PARTS OF A WHOLE: EXPLORING RESHORING AND STICKINESS IN THE APPAREL AND AUTOMOBILE INDUSTRIES FOLLOWING THE TRUMP TARIFFS

Abstract

Since the 2008 Financial Crisis, economists, journalists, and politicians have grappled with how to revitalize domestic manufacturing and bring back jobs to struggling communities, particularly in the American Midwest. Tariffs imposed by the Trump administration in 2018 on billions of dollars worth of imports intended to reshore jobs and invigorate these areas.

This thesis studies whether reshoring of employment actually occurred in two industries - automobile and apparel - following the Trump Tariffs. Using a polynomial distributed lag model with 12-month lag structure, I find that the Trump Tariffs did not precipitate any overall surges in domestic employment in the automobile and apparel industries.

Sticky supply chains may shed light on why reshoring of employment did not occur. I find that the apparel industry supply chain is not particularly sticky, responding to changes in tariffs within the first 3 quarters, while the automobile industry supply chain is rather sticky, taking between 3 to 6 quarters to adjust to shifts in tariffs. Therefore, fluid supply chains, such as that of the apparel industry, may have shifted from targeted to untargeted countries, in line with the argument made by Grossman and Helpman (2020). On the other hand, sticky supply chains, such as that of the automobile industry, may have simply not had time to adjust before the advent of the global coronavirus pandemic.