Donald Trump wants to open and reopen factories, using tariffs as a tool. Companies looking to relocate their production are trying to find the right ways to do so.
The American president has triggered a global trade war based on a bet, namely that taxing other countries would bring back jobs and factories to the United States. Many business people are skeptical. But Sanjeev Bahl is optimistic.
From his factory in Los Angeles, Bahl oversees about 250 people who sew, cut, and fold jeans for brands like Everlane, J. Crew, and Ralph Lauren. Together, they produce 70,000 pairs of denim jeans per month. "America," he says, "can make things again."
However, there is a problem. The operation only works because his company, Saitex, owns a much larger factory and spinning mill in southern Vietnam, where thousands of workers produce 500,000 pairs of jeans per month.
The tariffs imposed by Trump have disrupted supply chains, affected businesses, and brought corporate leaders together on one question: does America have what it takes to bring jobs back home? - writes The New York Times.
What America is Missing
In many industries, this approach would take years, if not decades. The United States lacks nearly every element of the production ecosystem - workers, training, technology, and government support.
"There are some harsh realities," said Matt Priest, executive director of the Footwear Distributors and Retailers of America trade group.
And Trump's strategy is shrouded in uncertainty. Last month, he stated, "We don't want to make sneakers and T-shirts" in the United States. However, the toughest tariffs he imposed, set to take effect in July, were aimed at countries producing clothing and footwear for the American market. Vietnam, with 46%, was one of the most affected countries.
These tariffs, designed to compel companies to bring their production capabilities back home, were deemed illegal by a ruling issued last week by the U.S. International Trade Court. The decision was temporarily suspended by another court, giving judges time to evaluate an appeal by the Trump administration. Amid all the legal disputes, Trump promised to find other ways to disrupt trade rules.
The Trump administration's policy has exposed the difficulties in reducing the vast geographical and logistical distances between where many products are manufactured and where they are consumed.
For executives like Bahl of Saitex, the disruptions caused by Trump's trade policies have added another issue to the challenges of managing global supply chains.
"The prolonged fear and uncertainty brought by the Covid pandemic were unforeseen. There was nothing to help us but the instinct for survival," said Bahl.
He believes Saitex could be a model for other clothing companies. "We could be the catalyst for the hypothesis that production can be brought back to the United States," he said. But his experience underscores how difficult it would be. There are no factories in America the size the industry needs, nor major zipper and button suppliers. The operating cost of a factory is high. Then there is the labor issue: there simply aren't enough workers, notes the American newspaper.
In response to the pandemic situation, Saitex opened a factory in Los Angeles in 2021. Since Trump announced his intention to impose high tariffs on Vietnam, Bahl has been considering how much more he could produce in the United States. He could probably bring about 20% of production to the United States, up from the current 10%, he said.
Americans Don't Want to Work in Factories, and Immigrants Are Expelled from the U.S.
American factories are already struggling to find people for about 500,000 jobs in this field, according to economists at Wells Fargo. According to their calculations, for the share of production in employment to return to the peak of the 1970s, to which Trump has sometimes referred, new factories employing 22 million people would need to be opened.
Currently, there are 7.2 million unemployed people in the U.S., the newspaper notes.
Trump's punitive approach to immigration has worsened things. Factory jobs have moved abroad, to countries like Vietnam, which had a growing population and young people looking for jobs to escape poverty.
The future Trump envisions, with millions of factory jobs, should include immigrants seeking the same opportunities in the United States.
Steve Lamar, CEO of the American Apparel and Footwear Association, a lobbying group for the fashion industry, said there is a gap between the "romantic notion of manufacturing" and the availability of American workers.
"Many say we should make more clothes in the U.S., but when you ask them, they don't want themselves or their children to work in a factory," he said. "The problem is there are no other people around," he added.
At the Saitex factory in Los Angeles, most workers come from countries like Mexico, Guatemala, and El Salvador.
Approximately 97% of the clothing and footwear Americans buy are imported for cost reasons. Companies that produce everything in the United States include firms like Federal Prison Industries, also known as Unicor, which employ inmates to make military uniforms for less than the minimum wage, Lamar said.
Other companies, like New Balance and Ralph Lauren, produce some of their fashion lines in the United States. Others are experimenting with a model where they produce small batches of clothing in the United States to test patterns and gauge popularity before placing large orders - usually from factories in other countries.
It is difficult to produce things in large volume in America. For Bahl, it all comes down to the cost of a sewing machine operator - in Los Angeles, that person is paid about $4,000 a month. In Vietnam, the salary is $500.
In his factory there, which Bahl established in 2012 in Dong Nai province, an hour's drive from Ho Chi Minh City, over a dozen sewing lines are carefully arranged and operate six days a week.
"The speed is much faster in Vietnam," says Gilles Cousin, a factory manager overseeing the sewing section.
All Calculations Depend on an Unpredictable Man
If Trump truly wants to bring back jobs, he should grant some tariff exemptions to companies like Saitex, which have a larger presence in the United States, Bahl said. American factories like his cannot expand without importing many of the components that go into their finished products.
In turn, Saitex delivers bales of American cotton to Vietnam, where its two-story factory turns fluffy cotton lint into yarn and eventually into rolls of fabric. The textile is then dyed and shipped back to the United States for the Los Angeles factory.
Until there is enough momentum from companies producing various things in the United States, the material, zippers, and buttons will have to be brought into the country.
Shifting production from abroad would also require massive investments. Saitex has invested around $150 million in Vietnam, where its factory recycles 98% of water, air-dries denim, and uses technology to reduce carbon dioxide emissions and mitigate labor-intensive practices.
In the United States, Saitex has spent approximately 25 million dollars. These are long-term commitments that take at least seven years to recover, Bahl explains.
In the end, if Trump decides to maintain the initial 46% tax on Vietnam, and Saitex cannot mitigate the financial impact, they should look towards other markets to sell the products manufactured in Vietnam - such as Europe, where they currently deliver about half of what they produce. "But then what happens to our factory here?" Bahl asks about the California unit.
It all depends on Trump. And, ultimately, on American justice.
T.D.