# Why Apple can't make the iPhone in America > Economist Willy Shih explains why tariffs and reshoring promises ignore the basic economics of global supply chains. - Title: Why Apple can't make the iPhone in America · The Verge - Summary: Economist Willy Shih explains why tariffs and reshoring promises ignore the basic economics of global supply chains. - Keywords: supply chains, manufacturing, tariffs, apple, iphone, willy shih, reshoring, china, trade policy, labor costs, global economy, The Verge - Source: The Verge — https://theverge.com/podcast/1024438/willy-shih-supply-chain-ai-chips-ram-where-does-my-stuff-come-from-book - Author: Nilay Patel - Published: 2026-11-05T15:00:00+00:00 - Read time: 4 min - Topics: supply chains, manufacturing, tariffs, apple, iphone, willy shih, reshoring, china, trade policy, labor costs, global economy, technology ## Willy Shih on supply chains Economist and Harvard Business School professor Willy Shih has written Where Does My Stuff Come From? The Powerful Economics Behind Global Supply Chains. He studies why goods are made where they are. ## Foxconn's Wisconsin promise In 2019, Foxconn promised to build an LCD factory in Wisconsin. Shih predicted it would fail because the supply chain to support a fab simply wasn't in place. It never happened. ## Markets circumvent tariffs When the US imposed tariffs on Chinese goods, manufacturers moved assembly to Vietnam, Mexico, or found other ways around them. Economic forces respond to trade barriers by finding cheaper routes. ## The Mexico workaround Chinese flat panel factories ship components directly to Mexico, where they are assembled into TVs and imported under the USMCA agreement, circumventing US tariffs on Chinese goods. ## Cheap goods drive globalization Americans benefit from globalization through cheap products. A fifty-inch TV for three hundred dollars at Costco is a miracle of modern supply chains and manufacturing efficiency. > It is a miracle, right? And it's cheaper, and it's because there's a place that, for better or for worse, can make it cheaper. ## The cost of reshoring When tariffs close off all trade routes, domestic prices rise. From two thousand to twenty twelve, low inflation partly resulted from cheap goods from China. Tariffs reverse that benefit. ## Globalization's hidden cost Manufacturing moved to China left American workers behind without retraining. The cost spread across people who also shop at Walmart and benefit from cheap goods, but the country didn't plan for displaced workers. ## China's trade surplus problem China runs a massive trade surplus, exporting economic problems to the US at the expense of jobs elsewhere. Germany, dependent on autos, now sees this as an existential crisis. ## Why the US is high-cost The US is a high-cost country. Manufacturing jobs that return use heavy automation and sophisticated processes to justify high labor costs, or involve products where the US has a technological lead. > if you want manufacturing jobs coming to the US, then you've got to have high labor productivity. ## What America makes best The US, France, and the UK are major suppliers of jet engines worldwide. High-temperature superalloys for jet engines are made by only three companies globally, two in the US and one in the UK. ## The iPhone's global complexity iPhones use the most advanced chips from Taiwan Semiconductor Manufacturing Company. TSMC has a fab in Arizona but its capacity is tiny compared to Taiwan. Assembly requires manual labor at massive scale. ## China's labor mobilization Chinese phone factories mobilize one hundred thousand to two hundred thousand workers for manual assembly at the scale Apple needs. The Danwei model, established after the Communist Revolution, provides housing and infrastructure for workers. ## China's competitive advantage Chinese factories invest heavily in automation and upgrade equipment every two or three years to stay competitive. Regional governments compete fiercely, raising the bar for technology and efficiency constantly. ## China's long-term planning China's 863 plan, launched in March nineteen eighty-six, identified critical technologies including information technology, biotechnology, semiconductors, civil aircraft, and robotics. They have executed every one of those things. ## US policy instability The Trump administration's tariff actions changed constantly. Howard Lutnick said tariffs would move manufacturing back, then three weeks later said robots would do all manufacturing. Tariffs were then struck down and replaced. ## Instability kills investment Companies cannot make long-term plans when tariffs change every couple of weeks. Semiconductor fabs need ten to twenty years of stable demand to earn a return. Uncertainty causes companies to hold off investment. ## The chicken tax legacy A tariff on imported light trucks, called the chicken tax, resulted from a trade spat.It made SUVs and light trucks more profitable, so Detroit automakers focused on them. ## Strategic supplier relationships work Toyota's Georgetown, Kentucky plant uses mostly domestic content from Kentucky, Ohio, Indiana, Alabama, Mississippi, and Texas. The plant manager said they have a strategic long-term relationship with suppliers, not a transactional one. > We have a strategic long-term relationship with our supplier. ## What comes next Shih recommends a strategic approach: harness US market power with nuanced understanding of supply chains. Trade within a bloc of like-minded countries with complementary capabilities rather than pursuing tariffs or going it alone. ## Key takeaway Reshoring manufacturing to America faces structural barriers: high labor costs require automation or differentiation, China's long-term planning and regional competition outpace US policy instability, and tariffs circumvent rather than rebalance supply chains.