Manufacturers Flee China – But Biden Policies Keep Them Out of America

AMAC Exclusive – By Andrew Abbott

Late last month, Apple CEO Tim Cook announced that Apple would move 25% of all iPhone production to India by 2025, joining a growing number of companies shifting away from China amid escalating geopolitical tensions. But as China sees its status as the world’s foremost manufacturer begin to slip, U.S. President Joe Biden’s regulatory assaults and onerous tax policies mean that many American businesses are relocating to countries besides the United States.

Apple’s announcement in April was just the latest relocation news from the world’s most valuable company. In February, Apple supplier Foxconn also released plans for a $300 million facility in Vietnam, citing supply chain issues, riots at the company’s Zhengzhou factory, and extreme COVID-19 restrictions in China.

Other companies have followed suit. Dell and HP quietly announced plans to shift 30% of their laptop manufacturing out of China in January. Nike has been moving production from China to elsewhere in Southeast Asia and Africa for years. Toy company Hasbro recently moved most of its production to Vietnam and India. Google plans to move production of its smartphone and various smart home products out of China in the near future.

All of this is part of a broader trend that has led to a downturn in the Chinese manufacturing sector – even before the pandemic. From 2016 to the present day, China’s consumer goods exports have dropped in almost every major category. Specifically, clothing and accessories, furniture, travel goods and handbags, as well as footwear have all fallen by more than 10%.

This should have been a golden opportunity for President Biden, who campaigned in 2020 on reviving the American manufacturing sector – clearly recognizing President Trump’s success on the issue. Biden has tried his best to mimic the pro-manufacturing talk of his predecessor, repeatedly touting his “made in America” agenda and alluding to the country’s hollowed-out manufacturing sector. One former government trade official aptly described Biden’s manufacturing talking points as “Trump wine but in a Biden bottle.”

But that rhetoric has run up against the inconvenient reality of a Democrat policy agenda that is virtually identical to the one that drove offshoring in the first place.

The most obvious example of this is Biden’s plan to raise the corporate tax rate from 21% to 28% – making it the highest in the developed world. The economy and the manufacturing sector in particular saw a boom after President Trump lowered the tax rate to 21% from 35% as part of the 2017 Tax Cuts and Jobs Act. Now, Biden wants to raise it once again.

Biden has also re-imposed many of the suffocating regulations that drove American companies away from the United States. President Trump’s “two-for-one” policy – requiring the cutting of two old regulations for every one new regulation – helped dramatically lower energy costs and regulatory burdens in the United States and encouraged more American companies to return home.

Defenders of Biden have pointed to the Inflation Reduction Act, the American Rescue Plan, and the CHIPS Bill, together totaling more than $500 billion in supposed investments, as evidence of the president’s commitment to U.S. manufacturing. But while these bills contained some incentives for companies to re-shore, they were also chock-full of spending that had nothing to do with manufacturing, and were more than offset by Biden’s other anti-growth policies, especially his attacks on domestic energy production.

Furthermore, there is little evidence that Biden’s program of subsidies – as opposed to Trump’s general platform of tax cuts and tariffs – has any real effect on companies deciding to move production back to the United States. A 2018 economic white paper which analyzed dozens of studies on corporate subsidies and investments found that direct subsidies often have little to no effect on “decisions to locate, expand or remain in place for the vast majority of firms receiving subsidies.”

It’s worth noting that Biden does not have a particularly strong record when it comes to trade and manufacturing. The free trade policies of the late 90s and early 2000s, specifically admitting China into the World Trade Organization and the passage of the North American Free Trade Agreement, directly led to the collapse of American manufacturing. Joe Biden, who served as a senator then, supported both of these measures.

Now, Biden appears to be putting a different rhetorical spin on the same underlying policy approach. Unsurprisingly, the results are virtually identical – American companies are staying far away from America, and American workers are suffering.

Andrew Abbott is the pen name of a writer and public affairs consultant with over a decade of experience in DC at the intersection of politics and culture.