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In a US manufacturing hub, no illusions about tariffs and jobs
Thomasville, North Carolina
IN A TOWN where a 30-feet tall chair is the chief landmark, and which is synonymous with a US furniture industry decimated over the years by imports from China, many greet the possibility of tariffs on Chinese goods with a shrug.
No wonder. Of three once-bustling Thomasville furniture plants in the city limits, one is being demolished and cleared for parkland, another may become the site of a new police station, and a third is being converted into apartments.
US President Donald Trump is threatening to levy tariffs of up to 25 per cent on US$500 billion of goods imported from China each year, including roughly US$20 billion of furniture, as a way to bring back hundreds of thousands of manufacturing jobs lost to China and other low-cost competitors.
Yet, the transformation of US industries since China's emergence as the world's low-cost producer almost two decades ago means many no longer directly compete with Chinese imports, so tariffs may not translate so easily into more US jobs.
At family-owned Bernhardt Furniture in Lenoir, some 90 miles west of Thomasville, executives say it would take about US$30 million in capital investment - some 10 per cent of annual sales - to resurrect standard wood furniture lines now mainly made in countries like China and Vietnam. That is too much to commit based on a policy that a future administration could reverse.
"The theory is you turn (imports) off, the jobs come back. That's not really true... The buildings don't exist. The people don't exist. The machinery does not exist," to make the sorts of furniture that now gets imported, said Alex Bernhardt Jr, chief executive and the company founder's great-grandson.
What the company needs now, executives say, is the open markets and steady economy that have allowed it to grow its workforce from below 800 at the end of the 2007-2009 recession to almost 1,500 today - partly on the basis of exports to China.
That growth has been largely driven by demand for more customised, higher-end furniture. In expanding, the 129-year-old company has been hiring not only factory workers, but also designers, marketing experts and other professionals. In all, it is a different firm from what it was three decades ago when it first began dividing product lines between the United States and Asia.
Economists say the same is true across much of US manufacturing. To invest and hire more workers, executives would need certainty, for example, that consumers would prefer US-made products at a potentially higher price. They would need confidence that tariffs would last beyond the Trump administration and that production could not be shifted to other more cost-competitive countries. Even then, there may be little incentive to go back to old product lines for industries that have changed dramatically because of globalisation.
Across the Rust Belt and the former factory towns of the south, the transformation is apparent. In Buffalo, an old steel mill is now a solar panel factory, and a retail goods manufacturer now houses an office and restaurant park. In Cleveland, a shuttered GM plant has reopened as a Chinese-owned auto glass company. Abandoned factories throughout North Carolina have landed on the Environmental Protection Agency's list of "brownfield" sites that need clean-up.
Some companies are considering moving production from China as a result of the tariffs, but the jobs are unlikely to head home.
Illinois-based CCTY Bearing, for example, said it planned to move US-bound production from Zhenjiang, China, to a new plant near Mumbai in India to keep labour costs down. JLab Audio's China-made Bluetooth products are not being taxed yet, but its chief executive Win Cramer had been scouting for suppliers in Vietnam and Mexico.
"I would love to build products onshore, but consumers have proven time and time again that 'Made in America' isn't as valuable a statement as it once was," Mr Cramer said. "They make decisions based on the cost."
The price of, say, its Bluetooth earbud would jump from US$20 to as much as US$50 if it was made in the United States, Mr Cramer said, far more than what tariffs would add to the cost of imports.
To be sure, early reactions suggest that foreign companies that make US-bound goods in China may move some of that production to the US. Still, countries such as Vietnam may ultimately benefit the most from Mr Trump's tariffs.
So far, Washington has imposed duties on US$250 billion of Chinese imports and Mr Trump has threatened to slap tariffs on all Chinese goods.
In Thomasville, few expect that tariffs will bring furniture manufacturing back to its heyday, nor does the community need it, said city manager Kelly Craver.
Since the recession, Thomasville has become a residential hub for growing nearby cities such as Greensboro and Charlotte. It also has its own mix of manufacturing and white collar jobs. Mohawk Industries recently expanded its Thomasville laminate flooring facility while the Old Dominion Freight Line transportation firm and the fast-growing Cook Out burger chain have corporate headquarters there. "We, for the very first time in this city's existence, are going to have a diversified economy," Mr Craver added. REUTERS