How We Got a $12.98 American Made T-shirt

Asked the price of a cotton T-shirt, many of us would say at least $30. Then, told it was Made in America, we might go up several notches to $60.

We would be wrong.

The $12.98 American Made T-Shirt

Interviewed by the Wall Street Journal, American Giant’s founder, Bayard Winthrop, explained why few thought he could produce a $12.98 t-shirt in the U.S.

Outsourcing

After all, it is likely that your t-shirts come from Peru, Vietnam, China, or countless other places, but not here. Made in China, it’s simple. Yes, we might grow the cotton in Texas or Mississippi. But then it travels to China, and they do almost everything. Elsewhere, the labor is less expensive. And, as we have seen before at econlife, the container ship brought transport per shirt down to pennies from dollars. During 2023, less than 4% of the clothing sold here was made here.

American Made

Bayard Winthrop, though, had a different vision. Convinced U.S. manufacture was feasible, he committed his company, now approximately 12 years old, to making sweatshirts and sweatpants and t-shirts here. Still, for one of his sweatshirts, we paid more than $138. But then, Walmart heard Bayard on a podcast, admiring their pledge to boost domestic production. They asked him to visit their headquarters in Bentonville, Arkansas and the rest of the story is history.

A t-shirt supply chain includes farmers that grow the cotton and cotton gins that separate the fiber from the seeds. Then, it travels to mills that make the yarn and knitters to make the cloth. After that, dyers and cutters and sewers and silk screeners finish the shirt. Bayard said he could do it all cheaply if he were guaranteed a gargantuan purchase. Sounding rather like Adam Smith and his pin factory, Bayard just needed a huge economy of scale. Then he could invest in the equipment that would save him money.

Walmart said yes.

Responding, he hired 75 people for a sewing facility and bought approximately $1 million of machinery. American Giant automated label setting and did the screen printing. Redesigning t-shirt assembly, they used a rougher fabric that cost less and eliminated some seams so they could sew less. Here again it echoes economic history through their vertical integration–controlling every rung of the supply ladder–like John D. Rockefeller did with oil. But here the goal was to lower the price.

Our Bottom Line: The Factors of Production

As economists, we know we are talking about land, labor, and capital. Called the factors of production, all goods and services are made from land, labor, and capital. For the American made T-shirt, the land moved from places like China to the U.S. Yes, labor was paid more. But also, it was replaced by automation that reduced the cost per shirt.

As economists, we can see we had tradeoffs. We wound up with an affordable low-price quality T-shirt and the return of domestic manufacturing. We’ve noted in the past that having local facilities nurtures local innovation. But we needed a guarantee for massive volume and the possibility of lost jobs because of automation. Economic thinker David Ricardo would be shouting from his grave that we should remember the perks of comparative advantage. Saying we were losing the benefits of international trade, Ricardo would ask what we were sacrificing by making those t-shirts.

My sources and more: Thanks to WSJ for alerting me to the Walmart t-shirt. Then, happily, I discovered a Journal podcast that had more detail.