Reports of the death of U.S. manufacturing have been greatly exaggerated. The fallacy that trade killed manufacturing has long been a pretense for protectionism and industrial policy. But by historic standards and relative to other countries’ manufacturing sectors, U.S. manufacturing remains a global powerhouse.
Claims of “rapid deindustrialization” are misplaced and often based on the declining share of manufacturing value-added relative to the overall economy. Indeed, manufacturing’s share of the U.S. economy peaked in 1953 at 28.1 percent, whereas in 2015 manufacturing accounted for only 12.1 percent of GDP. However, in 1953, U.S. value-added in the manufacturing sector amounted to $110 billion, as compared to a record $2.1 trillion in 2015 — more than six times the value in real terms.
Trade critics also tend to conflate manufacturing employment with the condition of manufacturing. But declining employment in a manufacturing sector that produces record-setting output year-after-year is a sign of greater efficiency, which frees human resources for other, higher-valued added endeavors. In 2015 the stock of FDI in U.S. manufacturing surpassed $1.1 trillion, more than double the value of FDI in China’s manufacturing sector (and eight times the value in per capita terms).
On this page you will find Cato’s work related to the U.S. manufacturing sector, trade in industrial goods, and subsidies and other industrial policies that distort production decisions and affect supply and demand.