The decline of US manufacturing and the rise of Chinese manufacturing has preoccupied policymakers over the past 25 years. It has resulted in the latest effort to use tariffs to try to drive domestic and foreign manufacturers back to the United States and limit trade disparities with China. This idea of bringing back manufacturing to the US is so ingrained in people’s thinking that it almost seems odd to question if that is a goal the US should pursue.
The facts are clear: Employment in the US manufacturing sector from 1965 to 2000 was fairly stable in a range between 17 million and 19 million. However, there was an abrupt shift away from manufacturing in the early 2000s, to a new lower range of 11.5 million to 13 million, which was nearly a 6 million decline, or 33 percent (see chart 1).