Ben Franklin might have believed that a penny saved is a penny earned, but buying American could mean spending quite a bit more. While “Made in USA” products are often warmly welcomed, they come with a big drawback — the cost. With inflation still fresh in everyone’s mind, American businesses are discovering that, sometimes, money speaks louder than a compelling story.

We barely build anymore: Manufacturing output in the US reached record highs of $2.5T last year, but ask politicians and business leaders about it, and they’ll paint a different picture of America’s industrial landscape. For 20 consecutive months, the country’s industrial core has been in decline, with weak demand weighing on the sector’s outlook. Industry watchdogs point to cheap imports from China, Mexico, and elsewhere as a major issue — but that’s not the whole story.

• The cost of goods, labor, and other inputs is higher in the US, ensuring that items bearing the Stars and Stripes label will always come at a premium — a tough sell for a public that’s increasingly cost-conscious.
• Even with record industrial output, the US trade deficit widened to a two-year high in July, shortly after surpassing $1T.

Politics of Reshoring

Fortunately for the industry, there’s plenty of political support for giving American manufacturers an edge, mainly through taxes on cheaper imports (tariffs) and subsidies for domestic producers. Both major political parties argue that the cost of producing goods in America is justified — even if it could hurt our relationships with trade partners and cost Americans more money.

• In his first term, Donald Trump imposed aggressive import levies on China to counterbalance its lower production costs and boost domestic manufacturing — a commitment he aims to expand in a second term.
• President Joe Biden has maintained and even expanded those import duties — and a Harris administration would continue this approach despite warning that broad tariffs effectively act as a tax on American consumers.

Tariff 2.0: The effects of tariffs on the US economy haven’t been entirely positive. The Tax Foundation reports that the initial policies could reduce long-term GDP and job growth. Since import fees are meant to make domestic goods more competitive, they often lead to higher prices for consumers. That could worsen, as conservative proposals to increase tariffs might raise costs by $1.7K per year for the average household. It begs an important question: What’s more crucial — Americans’ preference for affordable products or the potential growth of a domestic manufacturing sector?