From the Fraser Institute

By Jock Finlayson

Since 2015, the number of American manufacturing jobs has actually risen modestly. However, as a share of total U.S. employment, manufacturing has dropped from 30 per cent in the 1970s to around 8 per cent in 2024.

Donald Trump has long been convinced that the United States must revitalize its manufacturing sector, having—unwisely, in his view—allowed other countries to sell all manner of foreign-produced manufactured goods in the giant American market. As president, he’s moved quickly to shift the U.S. away from its previous embrace of liberal trade and open markets as cornerstones of its approach to international economic policy —wielding tariffs as his key policy instrument. Since taking office barely two months ago, President Trump has implemented a series of tariff hikes aimed at China and foreign producers of steel and aluminum—important categories of traded manufactured goods—and threatened to impose steep tariffs on most U.S. imports from Canada, Mexico and the European Union. In addition, he’s pledged to levy separate tariffs on imports of automobiles, semi-conductors, lumber, and pharmaceuticals, among other manufactured goods.

In the third week of March, the White House issued a flurry of news releases touting the administration’s commitment to “position the U.S. as a global superpower in manufacturing” and listing substantial new investments planned by multinational enterprises involved in manufacturing. Some of these appear to contemplate relocating manufacturing production in other jurisdictions to the U.S., while others promise new “greenfield” investments in a variety of manufacturing industries.

President Trump’s intense focus on manufacturing is shared by a large slice of America’s political class, spanning both of the main political parties. Yet American manufacturing has hardly withered away in the last few decades. The value of U.S. manufacturing “output” has continued to climb, reaching almost $3 trillion last year (equal to 10 per cent of total GDP). The U.S. still accounts for 15 per cent of global manufacturing production, measured in value-added terms. In fact, among the 10 largest manufacturing countries, it ranks second in manufacturing value-added on a per-capita basis. True, China has become the world’s biggest manufacturing country, representing about 30 per cent of global output. And the heavy reliance of Western economies on China in some segments of manufacturing does give rise to legitimate national security concerns. But the bulk of international trade in manufactured products does not involve goods or technologies that are particularly critical to national security, even if President Trump claims otherwise. Moreover, in the case of the U.S., a majority of two-way trade in manufacturing still takes place with other advanced Western economies (and Mexico).

In the U.S. political arena, much of the debate over manufacturing centres on jobs. And there’s no doubt that employment in the sector has fallen markedly over time, particularly from the early 1990s to the mid-2010s (see table below). Since 2015, the number of American manufacturing jobs has actually risen modestly. However, as a share of total U.S. employment, manufacturing has dropped from 30 per cent in the 1970s to around 8 per cent in 2024.

Economists who have studied the trend conclude that the main factors behind the decline of manufacturing employment include continuous automation, significant gains in productivity across much of the sector, and shifts in aggregate demand and consumption away from goods and toward services. Trade policy has also played a part, notably China’s entry into the World Trade Organization (WTO) in 2001 and the subsequent dramatic expansion of its role in global manufacturing supply chains.

Contrary to what President Trump suggests, manufacturing’s shrinking place in the overall economy is not a uniquely American phenomenon. As Harvard economist Robert Lawrence recently observed “the employment share of manufacturing is declining in mature economies regardless of their overall industrial policy approaches. The trend is apparent both in economies that have adopted free-market policies… and in those with interventionist policies… All of the evidence points to deep and powerful forces that drive the long-term decline in manufacturing’s share of jobs and GDP as countries become richer.”

This brings us back to the president’s seeming determination to rapidly ramp up manufacturing investment and production as a core element of his “America First” program. An important issue overlooked by the administration is where to find the workers to staff a resurgent U.S. manufacturing sector. For while manufacturing has become a notably “capital-intensive” part of the U.S. economy, workers are still needed. And today, it’s hard to see where they will be found. This is especially true given the Trump administration’s well-advertised skepticism about the benefits of immigration.

According to the U.S. Bureau of Labor Statistics, the current unemployment rate across America’s manufacturing industries collectively stands at a record low 2.9 per cent, well below the economy-wide rate of 4.5 per cent. In a recent survey by the National Association of Manufacturers, almost 70 per cent of American manufacturers cited the inability to attract and retain qualified employees as the number one barrier to business growth. A cursory look at the leading industry trade journals confirms that skill and talent shortages remain persistent in many parts of U.S. manufacturing—and that shortages are destined to get worse amid the expected significant jump in manufacturing investment being sought by the Trump administration.

As often seems to be the case with Trump’s stated policy objectives, the math surrounding his manufacturing agenda doesn’t add up. Manufacturing in America is in far better shape than the president acknowledges. And a tariff-driven avalanche of manufacturing investment—should one occur—will soon find the sector reeling from an unprecedented human resource crisis.

Jock Finlayson

Senior Fellow, Fraser Institut

From the Fraser Institute

By Bjørn Lomborg

Politicians—supported by powerful green energy interests and credulous journalists—keep gaslighting voters claiming green energy is cheaper than fossil fuels.

Global evidence is clear: Adding more solar and wind to the energy supply pushes up the price of electricity for consumers and businesses. Families in Ontario know this already from their bitter experience: from 2005, the Ontario government began phasing out coal energy and dived headlong into subsidizing wind and solar generation.

Those green policies led to a sharp hike in electricity prices. From 2005 to 2020 the average, inflation-adjusted cost of electricity doubled from 7.7 cents to 15.3 cents. Since 2019 the Ontario government has subsidized these high costs through a slew of programs like the “Renewable Cost Shift”, lowering the direct pain to ratepayers but simply moving the increasing costs onto the government coffers. Today, this policy costs Ontario more than $6 billion annually, four-times what was being spent in 2018.

A relatively small amount of wind energy costs Ontarians over a billion dollars each year. One peer-reviewed study finds that the economic costs of wind are at least three times their benefits. Only the owners of wind power make any money, whereas the “losers are primarily the electricity consumers followed by the governments.”

Yet, politicians—supported by powerful green energy interests and credulous journalists—keep gaslighting voters claiming green energy is cheaper than fossil fuels.

They argue fundamentally that the green transition is not just cheap but even that it makes money, because wind and solar are cheaper than fossil fuels.

At best, this is only true when the sun is shining and the wind is blowing. At all other times, their cost is significantly higher. Modern societies need around-the-clock power. The intermittency of solar and wind energy means backup is required, often delivered by fossil fuels. That means citizens end up paying for two power systems: renewables and their backup. Moreover, much more transmission is needed to ensure wind and solar reach users, and backup fossil fuels, as they are used less, have even fewer hours to earn back their capital costs. Both increase costs further.

This intermittency can be huge, as when solar power in the Yukon delivered a massive 150 times more electricity to the grid in May 2022 than it did in December 2022. It is also the reason that the real energy costs of solar and wind are far higher than green campaigners claim. Just look around the world to see how that plays out.

One study shows that in China, when including the cost of backup power, the real cost of solar power becomes twice as high as that of coal. Similarly, a peer-reviewed study of Germany and Texas shows that the real costs of solar and wind are many times more expensive than fossil fuels. Germany, the U.K., Spain, and Denmark, all of which increasingly rely on solar and wind power, have some of the world’s most expensive electricity.

Source: IEA.org energy prices data set

This is borne out by the actual costs paid across the world. The International Energy Agency’s latest data from nearly 70 countries from 2022 shows a clear correlation between more solar and wind and higher average household and business energy prices. In a country with little or no solar and wind, the average electricity cost is about 16 cents per kilowatt-hour. For every 10 per cent increase in solar and wind share, the electricity cost increases by nearly 8 cents per kWh. The results are substantially similar for 2019, before the impacts of Covid and the Ukraine war.

In Germany, electricity costs 43 cents per kWh—much more than twice the Canadian cost, and more than three-times the Chinese price. Germany has installed so much solar and wind that on sunny and windy days, renewable energy satisfies close to 70 per cent of Germany’s needs—a fact the press eagerly reports. But the press hardly mentions dark and still days, when these renewables deliver almost nothing. Twice in the past couple of months, when it was cloudy and nearly windless, solar and wind delivered less than 4 per cent of the daily power Germany needed.

Current battery technology is insufficient. Germany’s entire battery storage runs out in about 20 minutes. That leaves more than 23 hours of energy powered mostly by fossil fuels. Last month, with cloudy skies and nearly no wind, Germany faced the costliest power prices since the energy crisis caused by Russia’s invasion of Ukraine in 2022, with wholesale prices reaching a staggering $1.40 per kWh.

Canada is blessed with plentiful hydro, powering 58 per cent of its electricity. This means that there has been less drive to develop wind and solar, which deliver just 7 per cent. But the urge to virtue signal remains. Indeed, the federal government’s 2023 vision for the electricity system declares that shifting away from fossil fuels is a “scientific and moral imperative” and “the greatest economic opportunity of our lifetime”.

Yet the biggest take-away from the global evidence is that among all the nations in the world—many with very big, green ambitions—there is not one that gets much of its power from solar and wind and has low electricity costs. The lower-right of the chart is simply empty.

Instead, there are plenty of nations with lots of green energy and exorbitantly high costs.

Bjørn Lomborg