Explainer: The Cost of ‘Making America Great’

America’s economy should be made in America. That’s the call from President Donald Trump.

"Foreign leaders have stolen our jobs," said Trump on April 2. "Foreign cheaters have ransacked our factories. Foreign scavengers have torn apart our once-beautiful American Dream."

The U.S. leader says tariffs will make it more expensive to produce goods on foreign soil. He’s hoping firms will make their products in America instead.

It’s not hard to see where Trump is coming from. In the late 1970s, the manufacturing sector employed one in four American workers. Today it’s one in 12.

More factories in the U.S. should mean more jobs for Americans. The National Association of Manufacturers (NAM) estimates that every new job in the sector creates another five, either directly or indirectly.

But doing business in the world’s biggest economy is not always cheap.

Research by The Reshoring Institute points to a massive wage gap between American and Asian workers. The group says in 2022 U.S. factory workers earned roughly three times more than those in Thailand, Malaysia and Vietnam.

Some U.S. firms have chosen to set up operations in neighboring Mexico. And it makes business sense. Figures from Our World in Data show that U.S. wages in 1975 were three times higher than those in Mexico. Just over 40 years later, American wages were 10 times higher.

Pain in the pocket

Firms in America also have to follow American rules and regulations. NAM claims its members paid an average of $29,100 per worker simply to comply with federal regulations in 2022.  

"When I speak to manufacturers they say they’ll flourish in the U.S.," NAM chief executive Jay Timmons told Bloomberg. "But that’s if we reduce the cost of doing business."

Trump’s cabinet has promised to cut through the red tape and slash the cost of compliance. "The big tax on consumers that goes unnoticed is regulation," said Treasury Secretary Scott Bessant on Tuesday. "We are deregulating. By the third and fourth quarter of this year, that’s really going to kick in."

But there are other challenges. Companies have built supply chains in regions that allow them to benefit from cheap labor. Experts say it’s not always easy to change those operations.

"It’s very expensive and time consuming to uproot these suppliers," says Terrence Guay, a business professor at Penn State University. "When tariffs are going up and down and being delayed and rescinded, they can’t just invest millions in a new factory in the United States."

Meanwhile, it’s not entirely clear who will work in the new factories that Trump wants. NAM estimates that American manufacturers will need another 3.8 million workers by 2033. But it’s warned that the industry may struggle to fill half those jobs if it doesn’t push to attract young talent.

None of this means Trump is wrong to support local manufacturers. They are still a crucial part of America’s economy, accounting for nearly 10 percent of output. But as the president pushes to ‘make America great’, it’s becoming clear that greatness will come at a cost.