ECO100 - Principles of Economics: US Manufacturing Industry Analysis

This report provides an industry analysis of the US manufacturing sector. It begins with an introduction highlighting the industry's significant contribution to US exports and its evolution driven by technological advancements. The report assesses the sector's size and growth, referencing its contribution to the US GDP and global goods production. It examines the macroeconomic indicators and policies affecting the industry, particularly the impact of the US-China trade war and the need for policies addressing trade imbalances. The analysis further explores recent trends, such as declining manufacturing employment and the effects of trade barriers on the sector's performance. The report concludes by summarizing the key findings, emphasizing the challenges and opportunities facing the US manufacturing industry, including the impact of trade policies and the sector's role in the broader economy. The references provide additional context and support for the analysis.

Running head: PRINCIPLES OF ECONOMICS
PRINCIPLES OF ECONOMICS
Name of Student:
Name of University:
Author Note:

1PRINCIPLES OF ECONOMICS
Table of Contents
1. Introduction..................................................................................................................................3
2. Size and Growth of the Industry..................................................................................................3
3. Macroeconomic Indicator or Policy and Its Importance and Impacts.........................................4
4. Recent Trend................................................................................................................................4
5. Conclusion...................................................................................................................................5
Reference List..................................................................................................................................6

2PRINCIPLES OF ECONOMICS
1. Introduction
Manufacturing is an efficient industry in US which contributes about half of US exports.
US is reported as the second best manufacturer after China that generates an output over 2.00
trillion dollars in 2018. The sector provides high-paid blue collar jobs due to the evolution of
factors like the innovation in supply chain, information technology, capital intensive approaches
and highly skilled labor force (Pierce & Schott, 2016). Despite this growth, employment in the
manufacturing sector has started going down since 2017. The aim of the paper is to do an
industry analysis of the manufacturing industry in US to study its trend and outcomes.
2. Size and Growth of the Industry
The manufacturing sector generated about 2.33 trillion dollars that drives over 11.6 percent of
the aggregate economic output of U.S. The sector produces about 18.2 percent of the world’s
total goods (Pierce & Schott,2016). The size of the manufacturing industry in 2018 is about
6217.0 billion dollars that has a growth rate of 6 percent as estimated from the data of 2018.
Figure 1: Representation of size of the industry as estimated from the size of real GDP

3PRINCIPLES OF ECONOMICS
Source: (As created by the author)
From Figure 1, it is evident that manufacturing sector has been growing since 2010 where
goods are produced and served in the economy. The manufacturing activities has helped in the
growth of other industries that has effectively improved the economic conditions of US
economy.
3. Macroeconomic Indicator or Policy and Its Importance and Impacts
The manufacturing sector has been facing the macroeconomic problem of declining
revenues and must monitor the macroeconomic indicators to improve the conditions of market.
About 12.85 million manufacturing jobs are provided to the people of US that employs over 8.5
percent of work force (Platzer & Sargent, 2016). The customers are large in number as most of
the goods are exported to other economies which is then used by the targeted customers.
The reason for the fall in manufacturing growth is to concentration of US-China trade
war. In order to improve the market conditions, a low tax rate was ejected in order to increase the
level of exports and raise the level of domestic consumption. Manufacturing activities are
decreasing due to high import quotes and export duties. Therefore, a policy is needed that will
effectively lower or remove the trade balance in the economy. This has resulted in a deficit of US
economy as blue of imports exceeded the value of exports (Levinson, 2015). Exports generate an
output of are 1,051 billion dollars which is 1,920 for imports. This creates a huge cost for the
manufacturing sector as both extract economic prod
4. Recent Trend
The newest trend in the sector is that the manufacturing employment reduced to 28
percent of the total employment in 1960. The value is about 8 percent in 2017 due to

4PRINCIPLES OF ECONOMICS
concentration of market in US. Goods are not produced and manufactured in US totally. US acts
as an intermediary for manufacturing goods that are produced at other countries. About 40
percent of the total imports are imported from Mexico which is then manufactured and exported
to other economies. Trade barriers is affecting the inflow of goods that cannot be manufactured
and served to other economies at low costs (Hombert & Matray, 2018). Trade barriers increases
the price of the manufactured items in the international market that leads to a fall in demand for
US manufactured products. This is lowering the level of foreign direct investment ad investment
opportunities for US in the near future.
5. Conclusion
Therefore, it can be concluded that manufacturing sector is one of the most important
sectors in US hat derives huge profits. However, the manufacturing sector is getting threats from
reduced profits and a falling activities. The number of people employed in the sector is falling
drastically although the sector provides one of the highest paid white collar jobs. The reason is
that US acts an intermediary in manufacturing. Imposition of trade barriers has lowered the level
of imports that has effectively lowered the level of manufacturing activities in the economy. The
overall price and production costs has increased effectively that has lowered the demand for
price in the international market. In order to improve the market conditions, the government has
effectively introduced a tax structure that enables firm to manufacture products at low costs as
firms does not need to pay the tax .

5PRINCIPLES OF ECONOMICS
Reference List
Brunel, C. (2017). Pollution offshoring and emission reductions in EU and US
manufacturing. Environmental and Resource Economics, 68(3), 621-641.
Hombert, J., & Matray, A. (2018). Can innovation help US manufacturing firms escape import
competition from China?. The Journal of Finance, 73(5), 2003-2039.
Levinson, A. (2015). A direct estimate of the technique effect: changes in the pollution intensity
of US manufacturing, 1990–2008. Journal of the Association of Environmental and
Resource Economists, 2(1), 43-56.
Pierce, J. R., & Schott, P. K. (2016). The surprisingly swift decline of US manufacturing
employment. American Economic Review, 106(7), 1632-62.
Platzer, M. D., & Sargent, J. F. (2016). US semiconductor manufacturing: Industry trends,
global competition, Federal Policy. New York: Congressional Research Service.
Wang, L., & Wang, G. (2016). Big data in cyber-physical systems, digital manufacturing and
industry 4.0. International Journal of Engineering and Manufacturing (IJEM), 6(4), 1-8.