As the world’s second-largest manufacturer, the United States has historically benefited from a robust manufacturing market, boasting plentiful manufacturing jobs and competitive power in the global economy.
However, high tariffs and expensive labor pose significant challenges, and this August, U.S. manufacturing shrank for the first time in about ten years, sparking concerns about the sector’s future. Are there still benefits to domestic manufacturing?
The impact of American manufacturing
Domestic manufacturing significantly impacts the U.S. economy. According to the National Association of Manufacturers (NAM), $1.82 is added to the economy for every $1 spent in manufacturing, and when manufacturing for other industries’ supply chains is taken into account, it could account for up to one-third of the GDP and employment.
Aside from contributing to local workforces, domestic manufacturing is also better for vendors and consumers. When products are manufactured outside of the U.S. and imported, there are plenty of opportunities for things to go wrong — untraceable shipments, delays at customs, damage during transport, and more.
Domestic manufacturing has a shorter supply chain, which translates to faster delivery, more streamlined service, and better quality control, without the complications of international warehousing and shipping.
An interview with Kimberly Amadeo, U.S. Economy expert for The Balance
To learn more about the impact of domestic manufacturing, we spoke with Kimberly Amadeo, who has 20 years of senior-level corporate experience in economic analysis and business strategy. Here are a few of the questions we posed about domestic vs. outsourced manufacturing, and what she had to say:
- In your opinion, what is the #1 benefit of utilizing domestic manufacturers?
There are many reasons, but the #1 benefit is the protection of intellectual property. That includes manufacturing processes as well as products. Some countries, such as China, allow their factories to copy U.S. manufacturing processes and designs. They use this knowledge to make "knock-offs" that they can sell for less. They create just enough differences to avoid costly lawsuits. Once the technology is copied, that genie cannot be put back into the bottle.
- You’ve been writing about the U.S. economy for years. Has the shift toward foreign manufacturing affected the overall health of our country? If so, how?
The biggest impact has been on unemployment. According to the Bureau of Economic Analysis report “Activities of U.S. Multinationals,” foreign affiliates that are majority-owned by U.S. multinationals employed 14.3 million workers in 2015. That's more than double the 5.9 million Americans who were unemployed in June 2019, according to the Bureau of Labor Statistics.
If all those jobs returned, it would be enough to also hire the 4.3 million who were working part-time but would prefer full-time positions. Of course, not all those jobs could return. Many foreign employees are hired to help with local marketing, contacts, and language.
- What would you say to business leaders in America who want to go with the “cheaper” option and shift operations overseas?
They are running a risk. First, their products, processes, and technology could be copied by their foreign partners. Moving operations overseas also diverts the attention of top management from other core business needs, such as marketing and product development. Manufacturing overseas also increases the company's exposure to volatility in transportation costs and exchange rate risks.
Herculite: Made in the U.S.A.
As Kimberly Amadeo explains, domestic manufacturing is the safest route, benefiting vendors, consumers, and the overall U.S. economy.
We’re proud to say that our products are made in America. Our domestic manufacturing supports local economies and communities, and allows us to create high-quality products that comply with FTC standards. We also carefully select local wholesale distributors for our marine and awning fabrics to maximize quality and availability.