Trump's magical manufacturing thinking
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Illustration: Lindsey Bailey/Axios
To make a manufacturing renaissance happen in America, President Trump needs three things to happen simultaneously:
- The private sector needs to commit capital, in size and with confidence, to support a national campaign to build factories, ships and the like.
- There needs to be a willing labor force for that construction — either American workers agreeing to take lower-wage construction jobs, or a reversal of the immigration crackdown that's straining the labor market.
- All of the above needs to happen, nationally and in real time, without runaway inflation, as everyone seeks the same steel, lumber, workers, etc.
The big picture: No one can yet square that magical thinking with reality. Until they do, trillions of dollars in investments may be on hold.
How it works: The administration sees things progressing in a simple line.
- Trump (possibly) imposes tariffs, companies opt to re-shore their manufacturing, American workers get good jobs, the economy thrives, everyone's happy.
Yes, but: The problem comes when you try to dig in on how long it'll take, and what'll happen in the meantime.
- For example: Commerce Secretary Howard Lutnick was asked on CNBC last week about CEOs freezing up and not making big decisions — like building factories — because of the uncertainty in this environment.
- Lutnick, after a diatribe about trade rules, potato exports and french fries, said simply "There will become a balance. Interest rates will be much, much lower. The United States of America will be much, much stronger."
- Lutnick's not putting a timetable on how long Americans will have to eat the pain of the transition, because no one knows how long it will take.
- And now, add the fundamental problem of the world not really knowing with any confidence whether Trump's tariffs will stick at all.
That leaves the country in a state of radical uncertainty, with a void only the private sector can fill through a massive surge in activity.
- That may not happen.
- "(We) haven't learned much new on how trade policy uncertainty is
expected to affect investment spending, but we have no reason to revisit our prior conclusion that this uncertainty will be a headwind to capex growth later this year," JPMorgan chief U.S. economist Michael Feroli wrote last week of the new tariffs. - In other words, even with Trump's early manufacturing wins like Apple and Hyundai, there's no reason to think businesses, by and large, are incentivized to spend big.
- They're not necessarily starting from a strong foundation either — as Axios Pittsburgh's Ryan Deto reports, the Rust Belt's decline was decades in the making, and pre-dates the modern expansion of free trade.
- "We are just not that economy anymore, nationally or locally," PNC chief economist Gus Faucher said.
The intrigue: It's not just finding the will, workers and materials to build the new factories the administration envisages changing America. The administration wants the U.S. to build the ships to carry the output of those factories around the world, too.
- We don't currently do that in any kind of scale. The investment would be massive. And even with the administration reportedly pulling back on a plan to charge massive port fees to Chinese ships, the prospect of requiring a bigger U.S. fleet is daunting.
- "One shipyard in China made more commercial ships last year than the total number the U.S. has produced since World War Two," Flexport CEO Ryan Peterson wrote on X Monday in a lengthy thread criticizing the port fee proposal.
The irony is that since April 2, there hasn't been a flurry of manufacturing announcements — but there have been plant closures, including reports of car makers pausing production at some factories and laying off workers (which Trump adviser Peter Navarro said they had "no business" doing.)
The bottom line: President Trump seeks a fundamental reordering of the American economy that requires millions of people to commit trillions of dollars in capital and labor to rebuild industries the country hasn't had for decades.
- Thus far, there aren't many volunteers to start.
