What will it mean to American businesses if -- I should say when -- Chinese imports cost as much as they should cost?
A currency and trade rebalancing is going to happen sooner or later because it has to. We can't run a trade deficit forever. If something is unsustainable it can't be sustained. Eventually we have to earn the money to pay off what we are borrowing and the only way to do that is with exports. The first step to that is to stop importing so much and at least make things to sell to ourselves.
This rebalancing could happen because China lets its currency approach market levels. Or, if China refuses to stop unfairly subsidizing their exports (their currency manipulation is just one piece of that) our government will have to impose tariffs on imports from China. There are other things that could change the current trade imbalance. The only thing that is for sure is that the current situation can't just continue. We can't just keep sending factories, supply chains, jobs, and dollars away. It's a bubble that has to pop. And it will. American business should be planning for this approaching new era of American manufacturing.
Once the Chinese import bubble pops new phrases will enter the lexicon, so start getting used to them. "Re-shoring," "on-shoring" and "insourcing" will replace "offshoring" and "outsourcing."
A week ago I wrote about a CNBC segment on this,
For many years we've been hearing about outsourcing and offshoring. President Obama has started taking steps to rebalance world trade and the pendulum is about to start swinging the other way. More and more often you'll be hearing new words: "insourcing," "on-shoring" and "re-shoring."
Watch this CNBC segment from Friday, Made in America Making a Comeback.
American businesses -- are you ready? It's coming.
P.S. Here's a stock tip: machine tools.
Update and P.S. --
Help bring manufacturing back to the U.S.!
At last somebody is doing something: the May 12, 2010 NTMA/PMA Purchasing Fair focuses on re-shoring. The $ is down vs. many currencies. JIT and R&D are best supported, and carbon footprint minimized, by local sourcing. The time is right for this effort to succeed.
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