The implementation of tariffs by President Donald Trump is, he says, aimed at revitalizing America manufacturing and bringing back jobs to the U.S., as well as rolling back tariffs that foreign countries place on U.S. exports. However, several economic analyses and historical data suggest that such tariffs do not necessarily lead to a significant increase in manufacturing employment.

Douglas A. Irwin, the John French Professor of Economics at Dartmouth College and a senior fellow at the Peterson Institute for International Economics, warns even if some companies relocate factories back to the U.S. to avoid high tariffs, “jobs would probably not follow,” indicating that manufacturing processes might remain automated or streamlined, limiting new employment opportunities.

Moreover, the numbers the president presented when he announced tariffs this week, many economic sources point out, are just wrong.

Increased Production Costs and Consumer Prices

Tariffs function as taxes on imported goods, leading to higher costs for domestic manufacturers that rely on these imports for their production processes. For example, tariffs on steel and aluminum have raised costs for industries utilizing these materials, such as automotive and construction. These increased costs often result in higher prices for consumers and reduced competitiveness for U.S. products in international markets. A study by the Federal Reserve Board found that while tariffs provide some protection to domestic producers, the benefits are outweighed by the negative impacts of increased costs and retaliatory tariffs from trading partners.

The National Association of Manufacturers expresses concern that the large scale of the new tariffs would threaten jobs, supply chains and investment, which in turn would threaten “America’s ability to outcompete other nations and lead as the preeminent manufacturing superpower.”

Retaliatory Measures and Export Challenges

In response to U.S. tariffs, affected countries frequently impose their own tariffs on American goods, making U.S. exports less competitive abroad. This retaliation, which has already been indicated by several countries, happens this way: When China, for example, put tariffs on U.S. agriculture as a retaliation on U.S. steel tariffs during the first Trump Admin., it cost U.S. taxpayers dearly in the form of aid and price supports to farmers who lost hard-won and valuable customers in China. U.S. aid to American farmers grew from $13.2 billion in 2017 to $28 billion in 2019. Additionally, the tariffs shattered markets that took farmers a generation to build up. The Federal Reserve Board’s analysis indicated that retaliatory tariffs contributed to a reduction in manufacturing employment, as U.S. goods became less attractive in foreign markets.

Flawed Calculation Methodology

The administration’s approach involves calculating tariffs based on the U.S. trade deficit with each country, rather than the actual tariffs those countries impose on U.S. exports. Specifically, the formula divides the trade deficit by the total value of imports from that country to determine a tariff rate. For example, with China, the U.S. trade deficit in goods was approximately $295.4 billion, and imports totaled about $438.9 billion. Dividing these figures yields a 67% rate, which the administration then halves to set a 34% tariff on Chinese goods. This method does not account for the actual average tariff rates imposed by China on U.S. goods, which are significantly lower.

Thomas Sampson, associate professor at the London School of Economics, stated the approach is not legitimate. “The formula is reverse engineered to rationalize charging tariffs on countries,” he writes.

Limited Effectiveness in Job Creation

While the stated intention behind imposing tariffs is to protect and create domestic jobs, the actual outcomes have been mixed after Trump’s tariffs in his first administration. Some industries experienced short-term employment gains; however, these were often offset by job losses in other sectors due to increased production costs and decreased export demand. The Tax Foundation estimated that retaliatory tariffs resulting from Trump’s steel tariffs in his first term reduced U.S. GDP and led to a loss of approximately 27,000 fulltime equivalent jobs. The new tariffs go well beyond the scope of those previous tariffs.

Structural Changes in Auto Manufacturing

For all the rhetoric about trade deals gutting Main Street, manufacturing employment has grown over the last decade with no help from tariffs.

In 2014, the United States had approximately 12 million manufacturing workers, accounting for about 8.8% of total U.S. employment. By December 2024, manufacturing employment had increased to approximately 12.76 million workers, according to the Economic Policy Institute.

In 2010, the U.S. automotive manufacturing sector, encompassing both vehicle and parts production, employed approximately 415,180 workers. This number had increased significantly, with employment reaching around 1.1 million individuals in motor vehicles and parts manufacturing as of June 2024, according to the Bureau of Labor Statistics. This growth reflects a substantial expansion in the automotive manufacturing workforce over the 14-year period, chiefly through the expansion of foreign-owned auto companies like Toyota, Volkswagen, Hyundai and Kia, and the addition of supplier companies that locate manufacturing plants near assembly plants. The building of battery plants for electric vehicles has also contributed. The year 2010 was in the middle of the worldwide economic crisis. But numbers show how the sector has grown jobs amidst the many U.S. trade pacts.

The current slowdown in manufacturing job growth is largely attributed to automation and technological advancements rather than international trade. Modern manufacturing processes require fewer workers due to increased efficiency and automation via robotics and AI.

Global Supply Chains and Competitiveness

U.S. manufacturers are integrated into global supply chains, sourcing components and raw materials from various countries to maintain cost effectiveness. Imposing tariffs disrupts these supply chains, leading to inefficiencies and increased operational costs, as well as enormous enterprise costs associated with the disruption of supply chains. This disruption tends to deter investment in domestic manufacturing and move companies to consider relocating operations to countries with more favorable, and more predictable, trade conditions.

While tariffs are intended to protect domestic industries, though, their implementation under the Trump Admin. demonstrate that they do not necessarily result in a significant increase in manufacturing jobs.

The associated rise in production costs, retaliatory measures from trade partners and the evolving nature of manufacturing due to technological advancements collectively undermine the effectiveness of tariffs as a tool for job creation in the manufacturing sector.

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