More Than Jobs: The Real Stakes of Trump's Tariffs

April 2, 2025, is a day very few of us will forget.  President Donald Trump announced his intention to impose broad tariffs on almost all goods imported into the United States.

Two weeks hence, even though the administration hasn’t presented a clear, comprehensive plan for these tariffs, speculation about their intent has been widespread. The most commonly discussed rationale is:

• High tariffs are used as a negotiating tactic, leveraging anchoring.

• Tariffs force an economic slowdown, creating favorable conditions to refinance American debt.

• Tariffs as a catalyst for reshaping global economic dynamics.

• Tariffs to bring high-quality manufacturing jobs back to the U.S.

These intentions are essential, as most everyone agrees there will be some negative consequences, and the ultimate question becomes: will the economic consequences be worth it? The last point suggests tariffs could invigorate American manufacturing, prompting another crucial question: Given future market conditions and competitive pressures, are tariffs the best vehicle for delivering economic prosperity to all Americans? Let’s explore.

A Quick Look at Tariff History

Let’s quickly glance at some historical examples:

The McKinley Tariff Act (1890)

• Intended to protect American industries from foreign competition

• Temporarily boosted domestic production and increased consumer prices by 3-5%.

• Farmers faced backlash from reduced exports and retaliatory tariffs.

• Ended badly politically, with Republicans losing seats and the presidency.

The Smoot-Hawley Tariff Act (1930)

• Intended to protect farmers and manufacturers after the 1929 crash.

• Broad tariffs of 40-60% on over 20,000 imported goods

• Didn't just fail economically—it deepened the Great Depression.

• Short-term disaster, but some historians argue it helped specific industries survive tough times, setting them up for future strength. (1)

• Ended badly politically, with Republicans losing seats and the presidency.

The Trump Tariffs (2018)

• Intended to protect American industries, especially steel and aluminum, and reduce the U.S. trade deficit with China.

• Targeted steel, aluminum, and a range of Chinese products.

• Created short-term gains for some industries, but overall resulted in higher consumer costs.

• Highlighted vulnerabilities in global supply chains, influencing strategic thinking around national resilience.

Thinking about Jobs

The proposed 2025 Trump Tariffs (10% across all imports, a number of additional ‘reciprocal country-based tariffs ranging from 17% to 49%, and 145% specifically on China as of this writing) bring this discussion back into focus. Reinvigorating U.S. manufacturing sounds promising, but realistically, how achievable is that through tariffs alone?

Manufacturing includes vital sectors like semiconductors, machinery, electronics, and other critical components. Current US import reliance (excluding USMCA trade) stands at:

• Motor Vehicles: 23%

• Machinery: 30%

• Computers & Electronics: 50%

• Electrical Equipment & Appliances: 40%

• Furniture: 60%

There is undoubtedly room for domestic growth. However, a significant job surge isn't realistic given current productivity trends. Manufacturing employment peaked in 1979 at nearly 20 million jobs but has steadily declined since, even while output has risen, primarily due to:

• Automation and advanced tech.

• Better manufacturing processes.

• Companies are doing more with fewer employees.

The following graphic shows how this trend has played out since 1970. (2)

This second graph illustrates how automation and output have grown while manufacturing jobs have been halved. (3)

The productivity factors behind these trends are going to become more pronounced in the future. Manufacturing facilities may expand in the US, but increasingly fewer employees will be required to operate them.  

If the 2025 tariffs are unlikely to increase US manufacturing jobs dramatically, how else might we gauge whether the 2025 tariffs will benefit Americans? 

Thinking beyond Jobs

Strategically important industries, like semiconductors, illustrate the importance of broader metrics. Semiconductor manufacturing doesn't create many direct jobs per dollar invested, but the indirect benefits are significant:

• National Security: Less vulnerability to global supply disruptions, as highlighted by the recent semiconductor shortages.

• Technological Innovation: Heavy investments in research and development ensure global leadership in critical technologies.

• Economic Multipliers: Significant growth in related electronics, software, and advanced manufacturing sectors.

Other metrics we might want to consider:

• Technological Self-Reliance: Enhancing domestic innovation capabilities reduces reliance on potentially hostile foreign providers.

• Supply Chain Resilience: Strengthening domestic production in key sectors mitigates global economic and geopolitical risks.

• Global Competitiveness: Ensuring U.S. industries can sustainably outperform international competitors

Moreover, tariffs might serve effectively as a temporary measure, providing breathing room for critical sectors to enhance their competitiveness. By reducing external competition temporarily, targeted industries can benefit from strategic investments in innovation, infrastructure, workforce training, and technology upgrades. Once these industries regain competitiveness and can stand equally with global peers, returning to a free trade environment would optimize long-term economic prosperity and efficiency.

Essentially, free markets are good when US industries are competitive, tariffs can help them return to competitive levels when they’re not, assuming the appropriate investments are also made.

Applying Broader Metrics to Historical Examples

Using these broader metrics, historical tariffs provide nuanced insights. Despite its immediate economic damage, the Smoot-Hawley Act may have indirectly protected specific strategic industries, providing longer-term benefits. Recent tariffs have already reshaped thinking on supply chain resilience and technological autonomy, despite mixed economic outcomes.

Still, it's essential to recognize significant counterarguments: tariffs typically cause economic inefficiencies, higher consumer prices, and retaliatory trade actions. These risks highlight the necessity of coupling tariffs with strategic investments and supportive policies.

So, Are Tariffs Worth It?

Tariffs alone are unlikely to increase manufacturing jobs dramatically. However, they can strategically strengthen critical sectors with targeted public and private investments, such as workforce training, R&D incentives, and infrastructure improvements. Historical experience and current trends suggest the short-term economic pain of tariffs could be justified if they lead to a stronger, more resilient economic foundation. Sources: (1) Paul Bairoch - Economics and World History: Myths and Paradoxes (1993) (2) Bureau of Labor statistics, November 2020

(3) Federal Reserve Economic Data, June 2023