The tariffs announced by the Trump administration have been an Armageddon across many industries. Here’s what I’ve found from being in the trenches myself.
My business, my tiny team, and my family’s livelihood are all on the edge of collapse if I don’t do something in response to the tariffs.
Like any problem-solving small-business owner would, I’ve found a solution: bring my manufacturing here to the USA, just as the administration wants. This is a bold move to not only save my business, but also pivot to a new way of thinking about supply chains—and perhaps in the process help save other brands as well.
Countless companies are in the same boat as me, scrambling for a solution. Silicone consumer goods can be found in categories such as infant care (think baby bottle nipples), kitchen utensils (like spatulas and ice cube trays), toys (stacking cups and soft building blocks), fashion and accessories (bracelets, hair ties, iPhone cases), beauty products (lip brushes, makeup sponges), health products (menstrual cups, cushioning inserts), tech-related items (keypads, smartwatch bands), sporting goods (mouthguards, swim caps), and so much more.
Initially, the first thing I did (aside from job hunting) when looking for a new supply chain alternative was what everyone else in the space has been doing en masse. First, I thought, “How can I circumvent these tariffs?” Nope, that’s illegal…“Can I wait it out until the White House magically removes the tariffs?” Unlikely.
It was all too much. So, I started to look at producing here in America.
What I found is that nearly all of the silicone molding factories in the USA were set up for large-scale industrial contract manufacturing for aerospace, pharmaceutical, defense, automotive, etc., and only one in the nation, as far as I could tell, would produce for consumer goods. This opened the door to a new rabbit hole: What will it take for me to produce here in-house? And why is no one else doing it?
In China, you can source factories with low minimum-order quantities (MOQs), cheap product development, and low-cost items. But manufacturers in the U.S. have been optimized for large, multiyear contracts for high-margin industries. This allowed them to scale their overhead substantially to be able to predictably produce millions of a single part for years to come, which is not conducive to the fast-paced, ever-changing landscape of consumer goods. So that’s one reason no one else is doing it.
So, what does it really take to produce here in the USA, and can it be cost-effective? Well, I found something interesting about China’s factories. Most of them, like my own overseas supplier, are small satellite shops with just enough machines to mold the orders they receive. Small, efficient, low overhead, high output, and mostly rudimentary tech. iPhones are a different story, but for the silicone, rubber, and plastic items that fill our shelves, the machinery is super simple to operate. Very automated, very efficient, and low-cost—now this I can do. Decision made. Plan in action.
My new manufacturing startup and its facility (to be located in Riverside County, California) will be copying this Chinese model—essentially replacing the cost, MOQs, and customer experience of working with overseas factories and instead doing it all right here in the USA, with additional benefits unavailable for companies using overseas suppliers.
My startup’s quoting strategy (to steal China’s supply chain) is: “Give us your final landed cost per unit in 2024, including freight and previous 2024 tariffs, and we’ll engineer a plan to match it.”
I believe there is another reason no one is manufacturing consumer goods here. Manufacturing in the U.S. has been perceived as an unsexy, dirty industry, with a mental image of sweatshops filled with laborers. This outdated image is ingrained in the American psyche. Certainly, all the items you see on shelves must be made in China or developing nations where labor is cheap, right? Upon some research, you soon realize that China’s manufacturing labor workforce earns much closer to the U.S. worker than one might think.
I turned to ChatGPT Deep Research for a chart showing the average annual wage gap between Chinese and American manufacturing workers over the past 50 years. Here’s what it gave me:
According to these results, China’s manufacturing labor force now earns 31.5% of what the U.S. manufacturing labor force earns in U.S. dollars. In 1995, that number was just 2.5% of what American labor wages were. The reality is Chinese labor is not actually that much cheaper than American labor these days. Plus, many of the items produced are in fact very automated, especially molded goods.
Let’s start with some napkin math for U.S. labor:
6 Units x 60 runs per hour ÷ $36/hr wage = $0.10 labor cost per item
Explained: A 6-cavity mold with a 60-second cycle time can produce 360 units per hour. One machine operator making $36 an hour achieves a per-unit labor cost of $0.10 per unit Cycle two machines side by side (a common practice) and that labor is now $0.05 per unit. Add more cavities to the mold and reduce labor closer to the minimum wage, and you’ll achieve an even lower per-unit labor cost.
After I calculated labor, raw materials cost (one of the globe’s largest suppliers of silicone is based here in the USA), energy usage, and packaging, I found that producing here in the U.S. would actually be much cheaper than what my landed cost of goods sold in 2024 was prior to tariffs. Even when adding in a very healthy margin to the factory for overhead.
You can’t hedge an entire business model on some unprecedented tariffs. These will most likely go away, or change. But there are more benefits to producing in the U.S. than avoiding tariffs. This is what made me move forward with opening my factory. Among the benefits:
Achieve faster lead times, dropping freight from 45 days to 10. Right now, it takes on average 45 days for finished goods to arrive in the U.S. Imagine if this was cut down to 10 days. As someone who has paid hundreds of thousands in airfreight to expedite goods from China to the U.S. to meet customer demands, a 10-day delivery to a brand’s distribution center is a godsend. This also improves a company’s cash-conversion cycle as there is less time for cash outlay to receive goods.
Improved transparency, time zone sync, no Chinese holiday pauses. The pain points for American businesses working with Chinese suppliers are the time differences to be able to meet, the many weeks out of the year that factories shut down (Chinese New Year and other holidays), some minor language barrier issues, and occasionally the ability to get transparency on processes, development, materials, and labor compliance.
Financing benefits. Most lenders in purchase-order financing and lines of credit charge interest from 12% to 24% APR. That’s an entire 1.5% to 3% addition to cost of goods sold for just sitting on the water 45 days. Reducing cash outlay and interest has a benefit most don’t think about when considering a 45-day ship time. Not to mention the lender’s security in knowing funds are being sent to a U.S. entity.
Contributes to U.S. jobs and helps reduce the trade deficit. Adding jobs to the U.S. economy is a good thing. “But who’s gonna do the work?” you might ask. Well, many of the seemingly positive unemployment statistics we see today are skewed by the gig economy, such as Uber, Doordash, etc., and don’t reflect the reality that many Americans are feeling.
The notion that supply chains for consumer goods must be satisfied overseas is simply not true. And as illustrated above, there are plenty more benefits than just getting around tariffs that will have a lasting and long-term positive impact on the brands that decide to onshore their production to the USA.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
