Of Reshoring, Kuznets, and Reality

The Trump administration has spent the last month preaching and pushing the super duper great reality of various nations and companies promising to relocate and invest back into the United States and increase production of goods on America’s shores.

Normally this author would say this is a good thing, but sadly, we’ve heard this song before and I’m afraid that distinguishing between reality, platitudes, promises, and economic growth is an important aspect to analyzing the true impact of these announcements. Add that into the mix under the theory that de-globalization is an effective tool to counter the diversified supply chain and introduce a non-inflationary domestic manufacturing economy is a very nice theory; however it is just that, a theory.

This presents the problem of analyzing the reality of what happened in Donald Trump’s first term, the implications of the Biden junta’s disastrous policies, and how global manufacturers and governments will react to the tariff wars plus impacts on American supply chains is in order.

Reshoring the First Term

When President Trump’s first term began one of his biggest issues was to encourage reshoring and bringing America’s manufacturing jobs back home.

So just what kind of promises were made? Here’s some old headlines to review:

Apple’s new Mac Pro to be made in Texas – Note: The announcement was in 2019. The Mac Pro was built in the Austin plant since 2013. The internal components are manufactured overseas and final assembly occurs in Texas.

Walmart launches eco-friendly car seat/stroller made in U.S.

Ford scraps plan for $1.6 billion plant in Mexico after Trump criticism

Trump Comes To Wisconsin For Foxconn Groundbreaking With Walker

The results of this and other ‘bigly’ announcements?

Trump’s push to bring back US jobs shows limited results

Excerpt from the Forbes India article above:

Trump’s tax cuts unquestionably stimulated the U.S. economy in 2018, helping to push economic growth to 2.5% for the year and fueling an increase in manufacturing jobs. But statistics from the government and other sources do not support Trump’s claim about his policies’ effectiveness in drawing investment and jobs from abroad.

Foreign investment in the United States grew at a slower annual pace in the first two years of Trump’s tenure than during Barack Obama’s presidency, according to Commerce Department data released in July. Growth in business investment from all sources, foreign and domestic, accelerated briefly after Trump signed a $1.5 trillion tax-cut package in late 2017 but then slowed. Investment growth turned negative this spring, providing a drag on economic output.

At the end of his term, minus the Covid fiasco, here is out that turned out from 2019 until the most recent report this year:

Please notice the starting date of August of 1971 is not by accident. As the US dollar began a rapid depreciation from that era, the manufacturing jobs, especially after the 1979-1982 recessions, accelerated at a frightening pace. This was stemmed only by the stability introduced by a stronger dollar in the 1980s and the tax policy revisions introduced by the Reagan administration.

Thus when President Trump promised a massive reshoring effort, one might think that companies would be clamoring to relocate to the United States and take advantage of the lower corporate taxes and reduction in regulations happening by 2018, right?

The chart above does not lie. While there was a growth in manufacturing jobs from 2018 to 2020, the stall speed was hit in late 2019 and since then has only averaged 834 new manufacturing jobs created nationally on average. In fact, the number of manufacturing jobs has yet to surpass pre-GFC levels of 2007 which indicates that despite the incentives, the new supply chain structures established under the Obama administration may take decades to unwind; if they can be at all.

What was the impact on the United States trade balance? Pretty ugly:

This brings into doubt the effectiveness of Trump’s policies in his first term despite all of the bluster and publicity.

The Kuznets Fallacy

In 1971, Russian-American economist Simon Kuznets won the Nobel Prize for his theory on economic growth and income inequality. In theory, the ideas seemed logical and sound as this chart exhibits:

The chart and theory is an explicit demonstration of the simplification of economics as presented before the idea of modern economic evolution occurring not just on an annualized basis, but shifting an almost quarterly even time horizon, forcing capitalists to rethink the idea of annual planning and reactionary functions.

At stage four of the curve, this is what Professor Kuznets theorized:

The idea is that in the information and service age, aka, the post-industrial society, societal considerations would overcome the impulse of capitalism. A truly piss poor example of idealistic economic considerations when reviewing what has happened in hindsight since 1971.

Unfortunately for the the theory, which quite a few Western governments have adopted into their planning since that era, it would appear that the fallacy of the “greater good” and economic nationalism are surpassed by the capitalist ideals of profit and expansion, the very basis of the freedoms the United States economic system is based on.

Trump Reshoring and Trade Wars V2.0

The recent national elections brings this story full circle on the idealism of potentially bankrupt economic theories which will impact investment in the United States for the next decade if not longer.

The announcements of “new” investments in the US economy to placate President Trump are far and wide (from a “not” so pro-Trump source, Newsweek March 21, 2025):

List of Companies Pledging to Invest Billions in US Since Donald Trump Win

Excerpt:

Multiple companies are still putting big money into the U.S. economy.

• Johnson & Johnson: On Friday, Johnson & Johnson announced manufacturing, research and development, and technology investments of more than $55 billion in the U.S. over the next four years. They say it represents a 25 percent increase in investment compared to the previous four years under President Joe Biden, crediting an increase in investment levels to the 2017 Tax Cuts & Jobs Act. Also on Friday, the company broke ground on a 500,000-square-foot biologics manufacturing facility in Wilson, North Carolina.
• SoftBank: On Monday, SoftBank CEO Masayoshi Son visited Trump at Mar-a-Lago and announced a $100 billion investment over the next four years with a promise to create 100,000 jobs focused on artificial intelligence and related infrastructure, according to CNBC.
• United Arab Emirates: After a meeting with Trump, the United Arab Emirates committed to a 10-year, $1.4 trillion agreement with the U.S. that will sustain existing investments in AI infrastructure, semiconductors, energy, and American manufacturing, according to Reuters.
• Taiwan Semiconductor Manufacturing Company: Semiconductor giant TSMC announced earlier this month in response to Trump’s tariffs threat on foreign chips that it would invest another $100 billion into its U.S. operations. The anticipated new chip fabrication plants, two advanced packaging facilities, and a new research and design center will increase the company’s total investment in Phoenix to $165 billion—the largest foreign direct investment in U.S. history.
• In January, Trump announced a $500 billion private investment in AI infrastructure led by OpenAI, Oracle and SoftBank.
• Apple: Tech giant Apple announced a $500 billion investment.
• Nvidia: On Thursday, the White House announced that chipmaker Nvidia would invest hundreds of billions of dollars over the next four years in U.S.-based manufacturing operations.

Let’s just due a quick cursory review of what happened since Trump Reshoring and Trade War v1.0:

Nissan cuts shifts, offers employee buyouts at 3 US plants in bid to shed jobs

Cleveland-Cliffs to idle West Virginia tinplate factory

Cleveland-Cliffs to idle two Minnesota steel plants, laying off 630 workers

IBM layoffs, Panera factory closure impacting Piedmont Triad, WARN notices show

Those are just a sampling of the recent headlines. But just what was the impact and results of reshoring v1.0? Here’s a sampling of the stories outlining what has happened:

The 8th Wonder of the World

Excerpt:

The renovations never arrived. Neither did the factory, the tech campus, nor the thousands of jobs. Interviews with 19 employees and dozens of others involved with the project, as well as thousands of pages of public documents, reveal a project that has defaulted on almost every promise. The building Foxconn calls an LCD factory — about 1/20th the size of the original plan — is little more than an empty shell. In September, Foxconn received a permit to change its intended use from manufacturing to storage.

Reshoring: Reality or Myth? US–China Trade and the Future of American Manufacturing

Excerpt:

While tariffs on Chinese goods may offer short-term protection to certain US industries, they have also exposed deeper structural challenges. The risk is that these trade measures could inadvertently stifle the very innovation that is essential for the US to maintain long-term global competitiveness. As policymakers grapple with these issues, it’s clear that a nuanced trade approach, focused not only on protecting domestic industries but also on cultivating a highly skilled workforce for emerging sectors, will be crucial for ensuring the nation’s economic resilience.

The emphasis above is my own. So blaming China is perhaps not the best strategy in the world since only 15% or less of all Chinese exports are now causing the trade imbalance with the United States:

This throws great doubt on the voracity of the argument that China is the source of all American economic manufacturing problems. Perhaps an inwards look at regulatory, tax, and labor policy would be more fruitful.

The entire fiasco from Trump’s first “Trade War” has brought the world full circle to ask the question as to what happened to the FoxConn(among others) site in Wisconsin that was supposed to employ hundreds and create an economic opportunity zone in Trump’s first term promises? Microsoft said they would move in per this story from 2023:

New Microsoft data center proposed for Foxconn land in Mount Pleasant

Fast forward to January of 2025:

First Foxconn, now Microsoft: Wisconsin town dissed by big tech

Unfortunately, the degradation of the United States education system and moral teachings has resulted in almost two full generations of citizens with “expectations” rather than a results driven outcome. This failure to penalize failure and enhance the willingness to take risks versus the ideology of a the government, parents, or others bailing out poor life decisions has resulted in an almost slothful approach to capitalism where the population views “socialism” as an idealistic solution as of the most recent polls.

This is a result of expectations as a reward for existing, rather than innovation, risk taking, and just the plain old fashioned American work ethic . Despite the poll being six years old, there has been very little change since that time, which has also been reflected in the elections at the state and Federal level for three cycles now.

Conclusion

Why is this important to today’s investor and the economic outcomes for the United States?

Think about the trade war that has accelerated tonight with the automobile tariffs and the supply chain implications of the so-called “Liberation Day” on April 2nd.

The bond market is already nervous. Gold and Dr. Copper are at or flirting near all time highs. Distrust in the viability of agreements with the US government, taxation authorities, or political elites is growing.

Sadly, the entire US system is built on the faith of a stable economic an monetary system. Should the world view this agreement established since 1971 that our nation would not create a volatile and unstable economic platform, odds are our faith and credit not just in the dollar, but our credit might well be tested.

Instead of approaching the inequities of our trade with other nations on an individual nation by nation basis, the Trump 2.0 appears to have adopted the policy of viewing every nation as a nail, every solution as a hammer. This works great in home building, but poorly for empires.

If one doesn’t believe me, ask those who survived the decline and fall of the United Kingdom the last sixty years.

(Title Picture: FoxConn’s Wisconsin job site, via Wisconsin Public Radio)