OM in the News: Tariffs and a Strategic Move to Reshore Manufacturing

“President Trump has certainly employed tariffs as a strategic tool to reshape the American manufacturing landscape,” writes  UCLA Prof. Chris Tang in Industry Week (March 10, 2025).   The vision driving these initiatives, at its core, aims to bring manufacturing back to the U.S., reduce trade deficits, and protect national security.

Reshoring The central pillar of the strategy is to incentivize both American and foreign companies to establish manufacturing operations here. Imposing tariffs on imported goods provides a financial rationale for companies to rethink their offshoring strategies. The goal is to rebuild a robust industrial ecosystem that produces goods domestically for world markets.

Trade deficits  Most countries impose higher tariffs on American goods than the U.S. imposes on theirs. For example, the U.S. has relatively low tariffs on dairy products, around 25%, whereas Canada imposes tariffs of over 200% on certain dairy imports from the U.S.  With reciprocal tariffs and higher import tariffs, the U.S. seeks to make it less attractive for companies to rely on cheap foreign labor –and more feasible to invest in America. This shift is expected to reduce the trade deficit and boost domestic economic growth.

National Security Implications Dependency on foreign manufacturing in critical sectors like technology and pharmaceuticals poses risks. By encouraging companies to produce these goods domestically, the U.S. can ensure a more secure and reliable supply chain (critical during crises such as the pandemic).

Many firms have shifted operations from China to other countries to avoid paying higher tariffs associated with Chinese imports. For example, Apple shifted some operations from China to friend-shoring countries such as India. Likewise, toy manufacturer Mattel and tech manufacturer HP expanded operations to Mexico as a near-shoring strategy.

A significant outcome on the new tariffs is the renewed focus on building domestic manufacturing capabilities and its significant infrastructure.  Apple plans to invest more than $500 billion in the U.S., Eli Lilly $27 billion, and Taiwan’s TSMC over a $100 billion (for 3 new semiconductor plants).

Rebuilding an industrial ecosystem that was hollowed out over decades requires substantial investment, skilled labor and modern infrastructure. There are many long term benefits, including growing the U.S. economy through economic revitalization.

Classroom discussion questions:

1. What is the difference between near-shoring, reshoring, and friend-shoring?
2. Summarize the advantages of tariffs as a tool, according to Prof. Tang.