Trump’s tariff will not re -manufacture to America

The definitions announced by the Trump administration last month, it won the global financial market. They have destroyed $ 7 trillion of wealth in the first week and the effects will continue in the echo for several months.

Customs duties acquired a 125 percent tariff from China, the largest commercial partner in America. They broke the friendship association for 80 years with our neighbor and the nearest ally, Canada. They left our allies in Europe confused. Unnamed repercussions.

The logical economic basis for definitions is that it will return to the United States, the architect of this idea that has been dismantled is the economist Peter Navarro. His theory is that when goods become more expensive to import to the United States, companies will start transferring their manufacture here – an idea called “Pur” to manufacture.

I have examined this plan with the Master of Business Administration students in the strategic management at Pennsylvania State University. Here are the reasons that make the idea of ​​coldness is a fallacy.

The cold or the transfer of manufacturing to the mother’s country is a very complicated decision for companies. It depends on the costs of doing business in different countries; Introductory and non -sharp barriers in doing business; Near production to the markets; Availability and cost of resources such as raw materials, financing and work; The long -term strategies of companies.

The analysis of the prominent decision itself takes months if not years, and it must be cleared through multiple levels within the organizations, and the country’s organizational agencies at local and national levels.

First, re -evaluation to America will require investments in lands, buildings, equipment and workforce within the US highest costs of these main reasons for the presence of the transportation process abroad in the first place. The costs of all these production factors have escalated over the past few decades. With less than 17 percent of the American economy in the manufacturing sector, some of these factors are no longer an environmental system for manufacturing, available in America.

Re -sale will also be rebuilding the supply chain. Global supply chains are complex and multi -level. There are many layers of suppliers in different countries with different tariff rates. Big companies have thousands of suppliers. Contracts can take months or even years. The high tariffs will increase the cost of supplies from home suppliers, if these suppliers use imported goods.

The third complexity that companies cannot necessarily trust that the current Trump tariff will remain stable for a long time enough to match corporate accounts for the return to investment. Wide investments participating in transporting manufacturing across countries run hundreds of millions of dollars. These sunken costs take more than 10 years to recover.

None of Trump’s positions on customs tariff rates, application dates, delay and repercussions in his first administration-and his current stance that countries can negotiate individually on low tariff deals-a guarantee of stability. Instead, it pumps the massive uncertainty in the decision of any corporate council to accept it. Share shareholders will likely to sue couples of companies that agree to such unconfirmed investments.

So the hope that the definitions will lead to the lack of taming manufacturing of the United States is a fantasy.

What can companies do to reduce the disorder of these definitions? There are many differences that you can consider-reformulation, maintenance of friends, and partial dance. Companies can return the beach from a current location to a low country in the current vicinity. They can move to well -known friendly beaches.

European companies, which are subject to a 20 percent tariff in their country, can think about moving to Northern Ireland, which, as part of the United Kingdom. It is only subject to a 10 percent tariff. Companies can transfer some parts of their value chain to the United States to make their products have a higher “made in America” ​​content. They can adjust the “value -added” accounting across countries.

Many games can be played in responses to the definitions. But the most likely response at the present time is that companies continue to rationalize and diversify their supply chains.

Paul Sherfastava, co -chief Roma Cluband Global research tank, professor of management and organizations at Pennsylvania State University.