Bringing Manufacturing Back...Is That What America Needs?

Depending on where you stand, you might not love this take but one of the current administration's big talking points is about bringing manufacturing jobs back to the U.S. Sounds great, right? I can be good, but I’m not totally sold on it.

Manufacturing jobs have been on the decline in the U.S. since the ’70s and ’80s. Today, manufacturing and industrials makes up about 19% of the economy, agriculture accounts for roughly 1%, and the remaining 80% is services - that's your internet providers, teachers, accountants, nurses, realtors, lawyers, landscapers, and your favorite chef.

Now, there are areas where boosting manufacturing domestically absolutely makes sense.

Take national defense and security, for example. The CHIPS Act, pushed by the previous administration, is a great case in point - it’s crucial for us to make critical components like semiconductors right here at home. And Boeing’s current troubles with China withholding plane deliveries show exactly why we need to control our own manufacturing capabilities for defense tech, aircraft, and vital infrastructure. America needs to be strong on the world stage and, while you might disagree, I have personally seen, first-hand, why the world needs a strong United States. Allowing others to control a vital part of our security can be detrimental; let's bring it home.

With farm families being a big focus of my work, I think agriculture also deserves a lot more love domestically. Switzerland - a country obviously much smaller than ours - has nailed this: they keep farming viable by imposing tariffs on cheaper, inferior imports. Does this mean pricier groceries? Yep, but adopting a similar stance carefully tailored to our national differences, may also mean superior quality food and better health outcomes for Americans. Plus, it could encourage more families to return to farming, strengthening our own agricultural backbone and keep American farmland American-owned.

But here's where the "bring all the manufacturing back" argument turns to shit me: why the hell would we want to bring back menial manufacturing like clothes, toys, low-skill ceramics and metal stamping, etc.? What’s the upside? Some things, like near-shoring some auto production makes sense, sure - but so does keeping final assembly, finishing, and delivery in the States. The rest? It’s honestly better off overseas.

Having manufacturing move abroad isn’t a failure - it’s a sign of a mature, developed economy. As economies advance, they naturally shift labor-intensive work to developing countries. That’s not bad; it’s growth. It lets us focus more on services, which - by the way - offer something manufacturing can’t: price elasticity.

Quick macroeconomics refresher: price elasticity measures how rapidly prices respond to shifts in demand without causing major harm.

Industrial and manufacturing economies just don’t have that flexibility. Think about it - when cars, tractors, TVs, and other manufactured goods sit unsold, their value tanks, forcing retailers into desperate markdowns or losses. Services, on the other hand, are nimble. Professionals in service industries can swiftly adjust their pricing, adapting quickly to economic conditions then bounce back once their conditions have recovered.

The payoff? Service-based economies tend to experience shorter, less severe recessions. Sure, downturns might happen faster, but they don’t stick around as long or cut as deep. In a digital age that thrives on rapid information flow, this flexibility is a massive advantage.

Bottom line: America needs manufacturing. America needs agriculture. For me, I'd pay more for healthy, high-quality fruits, vegetables, and meat from a family I know and wear a cheap t-shirt while watching The Last of Us on an equally cheap tv.

Going full steam ahead to "bring back" a bunch of manufacturing jobs? That’s not forward-thinking - it’s stepping backward.

Let's focus on what we're already good at and leave the nostalgia at the door.

Jose Alvarez

Founding Advisor

Harvest Horizon Wealth Strategies

The information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The author may hold positions in any securities discussed in this blog. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational, entertainment, and educational purposes and should not be construed as advice. Advisory services are offered through Harvest Horizon Wealth Strategies LLC, an investment adviser registered with the state of Wisconsin.