It’s a Good Time to Buy America

Editor’s Note: We’ve written in these pages before about the oncoming manufacturing boom in America…

As artificial intelligence and robotics grow more advanced, we’ll see the resolution of a lot of the issues plaguing the manufacturing industry.

Automation will take over the menial – and often dangerous – tasks that human workers won’t or can’t do. There will be an industry renaissance that will see manufacturing return to the U.S..

Colleague Brad Thomas calls this the “Made in America” movement… And today, he explains why many American companies are full-on reshoring or preparing to make the shift in the months and years ahead.

For decades, the name of the business game was globalization.

Major Western corporations realized they could make a lot more money by investing beyond their backyards.

First, it began with transferring operations to China, India, and other Asian countries. That served the dual purpose of achieving cheaper labor costs and lessened tax burdens.

But then, as those economies began to grow thanks to that influx of investment… they became more and more appealing in their own right.

Big businesses began courting their growing consumer bases, thus increasing their profits even further. And the mainline thinking was that economies would only become more and more inseparable as time went on.

That understandable idea was thrown into absolute chaos, however, when the whole wide world shut down in 2020. With each country – and even each state or province, in some cases – making their own rules about how to “slow the spread” of Covid-19, the pitfalls of globalization became obvious.

That was especially true considering the world’s reliance on China, which shut its economy down hard. With supply chains thrown into chaos, the power of “Made in America,” which had fallen to the proverbial wayside for oh-so-long, came back into serious consideration.

Add in economic battles over who can make the cheapest products, and you’ve got even more reason to pull back into some sort of nationalism.

I’m not saying globalization is dead. But it is curtailed, and I expect that trend to continue for the foreseeable future.

Biden’s Big About-Face on Chinese Tariffs

Here’s one giant piece of evidence that globalization isn’t what it used to be…

Biden has come out in favor of tariffs against China, something he used to be very much against.

Back in 2019, he criticized then-President Trump for not understanding “the basics” about restricting international trade. “He thinks tariffs are being paid by China,” Biden said. “Any freshman econ student could tell you that the American people are paying his tariffs.”

Yet earlier this month, he didn’t just double them on Chinese-made electric vehicles (EVs). He quadrupled them!

Admittedly, politicians say a lot of things on the campaign trail… only to walk them back or completely reverse course once they win. It’s the name of the game, it seems.

There’s also the hindsight issue, where you simply didn’t know then what you later learned. Like how, say, Chinese automaker BYD released a market bombshell mere months ago:

The new BYD Seagull EV (Source: BYD)

Those little beauties are called the Seagulls, and they start at under $10,000.

Compare that to the otherwise affordable Nissan Leaf, which starts at over $29,000. That’s a huge difference in any economy, much less the inflation-hit reality we’re experiencing.

Now, the Seagull isn’t for sale in the U.S. But that could be BYD’s ultimate goal, which would make it an enormous threat to American automakers.

Ford, Chevrolet, Dodge: These companies work with notoriously thin margins. So, there’s no way they could compete against China’s advantage.

Knowing that – and how the top five employers in the battleground state of Michigan are all automakers or auto suppliers – Biden has every reason to restrict Chinese trade in this regard.

Which means “Made in America” is a government focus once again.

A Piece of the National Pie To Be

Biden and U.S. automakers are hardly alone in recognizing the ill effects of globalization. JPMorgan (JPM) CEO Jamie Dimon also recently made some telling remarks at a major corporate conference in Shanghai.

As the Financial Times reported…

“Some of the investment banking business has fallen off a cliff in the last couple of years, I don’t worry about that… that will have its ups and downs,” [Dimon] said, adding that other businesses including asset management “should hopefully grow over time.”

Hopefully.

He might not be nervous about the situation, as he insinuated, but that word hardly inspires my confidence. Plus, the article added that international banks in general “have struggled to retain a foothold in China’s vast but largely closed-off financial markets.”

China, you see, is trying to nationalize its industries. That’s why companies like Apple (AAPL) and Tesla (TSLA) have been seeing falling sales despite investing billions there.

It’s also why so many American companies are full-on reshoring, gearing up toward that goal, or seriously contemplating it.

Earlier this month, the NAIOP Research Foundation and Newmark published “Forging the Future: Manufacturing Growth and Its Effects on North American Industrial Markets.”

Lisa DeNight – managing director of Newmark’s national industrial research and one of the report’s leading writers – noted…

[There’s been an] unprecedented surge in North American facility announcements in recent years [that] underscores the profound impact of global risk considerations and domestic manufacturing incentives on the industrial market.

These companies see the signs, including rising conflicts around the world, both hot and cold. And the increasing push toward nationalism in North America, Europe, and even Africa.

I want to keep my eyes on the Made in America movement. It could take years to become a full-blown force to be reckoned with.

But it’s the early-in investors who can make the biggest profits.

Regards,

Brad Thomas
Editor, Intelligent Income Daily