A minimum of three years.
That’s the amount of time it would take to construct a factory in most industries and prepare it for production, says Bryant University Professor of Economic Analytics and Visualization Ramesh Mohan, Ph.D. Emphasizing that three years is an optimistic time frame, he shares that five years is a more reasonable outlook.
The debate over whether or not the United States should bring manufacturing jobs back to the country has been an ongoing public conversation. With a 10 percent blanket tariff currently imposed on imports of all foreign-origin goods into the U.S., Mohan shares that levies offer pros and cons: They provide protection to domestic industries, encourage local production, and are useful for government revenue, but consumers are at risk of absorbing increased product costs, outside countries may introduce retaliatory tariffs, and distorted resource allocation can result.
According to data from the Bureau of Labor Statistics, approximately 8 percent of Americans hold jobs within the manufacturing sector today. Mohan explains that the country’s shift from a manufacturing economy to a service-oriented economy had been gradual — beginning in the mid-1900s and speeding up in later decades. The transition can be attributed to four factors: increased productivity, globalization and outsourcing, growth of service industries, and changing consumer demand.
“When industries within the manufacturing sector became more productive, companies didn’t need as many workers to produce the same amount of output,” says Mohan, “Additionally, discovering that manufacturing goods could be done in other countries, particularly in Asia, at lower costs led to the U.S. outsourcing these types of jobs.”
Individuals also saw an increase in their disposable income, which resulted in spending less on goods and more on services. Furthermore, industries such as finance, healthcare, and technology saw an expansion — leading to today where, according to the World Bank Group, services made up 76.4 percent of the U.S.’s gross domestic product as of 2021.
Today, the U.S.’s top manufacturing subsectors include chemical manufacturing; food, beverage, and tobacco products; and computer and electronic products. Looking at the current manufacturing landscape, Mohan believes that high-tech manufacturing — advanced technologies, smart systems, state-of-the-art machinery — is the only type of manufacturing that should be brought back to the U.S. since the country can leverage it as its comparative advantage.
“We have the labor force, technology, and human capital for it,” Mohan says.
Choosing to invest in the education, technology, and infrastructure for high-tech manufacturing could allow the country to shift its comparative advantage toward higher-value activities over time — making it so the U.S. could repeatedly enhance its manufacturing base and sustain competitiveness.
As for attracting manufacturing and foreign investment, the challenge is real. Noting that the rules are not centralized, Mohan says economic instability will impact the number of businesses entering the U.S.
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“Multinational corporations are so scared that they are not even hiring people,” Mohan says. “Every single industry in the world is facing this uncertainty because of the government’s actions. We are a large open economy, and if we sneeze, you know other people will catch the cold. We are sneezing hard and that's impacting the world in a very big way.”
With businesses looking out for their best interests, Mohan explains that there are steps organizations can take to mitigate tariff exposure and strain. These actions include everything from exploring tariff engineering, which could allow companies to modify the way products are classified under tariff code to lessen the levy impacts, to having businesses take advantage of duty drawback programs that would help companies reclaim portions of the tariffs paid on goods that were later exported. It could also mean leveraging free trade agreements to export to countries with preferential tariff rates.
“Companies could also look into leveraging trade agreements and sourcing locally,” Mohan says.
