Senior Editor
U.S. manufacturing is confronting short-term problems while poised to benefit from longer-term trends, Boston Consulting Group said in a report.
In the United States, wages have risen faster in the past two years while productivity gains have less than five- and ten-year averages, Boston Consulting said.
As a result, the U.S. “has had a broad based decline in cost competitiveness for the first time in several years,” according to a summary of the report.
At the same, Boston Consulting said corporate tax cuts and “decreased regulatory burdens…should boost competitiveness in the decade ahead.”
In 2018, the U.S. corporate tax rate was cut to 21% from 35%. That was part of tax legislation that was signed into law in late 2017 by President Donald Trump.
“It’s a fairly big corporate tax cut,” Justin Rose, a partner of the consulting firm and leader of its operations practice. “It will bring the United States much more in line” with other countries. There was a comparative disadvantage before.”
Trade Uncertainty
One uncertainty is trade. The U.S. and China paused their trade war while attempting to negotiate about various issues. The U.S. also has trade tensions with Asia and Europe.
“I think 12 months ago companies believed it was essentially posturing and other significant would happen,” Rose said. “Six months ago companies were terrified the wheels of the global economy would fall off. Now companies are saying, ‘This is something I have to buckle in for.’”
Boston Consulting said manufacturing is moving toward more regional supply chains rather that producing goods in China for export.
“Chinese labor is getting more expensive,” Rose said. As a result, there is “a chance to re-shore and increase manufacturing output.”
