May 21, 2020
One of the positive externalities of the U.S.-China trade war will be the re-emergence of the United States as one of the two dominant manufacturing powers in the world. While China enjoys a labor advantage due to its large population, it also is constrained by the poverty of its population which forces the Chinese Communist Party to seek overseas markets to finance the state-owned enterprises (SOE) which provide employment for almost 50 percent of the Chinese working population. SOEs consume 70 percent of the financial resources of China, yet only contribute 30 percent of China’s GDP.
With the rise of automation and robotics in the manufacturing process in the United States, the costs of manufacturing will decrease, and the marginal profit margin of U.S. manufacturers will increase as a result. As U.S. manufacturers continue to decrease their manufacturing costs with advanced technology, the cost of goods sold will continue to decrease and the marginal profit margin will continue to expand. With market dynamics signaling that there are additional profits to be made in manufacturing through innovative automation and robotics, companies will expand their manufacturing using automation and robotics to the point where their marginal profit margins equal zero. It is at this point that the increase in manufacturing due to automation and robotics in the U.S. will level off and plateau.
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