Design World

  • Home
  • Technologies
    • ELECTRONICS • ELECTRICAL
    • Fastening • joining
    • FLUID POWER
    • LINEAR MOTION
    • MOTION CONTROL
    • SENSORS
    • TEST & MEASUREMENT
    • Factory automation
    • Warehouse automation
    • DIGITAL TRANSFORMATION
  • Learn
    • Tech Toolboxes
    • Learning center
    • eBooks • Tech Tips
    • Podcasts
    • Videos
    • Webinars • general engineering
    • Webinars • Automated warehousing
    • Voices
  • LEAP Awards
  • 2025 Leadership
    • 2024 Winners
    • 2023 Winners
    • 2022 Winners
    • 2021 Winners
  • Design Guides
  • Resources
    • Subscribe
    • 3D Cad Models
      • PARTsolutions
      • TraceParts
    • Digital Issues
      • Design World
      • EE World
    • Engineering diversity
    • Trends
  • Supplier Listings
  • Advertise
  • Subscribe

Tariff tango? A reminder why domestic manufacturing matters

By Lee Teschler | August 14, 2019

Teschler on Topic

Leland Teschler • Executive Editor
[email protected]
On Twitter @ DW_LeeTeschler

The recent round of tariffs on $300 billion-worth of imports from China rocked markets because it will mostly target popular consumer products such as cellphones, laptops, apparel, and toys. Unfortunately, the politics of tariffs can obscure the rationale underlying tariff wars: the need for a strong domestic manufacturing base. To really understand that rationale, it is good to consult a non-political source.

A few years ago, MIT professor Suzanne Doris Berger penned How We Compete, summarizing the results of a five-year study by the MIT Industrial Performance Center. The study looked over 500 international companies to figure out what business practices are succeeding today.

Berger says there is no question Chinese imports led to a drop in U.S. manufacturing jobs. Chinese imports accounted for about 33% of manufacturing job declines between 1990 and 2000 and 55% between 2000 and 2007. And the deck is stacked against entrepreneurs with ideas for new manufacturing companies but no money. Venture capital is strongly concentrated in IT and telecom where firms can scale up relatively quickly, Berger says. VC investors are less likely to invest in areas where it takes longer to develop products. As one CEO in the study put it, “The VC model does not work for manufacturing companies. VCs cannot make any money on something that costs $100 million and takes at least 10 years to build.”

It’s also evident that companies are more likely to lose their technological edge when they develop technology in the U.S. but chose to manufacture it elsewhere. The process by which technology scales from pilot to commercial production creates opportunities for learning by building, says Berger. When the learning takes place outside the U.S., it is likely to lead to innovations outside the U.S. as well.

Berger says the phenomenon manifested itself in the R&D trajectories of U.S. optoelectronics firms, some of which moved production overseas. Within a few years, the technological paths of those remaining in the U.S. diverged from those that had moved offshore. New optoelectronics technologies that integrated functions on a single IC flourished only in the firms staying in the U.S. Those that had moved production were generally stuck optimizing the discrete chips of the previous generation.

Though high-tech manufacturing gets headlines, medium-low-tech manufacturing firms account for almost eight times more value added in production. Berger likens them to the weight-bearing foundations of the U.S. economy. It turns out that many of these manufacturing firms are integral to U.S. innovation, but not in ways that can be measured in terms of patents and high-profile products.

Instead, superior performance seems to come from collocation, Berger says. Proximity to other firms and suppliers helps innovators handle problems that take special skill sets, unfamiliar equipment, and different kinds of experience. She explains that being across the street from suppliers was critical during the early years of manufacturing companies as they moved their ideas toward prototypes and into pilot production.

Specific instances illustrate these effects. An example is the contrast between Raleigh-Durham and Greenville, N.C. Both places host pharmaceutical companies. But Raleigh-Durham also hosts related industries such as medical devices and is the home of universities and community colleges with research programs. With these additional resources nearby, Berger thinks it’s no surprise that Raleigh-Durham employment growth in pharmaceutical industries far outstrips that of Greenville.

And that is the goal of adding tariffs to imports. The complementary activities that can produce high rates of growth and job creation can only happen if those activities take place here. That’s something to keep in mind if you find yourself paying a little more for your next cellphone. DW

You Might Also Like


Filed Under: Commentaries • insights • Technical thinking, NEWS • PROFILES • EDITORIALS, MANUFACTURING

 

LEARNING CENTER

Design World Learning Center
“dw
EXPAND YOUR KNOWLEDGE AND STAY CONNECTED
Get the latest info on technologies, tools and strategies for Design Engineering Professionals.
Motor University

Design World Digital Edition

cover

Browse the most current issue of Design World and back issues in an easy to use high quality format. Clip, share and download with the leading design engineering magazine today.

EDABoard the Forum for Electronics

Top global problem solving EE forum covering Microcontrollers, DSP, Networking, Analog and Digital Design, RF, Power Electronics, PCB Routing and much more

EDABoard: Forum for electronics

Sponsored Content

  • Sustainability, Innovation and Safety, Central to Our Approach
  • Why off-highway is the sweet spot for AC electrification technology
  • Looking to 2025: Past Success Guides Future Achievements
  • North American Companies Seek Stronger Ties with Italian OEMs
  • Adapt and Evolve
  • Sustainable Practices for a Sustainable World
View More >>
Engineering Exchange

The Engineering Exchange is a global educational networking community for engineers.

Connect, share, and learn today »

Design World
  • About us
  • Contact
  • Manage your Design World Subscription
  • Subscribe
  • Design World Digital Network
  • Control Engineering
  • Consulting-Specifying Engineer
  • Plant Engineering
  • Engineering White Papers
  • Leap Awards

Copyright © 2025 WTWH Media LLC. All Rights Reserved. The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of WTWH Media
Privacy Policy | Advertising | About Us

Search Design World

  • Home
  • Technologies
    • ELECTRONICS • ELECTRICAL
    • Fastening • joining
    • FLUID POWER
    • LINEAR MOTION
    • MOTION CONTROL
    • SENSORS
    • TEST & MEASUREMENT
    • Factory automation
    • Warehouse automation
    • DIGITAL TRANSFORMATION
  • Learn
    • Tech Toolboxes
    • Learning center
    • eBooks • Tech Tips
    • Podcasts
    • Videos
    • Webinars • general engineering
    • Webinars • Automated warehousing
    • Voices
  • LEAP Awards
  • 2025 Leadership
    • 2024 Winners
    • 2023 Winners
    • 2022 Winners
    • 2021 Winners
  • Design Guides
  • Resources
    • Subscribe
    • 3D Cad Models
      • PARTsolutions
      • TraceParts
    • Digital Issues
      • Design World
      • EE World
    • Engineering diversity
    • Trends
  • Supplier Listings
  • Advertise
  • Subscribe
We use cookies to personalize content and ads, to provide social media features, and to analyze our traffic. We share information about your use of our site with our social media, advertising, and analytics partners who may combine it with other information you’ve provided to them or that they’ve collected from your use of their services. You consent to our cookies if you continue to use this website.OkNoRead more