Why reviving U.S. tech manufacturing is harder than you think

The Trump administration's "Liberation Day" tariffs aimed to revive U.S. manufacturing, particularly in industries like tech, which have largely moved production overseas. However, reversing this trend is far more complicated than simply imposing tariffs due to deeply integrated global supply chains, especially in Asia.¹

The Rise of Asian Manufacturing

Over the past few decades, U.S. manufacturing's share of GDP has significantly declined (from 25% in the 1950s to 10% today), while Asian powerhouses like China have seen substantial growth (over 20%). China's dominance is attributed to a massive, skilled labor force, established logistical networks, and an "ecosystem" of thousands of suppliers.² China also boasts significantly more manufacturing workers (105 million) compared to the U.S. (13 million) and has invested heavily in industrial robots.

Furthermore, China has transitioned from just an offshoring hub to a leader in some key technologies, such as electric vehicles and batteries.³ This puts the U.S. in a challenging position of trying to catch up technologically with a lower-wage competitor.

The "China Plus One" Strategy and its Implications

Some U.S. tech companies have adopted a "China plus one" strategy, moving final assembly to countries like Vietnam, India, and Mexico. This shift, accelerated by the first Trump administration and COVID-19 lockdowns, aims to diversify supply chains.⁴ For example, Apple has begun sourcing more than half of its U.S.-bound iPhones from India.⁵ This could lead to separate supply chains for different markets, with China potentially supplying components while other countries handle final assembly. Chinese officials are reportedly not concerned by this, as they are focusing on higher-value domestic production.

However, President Donald Trump has expressed disapproval of this shift, threatening tariffs on iPhones not made in the U.S. While the U.S. still excels in producing high-end manufactured goods like aircraft engines and chipmaking tools, a 145% tariff on Chinese goods, or even the initially proposed 54%, would cripple U.S.-China trade and make Chinese-supplied components unaffordable.⁶ Current U.S. tariffs stand at 10% on most imports, 30% on Chinese imports, and 25% on national security goods, though some finished products like smartphones are exempt. The unpredictable nature of these policies makes long-term business planning difficult for companies.

Challenges and Potential Solutions for Reshoring

Experts like Dexter Roberts argue that reshoring something like iPhone production entirely to the U.S. is a "fool's errand," estimating it would triple the price of an iPhone from $1,000 to $3,500. A more methodical and stable strategy is needed, according to economists. Marc Fasteau, co-author of Industrial Policy for the United States, suggests that no single tool can achieve this alone; it requires a "whole ecosystem."⁷

Companies like Apple and Taiwan Semiconductor Manufacturing Co. have pledged significant U.S. investments, but the impact of these commitments amid shifting tariff policies remains uncertain. Fasteau believes that increased investment in automation and robotics is crucial for large-scale manufacturing to be economically viable in the U.S. Ultimately, the U.S. needs to define what kind of manufacturing it truly desires, as a U.S.-based iPhone factory assembling tiny screws is likely not the answer.