American companies repatriate production

The collapse of supply chains and dependencies on China are pushing many American companies to return to the United States. Despite the high costs and taxes.

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, proved how vulnerable this structure is. The return of the US economy to growth is not ruled out to torpedo the recovery of many companies. 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 dollars, while the sports company Nike is forced to reduce its production by 160 million sports shoes due to the reduction of the production in Vietnam.

220,000 new jobs by the end of 2021

More and more American companies are turning their backs abroad and repatriating production in an effort to eliminate 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, processor Intel announced it would invest $ 20 billion in two plants in Arizona. For its part, General Motors has decided to shift production of electric battery batteries from overseas to Michigan, while US steelmaker recently informed the public that it intends to build a new $ 3 billion plant in Alabama. or in 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, 220,000 new jobs are expected to be created on US 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 the production of microchips, electric batteries and pharmaceuticals.

Production costs in the US are higher than in Germany

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

Harry Mouser 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 job in manufacturing 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 (New York)

Edited by: Stefanos Georgakopoulos

Source: Deutsche Welle