President Trump’s concurrent trade disputes with Canada, Mexico, China, and the European Union represent a significant economic and political gamble: the belief that Americans will tolerate months or even years of economic hardship for the remote prospect of revitalizing American manufacturing.
This strategy is incredibly perilous. Recently, Trump himself has acknowledged, despite his confident assertions during the campaign about an impending economic boom, that the U.S. might be at risk of a recession as a consequence of his policies. Nevertheless, he maintains in both public and private discussions that a “minor disruption” in the economy is an acceptable trade-off for restoring manufacturing jobs to the U.S.
His closest political allies are reinforcing this approach. “President Trump’s economic strategy is straightforward,” Vice President JD Vance commented on social media on Monday. “Investing in and creating jobs in America comes with rewards. We will reduce regulations and taxes, but if you manufacture overseas, you’re responsible for your own fate.”
The last time Trump implemented a similar strategy, during his first term, it did not yield the expected results. In 2018, he imposed 25 percent tariffs on steel and 10 percent on aluminum, arguing that it was a matter of national security and would lead to job growth in the U.S. While there was a temporary increase of about 5,000 jobs nationally, prices surged, and during the pandemic, some tariffs were dropped; the industry now employs approximately the same number of Americans as before.
Concerns arise from various studies that indicate the country lost tens of thousands of jobs — with one report estimating a loss of over 75,000 jobs — in sectors reliant on steel and aluminum imports. Productivity among American steel manufacturers had declined, even as overall manufacturing productivity in the U.S. rose.
The current endeavor that Trump is pursuing is on a much larger scale. Retaliatory tariffs aimed at U.S. manufacturers, such as those targeting Kentucky’s bourbon, boats, and Harley-Davidson motorcycles produced in critical states like Michigan and Pennsylvania, are meticulously structured to create substantial difficulties in areas where Trump’s base resides.
“If Trump is serious about sticking to these tariffs, he is wagering his presidency on their effectiveness, as well as the tolerance of the American people, who currently seem to have little patience,” stated William Galston, a scholar at the Brookings Institution.
Trump appears unlikely to change course. He has championed tariffs for decades, firmly believing that they can end what he sees as an era in which the U.S. has been exploited by both allies and adversaries. While many of his senior economic advisors, led by Treasury Secretary Scott Bessent, never advocated for broad tariff measures before, they understand that conforming to Trump’s perspective on geoeconomics is essential to maintaining their influence within the administration.
“If another country’s actions harm our economic interests and citizens, the United States will take action,” stated Mr. Bessent last week during a speech at the Economic Club of New York. “This embodies the America First trade policy.”
The truth is that Trump’s rationale for levying tariffs is inconsistent, a point highlighted by numerous business executives who have expressed concerns — albeit off the record — following recent visits to the White House. Michael Froman, who served as U.S. Trade Representative from 2013 to 2017 and is now the president of the Council on Foreign Relations, categorizes Trump’s arguments into three main points.
“When the president contemplates tariffs, he typically focuses on three aspects: leverage, revenue, and re-industrialization,” stated Froman on Wednesday.
“The leverage is currently effective,” he added. Mexico and Canada have developed plans to reduce the flow of fentanyl across the border, even though they are merely revamping programs that had already been initiated prior to Trump’s demands. Interestingly, Canada has experienced some of the most significant tariffs despite the fact that a minimal amount of fentanyl enters the U.S. from there. (Justin Trudeau, Canada’s departing prime minister, remarked last week, “What Trump desires is a complete collapse of the Canadian economy, making it easier for him to annex us.”)
However, Froman argues that the White House is beginning to face diminishing returns from its approach. “You can leverage this tactic one or two times to bring parties to the negotiating table,” he remarked, “but eventually, countries retaliate,” as Canada and the European Union have begun to do.
Trump is also enamored with the idea that tariffs can generate government revenue. During his Inaugural Address, he praised President William McKinley, who supported substantial tariffs in the 1890s, asserting that this period represented a peak in American economic policy. “Instead of imposing taxes on our citizens to enrich other nations, we will levy tariffs and taxes on foreign countries to benefit our citizens,” Trump declared on January 20. “For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties, and revenues. This will lead to substantial sums entering our Treasury from overseas sources.”
Yet again, the reality does not always align with this view. While the U.S. government collected over $60 billion in tariffs from China during Trump’s initial term, it simultaneously compensated American farmers impacted by retaliatory tariffs from Beijing, almost matching that expenditure.
Lastly, Trump argues that tariffs will bring manufacturing jobs back to America. This notion is deeply embedded in his mindset and political background; he shows little interest in considering empirical research that may complicate this narrative.
While Trump may wish for all goods to be produced in the United States, nations engage in trade for various reasons. Some possess a comparative advantage in certain industries, while others may be at different developmental stages. Furthermore, countries often prefer not to focus solely on low-tech manufacturing when they aspire to advance. For instance, towns north of Boston that once dominated the shoe industry in the 1800s are now more recognized for software startups, law firms, and some of the nation’s priciest real estate.
However, Trump’s perspective emphasizes traditional manufacturing, as he himself acknowledged in a 2016 interview, claiming the 1950s represented his ideal era when American manufacturing and influence were paramount.
He remains unfazed when economists highlight that car components may cross the Canadian border multiple times before being assembled into a vehicle in the U.S., which would become more costly due to his tariffs on Canada. Additionally, the intricate designs for cutting-edge semiconductors might be exchanged frequently with Taiwan Semiconductor, the leading chip manufacturer worldwide, prior to production in Taiwan — even if the design’s intellectual property is rooted in the U.S.
An area where Trump and his predecessor, Joseph R. Biden Jr., align is in the push to bring semiconductor manufacturing back to the United States. Biden’s strategy involved the CHIPs Act, which received bipartisan support and allocated over $50 billion in federal resources to stimulate investment in advanced chip manufacturing facilities. This initiative actually began during Trump’s first term, but he criticized it at the conclusion of his recent congressional speech.
“Your CHIPS Act is an atrocious, atrocious initiative,” he told Congress members. “We allocate hundreds of billions of dollars, yet it doesn’t amount to anything. They take our funds and don’t utilize them effectively.”
Trump concludes that the solution lies in tariffs. If the semiconductors are produced within the United States, they will not be subject to tariffs.
However, the timing poses a challenge. Establishing the most advanced chip facilities can take years. (For instance, Intel has recently delayed the opening of an Ohio factory it originally slated for 2025 or 2026 by at least four years.) Additionally, even after these facilities are established, the U.S. will still rely on Taiwan for approximately 80 percent of its most advanced semiconductors.
It remains uncertain whether voters will exhibit the patience to wait for such outcomes.
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