Health care costs: one of the biggest obstacles to reshoring American industry

The Trump administration continues to pursue the most aggressive tariff policies since the Smoot-Hawley Tariff Act of 1930. The intent of this trade war is to reshore a wide variety of American industries. Reshoring seeks to redress the economic harms that resulted from a systematic effort to move manufacturing to lower-cost labor markets abroad, a process that has been occurring for several decades.

But in the national debate over offshoring and reshoring, and the factors that lead to our current situation, one issue has been overlooked: the contribution of health care costs to the decision to move jobs offshore.

Two decades ago, one of us met with a major donor to a university medical center, a textile manufacturer with 1,500 employees in the U.S. That year, health insurance premiums for their employees increased by $1,000 per employee. When they looked offshore, they found they could get the same work performed in a low-wage country for just the per-employee cost of the health insurance increase. Several years later, they had only two employees left in the U.S.