but also unskilled, that I would have a path to citizenship for them," Moser said.

As well, he said reshoring would benefit from more support for worker training.

"For workforce, I believe we need an apprenticeship program like the Germans," he said. "We need really smart high school kids who would obviously, today, go to college and study who knows what, instead get them into an apprenticeship, [as a] toolmaker, welder, precision machinist."

Moser's group said the number of manufacturing apprenticeships is up 83 percent in the last 10 years.

While much of the webinar focused on economic policy, Moser said surveys of executives show that geopolitical risk is the biggest factor driving reshoring decisions, as companies want to insulate their supply chains from world conflicts and tensions.

"It's a fear of something happening, perhaps in Russia and so on but … mainly in China and Taiwan, that's there's going to be an event, and we won't get anything, components, products, for a year, for two years, for five years," he said.

A July report from Moser's group called geopolitical risk the number one factor driving reshoring decisions, pointing to wars in Ukraine and the Middle East and tensions between the U.S. and China over Taiwan.

The report also pointed to climate investments in the 2022 Inflation Reduction Act and the CHIPS and Science Act as boosting reshoring and foreign direct investment in the U.S.

It said 39 percent of reshoring and FDI investment in 2023 came from makers of electric vehicle batteries, semiconductor chips and solar energy equipment, industries the report said are supported by U.S. industrial policies.

Moser presented a chart that showed that many of the biggest manufacturing investment announcements from 2020 to mid-year 2023 were in Republican leaning states, boosted by the IRA and other legislation.

"You'll see that most of them are in the red states, in the states that went for Trump," Moser said. "[Trump] said he's going to pull the plug on all these things, the chips and the EV batteries and so on. He's going to be hard pressed to pull hundreds of thousands of jobs out of the states that just voted for him."

An analyst from Tema said the manufacturing tax credits in the IRA are "embedded" in the legislation and would be difficult for the Trump administration to rescind.

Chris Semenuk, portfolio manager for Tema's reshoring fund, agreed with Moser that the Trump administration is not likely to roll back the programs that supported investments in EV battery making and other technologies.

"Governors of states that were large beneficiaries of these fiscal stimulus and what was effectively the largest industrial spending policy in the history of the country, I don't think that they're going to be happy if the president comes in and says, 'OK, all those jobs that were created over the last three years … you all have to go home now,'" Semenuk said.