President Trump continues to assert that his unprecedented tariffs on other countries will help bring manufacturing back to the US.
However, a recent CNBC survey suggests there are several hurdles tied to domestic production that may still discourage American companies from onshoring supply chains.
US stocks have recovered some of their lost ground in recent sessions after the White House agreed to a 90-day pause on almost all its reciprocal tariffs, except ones it has slapped on China.
Still, the benchmark S&P 500 index is down nearly 15% versus its year-to-date at writing.
Manufacturing in the US costs significantly more
Well over half of those who participated in the CNBC survey said US businesses will be hit with immensely higher costs if they were to onshore production.
In fact, companies will prefer moving supply chains to other, low-tariff countries since bringing back supply chains to the US could roughly double the cost of making products.
In comparison, relocating production to lower-tariff countries will prove much more cost-effective, they added.
So, Trump’s tariffs will likely see China lose some of its manufacturing dominance.
However, it will likely not be the US that benefits on the other end of it, according to the new CNBC Supply Chain survey.
Why else do companies manufacture outside of the US?
Another top reason that popped up in the CNBC study for why businesses may not relocate production to the US in the wake of Trump tariffs was difficulty in finding skilled labour.
According to Apple chief executive Tim Cook, a meeting of tooling engineers in China could fill up several football fields.
In the US, it may not even fill a room.
That’s a major hurdle in onshoring production as the Trump administration so desperately wants – “the vocational expertise in China is very deep,” Cook added in an interview last year.
Tax leniency is insufficient to inspire onshoring production
President Trump has promised significant leniency on the tax front for companies that commit to onshoring supply chains.
But the tax benefits are not sufficient to offset the sharply higher costs of domestic production, as per the CNBC survey respondents.
All in all, the majority of the survey participants said Trump’s new trade policies felt more like “bullying” to corporate America.
Experts are concerned that tariffs could trigger a trade war this year and push the US economy into a recession in the second half of 2025.
That’s made several Wall Street analysts trim their year-end targets on the S&P 500 in recent weeks.
Bank of America, for example, lowered its year-end target on the S&P 500 last week to 5,600, which signals potential upside of just 3.0% from here.
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