How the U.S. Slipped From Top Manufacturing Perch

 

"In the 1950s, around 35% of private-sector jobs in the U.S. were in manufacturing. Today, there are 12.8 million manufacturing jobs in the U.S., -- 9.4% of those private-sector jobs.

President Trump says his tariff regime aims to bring manufacturing back to the U.S. But economists are skeptical that tariffs can make that a reality, and worry that the damage they create will outweigh benefits.

America's rise to becoming a manufacturing juggernaut was driven by a confluence of factors. In the early 1900s, the U.S. pioneered the use of interchangeable parts and organizing factors for mass production.

World War II prompted a big increase in manufacturing capacity, while devastating competitors, says Case Western Reserve University economist Susan Helper.

In the postwar years, more Americans joined the middle class, driving jumps in spending on long-lasting durable goods. America was America's best customer for manufactured goods.

Many of these goods were high tech for the time, such as dishwashers, TVs and jets. Making them in the U.S. made sense because staying on the leading edge required research and development teams working closely with the factory.

After the 1950s, manufacturing's role in the U.S. economy began to slip. Some of this came about merely because Americans were becoming more affluent, and devoting more of their spending to services, such as travel and medical care.

The jobs followed the spending, with more people going to work for service-sector employers. From the mid-1960s through the early 1980s, manufacturing employment essentially leveled off.

There also were shifts in where many of the nondurable goods Americans bought, such as clothing, were made. A lot of production shifted to states in the South, where labor was less costly. Meanwhile, less developed parts of the world, where labor costs were much lower, began dialing up manufacturing of nondurable goods in Latin America and Asia. The U.S. started importing more of those items. Eventually, the same thing happened with light durable items, such as blenders.

U.S. manufacturers had an increasingly difficult time competing with countries where labor costs were lower. That intensified in the 1990s, in part as a result of the North American Free Trade Agreement lowering duties on Mexican goods.

There also were job losses at steel producers after developing countries such as South Korea built up their steel industries and left the world awash in excess capacity, says Susan Houseman, an economist at the W.E. Upjohn Institute for Employment Research.

But what happened in the 1980s and 1990s pales in comparison to what happened after China joined the World Trade Organization in 2001, opening its country to foreign investment and gaining access to global markets.

The U.S. had faced import competition from other countries before, but never one that dwarfed its population. In 1999, the value of Chinese goods exports came to only about a 10th of U.S.'s. In 2008, it surpassed the U.S. as the world's top exporter of goods.

As China produced more stuff, the U.S. became more adept at producing services. Many of these can't be traded globally. In 2023, the U.S. exported $24 billion in advertising services, for example.

The U.S. exports in excess of $1 trillion-worth of services -- more than any country. And its services exports are undercounted as a result of companies moving overseas the rights to intellectual property developed in the U.S. for tax reasons." [1]

1.  U.S. News: How the U.S. Slipped From Top Manufacturing Perch. Lahart, Justin.  Wall Street Journal, Eastern edition; New York, N.Y.. 14 Apr 2025: A2.