- U.S. manufacturing raised output but lost a quarter of its jobs in the past two decades
- Offshoring and automation have cost low-skilled jobs while creating more skilled ones
- Misguided government policies that hurt productivity growth are the real culprit
President Donald Trump declared on October 1 that the new trade deal with Canada and Mexico signifies the return of the United States as a “manufacturing powerhouse.” U.S. manufacturing has indeed changed dramatically since 1992, when the three countries signed their original trade pact. But the complex and varied factors that have reshaped U.S. manufacturing cannot be summarily reversed – notwithstanding the president’s resolve.
As a presidential candidate and since taking office, Mr. Trump has consistently vowed to replace the North American Free Trade Agreement (NAFTA), which he blames for shifting U.S. manufacturing to Mexico (among other lower-wage countries). In a bid to “level the playing field,” the new U.S.-Mexico-Canada Agreement (USMCA) calls for a minimum wage of $16 per hour on at least 40 percent of automakers’ “labor activities.” Tariffs would be imposed on cars with less than 75 percent North American content (NAFTA currently sets this threshold at 62.5 percent).