Opinion | Despite Trump's Beliefs, His Tariffs Could Fail to Achieve Their Goals
Merely imposing tariffs will not restore the greatness of American manufacturing.
TroibNews 
Donald Trump originally secured the presidency by highlighting a sentiment that “We don’t make anything anymore.” While this claim isn’t entirely accurate—American manufacturers sold over $7 trillion in goods in 2024—it's true that the manufacturing sector has struggled over the past 25 years, jeopardizing both national security and a vital component of our economic prosperity.
Since 2000, production has declined between 10 percent and 30 percent in several strategically important industries, such as machinery, electrical equipment, chemicals, and metalworking. Although some sectors, including motor vehicles, aircraft, pharmaceuticals, and semiconductors, have fared slightly better, the overall modest growth in U.S. production pales in comparison to the sharp increase in both domestic and global demand. If current trends persist, even industries that have remained stable may find themselves outpaced by manufacturers in hostile countries.
Trump has committed to correcting this issue. As a co-author of a book examining how the global trade system has adversely affected many workers in the U.S. and beyond, I share his concern and believe it's a goal worthy of pursuit.
However, if Trump is serious about this, he must reconsider the strategies he intends to implement. Several policies that Trump and his advisors have proposed—primarily universal tariffs—could exacerbate the situation or, at best, fail to revive American manufacturing and improve the lives of its workers. Prosperity is not a zero-sum game, and inflicting pain on trading partners does not guarantee benefits for the U.S. In fact, punitive measures are more likely to have unintended consequences.
Let's examine Trump’s recent threats to impose tariffs globally.
Tariffs are essentially taxes levied on imported goods. They can make U.S.-made products appear relatively less expensive—at least to American consumers—compared to those from abroad. Theoretically, this could lead to increased employment, wages, and profits for American manufacturers in a tariff-free scenario. However, these benefits often come at the expense of American consumers, who would end up paying more for the same goods, leaving them with less disposable income for other purchases.
The overall impact hinges on how effectively American workers and factories can ramp up production to replace imported goods. For products where U.S. demand is currently low but domestic capacity is quickly increasing, like battery electric vehicles, the advantages of tariffs might outweigh their downsides. Conversely, applying tariffs on products with high demand and limited domestic capacity, such as coffee beans, would act similarly to a sales tax, extracting funds from consumers to reduce the federal budget deficit. In more transitional cases, tariff implementation might shift resources away from certain sectors—leading to more U.S.-manufactured T-shirts but fewer childcare workers.
Unfortunately, the incoming administration appears to misunderstand these complexities. Their primary focus seems to be the overall trade deficit, which represents the gap between U.S. exports and imports. To be fair, the deficit in manufactured goods amounts to around $1.2 trillion annually, translating to about $3,500 for every American citizen. Eliminating this deficit, all else being equal, could yield nearly a 5 percent increase in the average American’s income.
However, achieving a unilateral closure of this deficit is effectively impossible without harming the very economy it's meant to bolster.
Manufacturing import spending generally correlates with business cycles and new orders for domestic goods. Implementing "universal" tariffs sufficiently high to drop imports by over 40 percent—enough to eliminate the trade deficit—would likely trigger a serious economic downturn that impacts Americans more profoundly than anyone else. To mitigate this impact, domestic production would need to increase rapidly to fill the gap, a scenario that the experiences of the pandemic have shown may not be feasible.
A more probable outcome is that counteracting forces prevent tariffs from having any significant effect, similar to the prior Trump administration's experience where there was a minor downturn in manufacturing but little change in inflation and no adjustment to the trade balance.
The limited effectiveness of such tariffs arises because foreign manufacturers can respond by reducing their prices. While this may hurt their profit margins, it helps them maintain market share. Similarly, American wholesalers and retailers might absorb some cost injections to cushion consumers from high import prices.
An additional counterintuitive effect is that the dollar often appreciates following the announcement—or even the threat—of new tariffs. This occurs because tariffs increase the attractiveness of U.S. investment for producing goods intended for the American market, while diminishing the allure of overseas investments meant for the U.S. market. Unfortunately, a stronger dollar makes American products pricier for international customers, resulting in tariffs possibly harming exports more than imports, even without foreign retaliation.
A more pressing danger for U.S. manufacturers is the incoming administration's intention to eliminate subsidies for semiconductors, electric vehicles, and other high-value sectors established during the Biden administration. Many companies have pledged significant investments to bolster U.S. manufacturing based on expectations of support through affordable financing and guaranteed revenues. If the government introduces excessive regulatory and financial uncertainty, these commitments could be rescinded. Reducing subsidies could “save money” in a narrow sense, but at the cost of weakening American manufacturing and compromising national security.
A more effective strategy for boosting manufacturing through industrial policy would first acknowledge that U.S. producers face two interconnected challenges. There is insufficient global spending on manufactured goods from consumers, businesses, or governments. Maintaining a sophisticated and diverse manufacturing sector in any nation is harder than it should be due to limited revenue. This challenge is exacerbated by a second issue: manufacturing in the U.S. tends to be less profitable than in other countries where governments offer low-cost land and financing while putting pressure on workers and consumers.
Ideally, leaders in significant foreign economies such as China, Europe, and Japan would find ways to enhance the spending power of their populations. This would elevate living standards globally, increase demand for manufacturing, and render American manufacturers more competitive both domestically and internationally.
In the absence of such developments, the U.S. should strive to ensure that decisions made abroad do not undermine the sustainability of its own industrial base. Implementing tariffs or quotas to restrict specific imports may be necessary, along with limiting foreign investments in the U.S. and other interventions to prevent the U.S. dollar from becoming overly strong. The federal government should also ensure robust spending on a wide array of American-made products.
Continuing subsidies for semiconductors and electric vehicles that were established between 2021 and 2022, as well as increasing defense spending, are positive initial steps, but they shouldn't stop there. Policymakers must think creatively and avoid simplistic fixes. Slapping tariffs on foreign goods and dismantling his predecessor's achievements might satisfy Trump momentarily, but these actions will only hinder his ability to rejuvenate American manufacturing.
James del Carmen contributed to this report for TROIB News
Since 2000, production has declined between 10 percent and 30 percent in several strategically important industries, such as machinery, electrical equipment, chemicals, and metalworking. Although some sectors, including motor vehicles, aircraft, pharmaceuticals, and semiconductors, have fared slightly better, the overall modest growth in U.S. production pales in comparison to the sharp increase in both domestic and global demand. If current trends persist, even industries that have remained stable may find themselves outpaced by manufacturers in hostile countries.
Trump has committed to correcting this issue. As a co-author of a book examining how the global trade system has adversely affected many workers in the U.S. and beyond, I share his concern and believe it's a goal worthy of pursuit.
However, if Trump is serious about this, he must reconsider the strategies he intends to implement. Several policies that Trump and his advisors have proposed—primarily universal tariffs—could exacerbate the situation or, at best, fail to revive American manufacturing and improve the lives of its workers. Prosperity is not a zero-sum game, and inflicting pain on trading partners does not guarantee benefits for the U.S. In fact, punitive measures are more likely to have unintended consequences.
Let's examine Trump’s recent threats to impose tariffs globally.
Tariffs are essentially taxes levied on imported goods. They can make U.S.-made products appear relatively less expensive—at least to American consumers—compared to those from abroad. Theoretically, this could lead to increased employment, wages, and profits for American manufacturers in a tariff-free scenario. However, these benefits often come at the expense of American consumers, who would end up paying more for the same goods, leaving them with less disposable income for other purchases.
The overall impact hinges on how effectively American workers and factories can ramp up production to replace imported goods. For products where U.S. demand is currently low but domestic capacity is quickly increasing, like battery electric vehicles, the advantages of tariffs might outweigh their downsides. Conversely, applying tariffs on products with high demand and limited domestic capacity, such as coffee beans, would act similarly to a sales tax, extracting funds from consumers to reduce the federal budget deficit. In more transitional cases, tariff implementation might shift resources away from certain sectors—leading to more U.S.-manufactured T-shirts but fewer childcare workers.
Unfortunately, the incoming administration appears to misunderstand these complexities. Their primary focus seems to be the overall trade deficit, which represents the gap between U.S. exports and imports. To be fair, the deficit in manufactured goods amounts to around $1.2 trillion annually, translating to about $3,500 for every American citizen. Eliminating this deficit, all else being equal, could yield nearly a 5 percent increase in the average American’s income.
However, achieving a unilateral closure of this deficit is effectively impossible without harming the very economy it's meant to bolster.
Manufacturing import spending generally correlates with business cycles and new orders for domestic goods. Implementing "universal" tariffs sufficiently high to drop imports by over 40 percent—enough to eliminate the trade deficit—would likely trigger a serious economic downturn that impacts Americans more profoundly than anyone else. To mitigate this impact, domestic production would need to increase rapidly to fill the gap, a scenario that the experiences of the pandemic have shown may not be feasible.
A more probable outcome is that counteracting forces prevent tariffs from having any significant effect, similar to the prior Trump administration's experience where there was a minor downturn in manufacturing but little change in inflation and no adjustment to the trade balance.
The limited effectiveness of such tariffs arises because foreign manufacturers can respond by reducing their prices. While this may hurt their profit margins, it helps them maintain market share. Similarly, American wholesalers and retailers might absorb some cost injections to cushion consumers from high import prices.
An additional counterintuitive effect is that the dollar often appreciates following the announcement—or even the threat—of new tariffs. This occurs because tariffs increase the attractiveness of U.S. investment for producing goods intended for the American market, while diminishing the allure of overseas investments meant for the U.S. market. Unfortunately, a stronger dollar makes American products pricier for international customers, resulting in tariffs possibly harming exports more than imports, even without foreign retaliation.
A more pressing danger for U.S. manufacturers is the incoming administration's intention to eliminate subsidies for semiconductors, electric vehicles, and other high-value sectors established during the Biden administration. Many companies have pledged significant investments to bolster U.S. manufacturing based on expectations of support through affordable financing and guaranteed revenues. If the government introduces excessive regulatory and financial uncertainty, these commitments could be rescinded. Reducing subsidies could “save money” in a narrow sense, but at the cost of weakening American manufacturing and compromising national security.
A more effective strategy for boosting manufacturing through industrial policy would first acknowledge that U.S. producers face two interconnected challenges. There is insufficient global spending on manufactured goods from consumers, businesses, or governments. Maintaining a sophisticated and diverse manufacturing sector in any nation is harder than it should be due to limited revenue. This challenge is exacerbated by a second issue: manufacturing in the U.S. tends to be less profitable than in other countries where governments offer low-cost land and financing while putting pressure on workers and consumers.
Ideally, leaders in significant foreign economies such as China, Europe, and Japan would find ways to enhance the spending power of their populations. This would elevate living standards globally, increase demand for manufacturing, and render American manufacturers more competitive both domestically and internationally.
In the absence of such developments, the U.S. should strive to ensure that decisions made abroad do not undermine the sustainability of its own industrial base. Implementing tariffs or quotas to restrict specific imports may be necessary, along with limiting foreign investments in the U.S. and other interventions to prevent the U.S. dollar from becoming overly strong. The federal government should also ensure robust spending on a wide array of American-made products.
Continuing subsidies for semiconductors and electric vehicles that were established between 2021 and 2022, as well as increasing defense spending, are positive initial steps, but they shouldn't stop there. Policymakers must think creatively and avoid simplistic fixes. Slapping tariffs on foreign goods and dismantling his predecessor's achievements might satisfy Trump momentarily, but these actions will only hinder his ability to rejuvenate American manufacturing.
James del Carmen contributed to this report for TROIB News
