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The biggest misunderstanding about trade and manufacturing, in 2 charts

One thing I consistently hear when I talk to people about trade or manufacturing is the idea that while the United States used to make lots of things, nowadays everything comes from China or Mexico or the like.

This is, however, not the case. Manufacturing has certainly declined as a share of the overall American economy, but US industrial production is higher than it's ever been:

St Louis Fed

One source of the misunderstanding is that manufacturing jobs really have disappeared. The growing use of automation in factories means that since the mid-1990s or so, output has managed to rise modestly even as employment has tumbled.

But another reason is revealed by this Pew chart of what America imports and exports, which shows basically that the United States imports a lot of stuff normal people buy and exports a lot of stuff normal people don't buy:


Consumer goods and cars are two big things people buy, and both of them are things the US imports more of than we export.

Meanwhile, 65 percent of our exports are either capital goods or industrial supplies — in other words, machines and equipment that companies buy to conduct their businesses. Sometimes that's something like a computer that might also be sold to a consumer. But more typically we are talking about products that aren't sold in stores or marketed to normal people. You've probably never bought a Boeing 737, for example, and almost certainly never will. But airplanes are very expensive. The sale of a single new passenger jet contains as much value of industrial output as a truly tremendous pile of shoes or toys or other consumer goods.