President Donald Trump wants America to move manufacturing back to the US. During his election, the tariff discussion was focused on reciprocal tariffs. Countries that tariff the import of US products will face the same level of tariffs for their products as they sell to the US. Without the artificial benefits of a one-way tariff, foreign products will be less attractive, and the sales of US products will rise, creating more jobs for Americans. Simple, right?
Well, maybe that’s a bit too simple. America’s global network of factories took decades of effort and investment. Not all of which paid off. Some factories didn’t work out at all. Others moved (and maybe moved again) before they found a successful offshore location. Part of the problem is that even multi-billion-dollar corporations (and all of their consultants) fail to understand the complexity and the full scope of needs for a factory. Suppliers, sea ports, training schools, government policies, road systems, and much more are required to feed those factories with materials and workers.
Today, we’re going to examine the process of moving a factory back to the U.S. There are a lot of steps, both in the US and in the offshore location where manufacturing happens today. First, we need to understand the scale of effort needed to move a significant number of factories. Between 75% and 90% of the Fortune 500 companies have moved at least some of their jobs offshore. There are thousands, if not tens of thousands, of factories that could be “reshored”.
Step 1: Shutting down the offshore factory. To move production back to the US, the existing production (in China, Mexico, Thailand, etc.) needs to be shut down. That means ending the lease for your factory or selling the land. You will want to move any useful equipment back to the US. Assuming that any of the equipment is still useful. Older equipment may not have any remaining value, but may still have loans that need to be paid off. In some factories, you may need to allow for severance pay.
If the nation you are leaving is China, you can expect penalties, taxes, and lawsuits, possibly being excluded from all future dealings with China. You don’t just get to pack up and leave. It’s more like a divorce. A very expensive divorce. Tesla’s MegaFactory in Shanghai costs around $2 billion to build, employs 20,000 workers, and produces 750,000 cars annually. Penalties for closing this one factory is likely to be in the hundreds of millions of dollars. Plus, the future opportunities in China’s market… the largest consumer market in the world… will be even more costly.
Step 2: Find a Place to build your new factory. What you manufacture may determine where you build. Do you need access to shipping and transportation, or are raw materials more important (wood, oil, cheap and reliable electricity). When a factory “returns” to the US, it may return to an entirely different region. For example, auto manufacturing is unlikely to return to Detroit. While some jobs have moved offshore, millions of auto jobs have moved to cheaper southern states with lower wages and cheaper land. Sometimes that land is free, provided by the municipality or state.
Over the last 20 years, a key characteristic of “new” factories in the US is that the owners often stage a contest between states to determine where they will build. Which state will reduce taxes, provide the greatest financial incentives, donate free land, greenlight time-consuming approvals, and rezoning, etc. Local taxes, jobs, and financial benefits are often bargained away long before the factory is built.
Step 3: New factories must be bigger, smarter, and faster. Every new factory, especially car and electronics factories, is more automated and employs fewer workers than the factory it replaces. Modern factories aren’t full of workers turning bolts. They’re full of robots doing high-speed welding, painting, and assembly, with just a handful of humans managing quality control and software.
We have entered the age of “Dark Factories”. Fully automated factories with no human workers. China may be the most advanced dark factory nation. By leveraging robotics, automation, and AI for all aspects of production, few (if any) on-site personnel will be needed. While few factories fully meet this standard. However, if America does reshore thousands of factories, our march towards fully automated factories will be accelerated by decades.
Step 4: Hire… But Not Like Before. If new factories are built in high-cost Detroit or low-wage Tennessee, no one will hire 10,000 people like in the old days. With automation, you’re lucky to hire 1,500–2,000 workers. And many will be engineers or technicians, not traditional line workers. Even so, workers will require significant training, and many will require a college degree.
Step 5: Restart the Supply Chain. Every car or washing machine is built from thousands of parts, most of which come from all over the world. Even if your factory is now in Ohio, you still need: Glass from Canada, semiconductors from Taiwan, wiring from Mexico, specialty steel from South Korea, etc. Trump’s economic policy requires that almost all of America’s supply chain be reshored back to the US.
For example, consider all of the parts in all of the cars sold in America. Regardless of the brand or the nation of origin, about 75% of all parts were made in foreign factories. And those suppliers have their own suppliers, and none of them will be thrilled to pack up and start over. It will take decades to even move a fraction of this supply chain back to the US.
Step 7: Selling reshored products. Finally, with your shiny new factory open, it’s time to sell the Made-in-America product. But here’s the catch: the new U.S.-built version might cost 10%–25% more than its overseas-built cousin. Will Americans pay extra for the sticker that says “Made in the USA”? Some will. But many, perhaps most, won’t. We know this because we have decades of consumer data that tells us that “lower cost” almost always beats “locally made”.
Conclusion: Is massive reshoring feasible? In certain cases, with major government support, it could be. But it’s slow (3–5 years per factory), expensive (hundreds of billions if done at scale), high-risk (consumer tastes can change), and may not add many jobs (and even fewer high-paying jobs). Auto factories might come back to America, but manufacturing jobs with high pay is far less likely. It’s a different world, and a different kind of factory.
Moving a factory back to the U.S. is less like flipping a switch… and more like moving an elephant across the country with a scooter and a prayer. If we’re serious about American manufacturing, we’d better be honest about what it takes… money, time, tradeoffs, and tough choices. Otherwise, we’re not reshoring factories. We’re just selling nostalgia.
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