Nigel Southway is based in Toronto, Canada, and is an independent business consultant and the author of Take Back Manufacturing: An Imperative for Western Economies, and Cycle Time Management: The Fast Track to Time-Based Productivity Improvement, an early LEAN thinking textbook.
The debate over trade tariffs continues to spark intense discussion among economists and policymakers. While critics warn of potential risks, Nigel Southway argues that President Trump's approach to tariffs is a strategic tool for reshoring industries and rebalancing trade. By fostering localized trade blocs and reducing reliance on global supply chains, this policy shift aims to reshore prosperity and strengthen Western economies.
The history and the rational for Trump’s change in the USA trade policy is explained in detail in my book Take Back Manufacturing… an imperative for western economies.
Trumps “trade bloc” journey to gain back prosperity
We keep hearing warnings from economists about President Trump’s approach to trade tariffs, but what they need to better understand is how he plans to use tariffs as a reshoring and trade-balancing tool to develop strong local trade blocs and regain prosperity.
In my book, I explain that in less than one lifetime, we have experienced the destruction of our manufacturing sectors in Western societies, the significant loss of national prosperity, and why the imperative for Western economies must be to Take Back Manufacturing!
The globalized manufacturing approach, with efficient supply chains supported by liberalized global free trade agreements, was touted as the way to go by many economists. As a result, this became the business norm over the last four decades, leading to massive amounts of domestic industrial capacity being relocated offshore. This shift has been the primary reason for the “hollowing out” of our Western industrial base.
Experts have predicted that most Western nations could experience further declines in their manufacturing and business sectors, becoming post-industrialized societies and facing additional losses in citizen prosperity unless action is taken.
President Trump is undertaking a trade policy journey to ensure this decline in prosperity does not happen to the USA. He will strive, with the correct political will and policy focus, to create national economic conditions that provide an opportunity for the US economy to shift back to a more localized trade bloc and reshore its manufacturing and business sectors.
The failed promise of global free trade
In 1995, the World Trade Organization (WTO) became the global supervisor of world trade liberalization.
The leading politicians in power at the time declared and promised that adopting global free trade would bring all nations closer together, reduce wars and conflict, improve the spread of democracy, and take us all to a new world order with improved global prosperity.
The economists of the day were optimistic that “all boats would rise together” economically.
But now, thirty years later, none of these promises have been kept.
Today, nations are far from closer together. We have even more wars and conflict, and democracy as a political ideology has declined. Meanwhile, the ascension of new major powers, such as China, Russia, and others adopting non-democratic political models, is increasing geopolitical tensions.
The notion of “all boats will rise together” is now a sick joke for most citizens in the Western world who have experienced significant prosperity loss over the same time period.
Global free trade has extended our supply chains and added waste to our businesses while reducing the value-added content of our Western economies.
Additionally, the associated global free movement of capital and the financialization of our economies have upset the delicate balance between capital and labor, which has further contributed to the significant reduction in our citizens' prosperity.
In retrospect, we appear to have placed the drive for uncontrolled global free trade ahead of common sense and sound economic principles.
In the future, we must stop listening to economists married to the failed notion of free-market comparative advantage ideology.
We must stop pandering to transnational corporations and ensure that, in the future, they are better controlled within our economies so that they fully participate in the costs of doing business with our consumers.
We must encourage free enterprise and the spirit of entrepreneurship but avoid being manipulated by self-serving global elites who have attempted, through lobbying and financial leverage, to maintain the global trade environment for their own advantage.
International trade is not a God-given right. It must only be undertaken if it benefits national citizens and not to serve some geopolitical feel-good ideology at the expense of national prosperity.
Some economists still retain the religion of global free trade, but many are far past the point of arguing for its continuance. They now accept that there is no such thing as free trade or fair trade, only beneficial trade. We must continue to re-educate economists away from the failed religion of free trade.
Localized trade blocs
It’s clear that localized trade blocs will offer far better national security and the opportunity to avoid long and expensive supply chains, as well as mitigate the massive wealth transfer gradients that clearly exist between the West and the rest.
A localized trade bloc will add far more value to national citizens by mining, making, and growing far more of what they consume. The trade bloc will attempt to minimize imports and the need for exports to balance such imports.
Although trade outside the trade bloc will be allowed, it must be discouraged with appropriate tariffs and controls. The goal is to group localized nations together into a trade bloc and create a trading zone large enough to become an autonomous, balanced economy.
The best examples of this trade bloc approach would be the USMCA and EU zones, but they must learn to operate far differently than before, with no duplicitous trading agreements outside the blocs. Trade and economic capacity must, as much as practical, be contained within the bloc through tariffs and other trade controls. Although some raw materials may need to be imported where local materials cannot be provided from within the trade bloc, all value-adding capacity must be encouraged through investment to be developed within the trade bloc.
In principle, future localized trade blocs will function as free trade zones as much as practical between the participating nations, but some unifying rules may be applied to certain commodities. It’s also clear that trade outside the trade bloc will be discouraged with tariffs.
The business world is also realizing that long global supply chains are, for many reasons, wasteful and unsustainable, and that being closer to the consumer is a better business model. This is why 85% of large corporations are undertaking a reshoring strategy in line with future recapitalization and investment strategies, with reshoring activity into local trade blocs doubling each year.
There is also an urgent need to reverse past trade policy mistakes, disconnect Western economies from unfriendly global actors, and move away from unsecured and uncontrolled global trade.
Not only does this reshoring of industrial capability make sense to avoid new geopolitical risks and protect national security, but these more localized trade blocs will also greatly improve citizen prosperity.
What Trump will be doing is energizing this reshoring transition with government trade policy using tariffs.
It’s very clear that many Western governments will be following his lead and adopting a reshoring/local trade bloc approach as a national initiative.
How will tariffs be used?
Trump will use tariffs in two ways.
First, it is a negotiating tool to get the attention of other Western nations.
Then, after the negotiation process is completed with future trade bloc partners, a reasonable but effective and agreed-upon level of tariffs will be applied to trade outside of the localized trade blocs.
The tariffs will become a realistic and focused control tool on certain targeted commodities to restrain imports and generate an environment for local trade bloc capacity to be built to replace these imports. This will also generate significant short-term tariff revenue.
At the same time, a reduction in internal taxation will likely be applied to neutralize the impact of any price pressure on the citizen population.
The remaining tariff revenue will be applied to support the reshoring process through subsidies for these focused commodities and for retraining and capital investment.
In the same timeframe, efficiencies will be found in the public sector, including public sector job capacity, which will be redeployed to provide capacity for producing the reshored commodities mentioned.
In the longer term, the impact of the tariffs on commodity prices will be minimized as local supply becomes available and the overall tax burden is reduced.
Some tariffs will remain to ensure imports are kept to a minimum.
Where possible, an export subsidy can also be provided for commodities that offer export activity and add value to the national economy.
In this manner, the tariffs are used to maximize the value-adding revenue within the trade bloc economies, control and minimize imports, and ensure that imports and exports remain in better balance across the localized trade bloc.
The future approach to trade and its benefits
What follows is a punch list of the economic advantages of reshoring our industrial capability and reducing “global waste” by adopting a localized trade bloc approach.
Avoid wealth transfer
Past multilateral and uncontrolled global free trade deals have created wealth transfer from the West to the rest, resulting in a death spiral for Western citizens prosperity.
To put this into perspective, global trade has increased eightfold since 1980, but global wealth has only tripled—and in Western nations, it has flatlined or worsened. So, it’s fair to say that global trade has been very poor at wealth creation but very effective at wealth transfer.
We need to avoid or cancel these so-called multilateral free trade agreements that emerging nations rarely adhere to, often at great expense to mature economies.
This also requires acknowledging that global free trade and international trade outside of local trade blocs, such as the USMCA and the EU, are significantly out of balance and should be avoided wherever practical. Currently, import levels stand at 15% and 20% of trade bloc GDP, respectively, while associated exports are only half of these import values. This imbalance negatively impacts GDP growth.
Reduce non-value adding imports and exports
It is clear that the globalization of trade has led to excessive imports in most Western nations, which cannot be balanced with exports, even when the latter are government-subsidized. Furthermore, imports from emerging economies are primarily finished goods, while exports from Western nations are largely raw materials, further diminishing the value-added contribution of such trade to Western economies.
This massive trade imbalance has forced nations to sell off national capital assets or support the imbalance with transnational loans or currency manipulation.
Those who endorsed these past global multilateral free trade deals naively assumed trade reciprocity would occur. However, this unplanned bartering mentality has proven ineffective. The only way to manage and balance trade is through national trade policies and well-planned border tariffs.
Additionally, such trade imbalances cannot be solved by entering into even more unilateral trade deals. This shortsighted approach, taken by many past Western governments, does not help; instead, it exacerbates the problem. It is the very definition of insanity—doing the same thing repeatedly while expecting different results.
The real solution lies in minimizing non-trade bloc imports by reshoring our industries and services. While we should encourage future exports, we must ensure they add value to the national economy. By reducing imports, we can eliminate the need to subsidize exports to pay for these excessive imports.
Reshoring capacity will generate significantly more value-adding economic activity, better employ our citizens, and allow wealth to multiply through our own local money supply, creating improved levels of prosperity.
Moreover, as local industrial capacity becomes necessary again, this will revitalize capitalization cycles and attract investments that have been offshored for far too long.
Reduce supply chain waste
As already mentioned, global supply chains are long and add significant waste in terms of additional transactions, delays, inventory, material obsolescence, energy usage, and third-world pollution.
Additionally, as interest rates return to more normal levels, maintaining these long global supply chains will place an added financial burden on businesses due to the excessive cash trapped in these extended systems.
When trade is conducted within the local trade bloc, these wasteful, long supply chains can be avoided. These chains have, in fact, contributed to the need for ultra-low interest rates.
Furthermore, many imports from offshore providers rely on the export of raw materials from other global sources. These multi-path supply chains significantly increase overall waste. Many of these multi-path supply chains could be eliminated if Western nations, which already have access to raw materials, produced their own finished products.
Some economists still believe offshore economies offer lower product costs. However, recent studies comparing all supply chain costs (landed cost tipping points) show that many products can be reshored and produced locally at nearly the same or even lower costs for consumers when paired with the latest automation and digital transformation technologies.
Reduce global energy waste & pollution
Global supply chains and third-world providers consume far more energy and produce significantly more pollution than localized Western supply chains.
Sea container ships, associated support equipment, and trans-national cargo aircraft create a massive carbon footprint. Collectively, they pollute more than six times the emissions of all gas-powered private vehicles on the planet.
Recover economic value
It is clear that Western economies have suffered a significant loss of value-adding direct manufacturing jobs due to globalized trade. An even bigger issue is the total erosion of the capability to design, develop, and provide the manufacturing technology needed to produce our own goods.
This loss of production capability in many sectors qualifies as a major national security issue, affecting critical areas such as food, clothing, transportation, energy, medical supplies, and defense.
In addition, many service jobs have been offshored, making them strong candidates for reshoring efforts.
The future task is to establish policies that recover economic value and bring these products, services, and jobs back home.
Revitalize local investment
As previously mentioned, the decline of many industries and the loss of industrial and general business growth opportunities have led to significant capital flight to other parts of the globe.
Rebuilding industrial capability will attract capital investment back to our nations. Additionally, the past tendency to allocate capital toward rent-seeking in real estate can be reduced and redirected into more productive investments that will better contribute to the local economy.
The way forward…
Although we now have political leadership aiming to create more useful policies to guide us in the right direction, achieving success will require ongoing trust, maturity, and coordinated teamwork among all participants in these localized trade blocs.
This includes forming rigid localized trade blocs with policies—such as tariffs—that will reduce elevated levels of imports from outside the bloc. These measures must drive reshoring efforts, reduce dependency on imports, and ensure that exports add far greater value to the trade bloc economies.
Economists must review and update how national productivity and prosperity are measured so that these metrics more accurately reflect their impact on the lives of citizens.
An ongoing review involving business leaders and industrialists must be conducted to determine which commodities and supply chains require better management and government controls to relocate them back within the trade bloc.
Next, a national plan must be developed to allocate resources and capacity for supporting reshoring initiatives.
The focus should be on synergistically aligning trade within the bloc to harness local strengths, such as natural resources, skills, location, and growth capabilities.
Trade bloc border controls must also be revisited to ensure the seamless movement of goods and services within the bloc while preventing unplanned and undesirable movement of goods and people, ultimately benefiting the citizen population.
The journey to reverse wasteful and dangerous global trade practices and reinstall economic capability within localized trade blocs will be challenging but worthwhile. It is now clear that this is the only viable option to reshore Western prosperity.
Nigel Southway, take back manufacturing author
Nigel Southway is based in Toronto, Canada, and is an independent business consultant and the author of Take Back Manufacturing: An Imperative for Western Economies, and Cycle Time Management: The Fast Track to Time-Based Productivity Improvement, an early LEAN thinking textbook.
He consults and educates worldwide on Business Productivity Improvement, LEAN business practices, Advanced Manufacturing Engineering, Future Supply Chain Management, Industry 4.0, National Sustainability, Global technology transfer projects and joint ventures and more.
He is a past chair of the Society of Manufacturing Engineers and the leading advocate and spokesperson for the Take Back Manufacturing Forum, and the North American Reshoring initiative in Canada.
Nigel Southway, Take Back Manufacturing Author
Nigel Southway is based in Toronto, Canada, and is an independent business consultant and the author of Take Back Manufacturing: An Imperative for Western Economies, and Cycle Time Management: The Fast Track to Time-Based Productivity Improvement, an early LEAN thinking textbook.
He consults and educates worldwide on Business Productivity Improvement, LEAN business practices, Advanced Manufacturing Engineering, Future Supply Chain Management, Industry 4.0, National Sustainability, Global technology transfer projects and joint ventures and more.
He is a past chair of the Society of Manufacturing Engineers and the leading advocate and spokesperson for the Take Back Manufacturing Forum, and the North American Reshoring initiative in Canada.
