American companies repatriate production

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What former President Donald Trump was aiming for is happening now: Hundreds of American companies are returning to the US, relocating their productive activities to their “homelands” despite higher labor costs and taxes. creates serious problems in the supply chain. At least 750 companies have relocated productive operations from abroad this year, employing more than 160,000 Americans. Another 1,800 have decided to follow.

For many decades American companies moved production abroad due to lower wage costs and cheaper raw materials. Globalization has squeezed costs, increased profit margins, and made countless American companies rich.

The pandemic, however, showed how vulnerable this structure is. Many companies will not be able to follow the return of the US economy to growth, as there are shortages of raw materials and suppliers everywhere.

The turnover of the American giant Apple decreased in the third quarter of 2021 by $ 6 billion, while the company Nike sportswear is forced to cut production by 160 million sneakers due to reduced production in Vietnam.

A blow to Asian economies

More and more American companies are turning their backs abroad and repatriating production, seeking to eliminate the problems in the supply chains that plague the global economy. As early as 2019, when the US-China trade war began, many American companies had decided to gradually withdraw from Asian countries to reduce their dependence on them.

In March the processor company Intel announced it would invest $ 20 billion in two plants in Arizona. On his part the colossus General Motors decided to transfer the production of electric battery batteries from abroad to Michigan. The steel production company US Steel recently informed the public that it intends to build a new $ 3 billion plant in Alabama or Arkansas.

According to the Reshoring Initiative, an initiative to stimulate the US economy, more than 1,800 US companies intend to relocate part or all of their production back to the US. By the end of the year is expected to thus creating 220,000 new jobs on American soil. Compared to 2010, the number of new jobs transferred from production to the US was only 6,000. Today most jobs are created in sectors with major problems in their supply chains, such as production of microchips, batteries for electric drive and pharmaceutical products.

High production costs in the USA

According to Harry Moser, who has been the head of a tool company for 22 years, the US government’s efforts to repatriate large companies are not enough and he explains: “Production costs in the US are 15% higher than in Germany and 40% higher than in China “. To ensure a sustainable comparative advantage for US producers, it proposes tax cuts and long-term investment in specialist staff training.

Harry Moser believes that the trend of returning medium and large companies to the US will continue, mainly strengthening the American labor market. According to the think tank Economic Policy Institutes in Washington, each new production job creates an additional five jobs. And in the production of consumer goods, such as cars and washing machines, the multiplier even exceeds seven.

Sabrina Kessler / Deutsche Welle

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