Reshoring, automation, and labor markets under trade uncertainty

We study the implications of trade uncertainty for reshoring, automation, and U.S. labor markets. Rising trade uncertainty creates incentives for firms to reduce exposure to foreign suppliers by moving production and distribution processes to domestic producers. However, we argue that reshoring does not necessarily bring jobs back to the home country or boost domestic wages, especially when firms have access to labor-substituting technologies such as automation. Automation improves labor productivity and facilitates reshoring, but it can also displace jobs. Furthermore, automation poses a threat that weakens the bargaining power of unskilled workers in wage negotiations, depressing their wages and raising the skill premium and wage inequality. Our model predictions are in line with industry-level empirical evidence.