The powerful force behind Trumps tariffs
President Donald Trumps defenders often frame his trade policies as prioritizing economic development over the free market. In their telling, America has an interest in manufacturing valuable goods domestically, even if producing such wares in the US is not maximally profitable right now. Our nation might not currently make semiconductors as well as Taiwan or electric vehicles as well as China. But if we protect our nascent chip and EV industries, they might eventually become globally competitive. And that could make America wealthier, as the international market for such technologies will be large and opportunities for productivity gains in those industries are significant. This is a reasonable argument for the utility of tariffs in some contexts. But it doesnt amount to a case for Donald Trumps tariffs.On Wednesday, Trump announced that he will impose a 10 percent minimum tariff on all foreign imports, and much stiffer rates on most nations: 20 percent for goods made in the European Union, 46 percent for Vietnam, and 54 percent for China. In a sign of the policys intellectual caliber, the president also ordered a 10 percent tariff on all exports from two uninhabited Antarctic islands (perhaps on the assumption that penguins will soon develop opposable thumbs thumbs and heavy industry).Traditionally, countries use tariffs and industrial policy to climb the international value chain to go from producing simple goods (like T-shirts) or basic commodities (like lumber) to making complex products that are more valuable.But Trumps trade policies would move the United States down the value chain. His tariffs are not designed to foster domestic production of a few highly valuable, cutting-edge products. Rather, he aims to move more or less all forms of manufacturing to the United States. His tariffs apply to all imported goods, from kitchen mitts to airplanes. As Bloombergs Joe Weisenthal notes, this would likely make the United States less competitive in the worlds most lucrative markets. If America lets poorer countries supply it with T-shirts and aluminum, it can dedicate more of its resources to producing semiconductors, airplanes, chemicals, medical equipment, software, and artificial intelligence. The more capital and labor we must devote to providing ourselves with socks and aprons, the less well have to expend on more fruitful enterprises. Trumps tariffs arent rooted in rational development aims. The president is not trying to dominate the industries of the future hes trying to bring back the economy of the past. Nostalgia is the point.Americas right-wing nationalists associate the manufacturing-heavy economy of the 1950s and 1960s with a favored set of social and material conditions. It was an era when rates of wage growth, marriage, and fertility were high, and regional inequality was low. And they believe that they can bend the arc of history back toward that golden age by dramatically increasing US manufacturing employment. But this is a fantasy. America can only return to the mid-century industrial economy in the sense that it can return to subsistence farming: It is technically possible to embrace an anachronistic mode of production, but only at immense economic cost. Why the right longs for the postwar industrial economyI dont mean to assert that nostalgia is the driving force behind Trumps trade agenda. Other motivations and intuitions are surely at play. For example, Trump seems to view trade as a zero-sum game, in which the loser is whichever country buys more goods than it sells.Nevertheless, nostalgia for the postwar industrial economy suffuses the nationalist rights rhetoric about trade policy, and informs its fixation on manufacturing employment. In the America first movements narrative of national decline, deindustrialization which is to say, the economys shift away from manufacturing and toward services is synonymous with economic devastation and moral rot. The basic story goes like this: In a bygone, golden era, American workers made things in factories, formed stable families, and coalesced into tight-knit communities. But then corrupt, globalist elites shipped US manufacturing jobs overseas, devastating middle-class workers in general and male ones in particular. Marriage rates collapsed, communities frayed, and moral standards declined. By reshoring production, Americas former greatness can be restored.As Trump explained in his first inaugural address, Americas fall from greatness began when factories shuttered and left our shores and the wealth of our middle class was ripped from their homes, leaving rusted-out factories scattered like tombstones across the landscape of our nation while crime and gangs and drugs festered in the ruins.In his speech to Congress this year, the president gestured at similar themes, arguing that tariffs are not just about protecting American jobs. Theyre about protecting the soul of our country.For the Trumpist right, the US economys shift away from manufacturing and toward services not only had ruinous economic effects, but destabilizing social implications. The industrial economy put a premium on brute strength, which men are far more likely to possess than women. The post-industrial economy, by contrast, features somewhat less demand for brawn, and considerable need for soft skills commonly associated with women. Deindustrialization was therefore a crisis for men in particular. Over the last 30 years and more, government policy has helped destroy the kind of economy that gave meaning to generations of men, Republican Sen. Josh Hawley argued in a 2021 speech. Domestic manufacturing once supported millions of American men with good wages, who in turn started and supported families. Now that industry lies all but dead on the altar of globalism.Some pro-Trump conservatives explicitly blame mens declining economic advantage over women for falling marriage and birth rates. They argue that women tend to prefer singledom to partnering with a man who enjoys less economic status or earning potential than themselves. Therefore, to promote family formation, you need to improve mens economic outcomes at womens expense. As one influential right-wing influencer mused on X, you do not solve low birth rates by giving money to women, you solve low birth rates by taking money away from women. National Review contributor Pascal-Emmanuel Gobry recently endorsed another X users sentiment that fertility is a solved problem and tracks differential status between men and women.It is unclear whether Trump and his allies consciously see reindustrialization as a strategy for shifting gender relations in mens favor. But the broad sense that the industrial economy was good for male workers specifically and thus, for family formation permeates the nationalist rights rhetoric.The rights nostalgia for the industrial economy is understandable. From the end of World War II through the 1960s, more than one-quarter of US laborers worked in manufacturing (today, that figure is 9.7 percent). And those decades of high manufacturing employment witnessed exceptionally high rates of wage growth and economic mobility. Between 1948 and 1973, hourly compensation in the US climbed by 91.3 percent, according to the Economic Policy Institute. Over the ensuing 50 years, by contrast, hourly wages grew by just 9.2 percent.Meanwhile, a child born into the bottom half of Americas income distribution in 1940 had a 93 percent chance of outearning their parents, according to economist Raj Chettys research. A child born into similar circumstances in 1980, by contrast, had just a 45 percent chance of doing so.Whats more, deindustrialization coincided with a profound shift in the relative economic power of men and women in the United States. Men bore the brunt of wage stagnation: From 1979 to 2019, the median male workers weekly earnings fell by roughly 3 percent, while the median female workers jumped by more than 30 percent.Courtesy of Federal Reserve Economic Data.The correlation between all these economic developments and the decline of manufacturing employment is not coincidental. In the postwar period, manufacturing workers earned significantly more than similarly skilled laborers in other occupations, enjoying a 12 percent wage premium in 1983, according to the Cleveland Federal Reserve. Thus, as the manufacturing sector hemorrhaged jobs, millions of (disproportionately male) workers transitioned into less remunerative employment.The manufacturing sectors unusually high pay reflected two key characteristics of the industry. First, it is easier to achieve productivity gains in manufacturing than in many service-sector occupations. Increasing the number of widgets a factory worker can produce in an hour is a more straightforward engineering challenge than, say, increasing the number of children an individual daycare worker can nurture over the same period. Second, the manufacturing sector was more heavily unionized than other parts of the economy. In 1980, 32.3 percent of manufacturing workers were organized, compared to 15 percent of all other private sector workers. The decline of manufacturing employment was therefore synonymous with the decline of unionization. And since unionized employers tend to pay higher wages than non-union ones, this likely contributed to wage stagnation.To be clear, the decline of manufacturing was not the sole or even primary driver of slowing wage growth or rising income inequality in the US over the past half-century. Productivity and GDP growth rates slowed during the past 50 years, which limited opportunities for wage gains. Meanwhile, pay inequality within all sectors of the economy grew, as high-skilled workers across industries saw their advantage over less-educated workers swell. Nevertheless, the decline of manufacturing explains about a quarter of the jump in US income inequality between the 1980s and 2000s, according to a 2019 IMF working paper.Deindustrialization also fed regional inequality, as localities that were economically dependent on manufacturing suffered wrenching economic decline while those dependent on the provision of high-end services such as finance or software development thrived. Some measures show a 40 percent increase in such inequality since 1980. Finally, there is evidence that the decline of manufacturing did in fact lead to lower marriage and birth rates, as a result of men losing economic status relative to women. The economists David Autor, David Dorn, and Gordon Hanson have found that trade shocks in which localities suffer manufacturing job losses as a result of foreign competition reduce the earnings of young men relative to young women, and consequently see lower marriage and fertility rates.All of which is to say, right-wing nationalists arent wrong to believe that deindustrialization contributed to many of the economic and social trends that they decry.But it does not follow that Trump can reverse these trends by imposing giant tariffs on Vietnam, Bangladesh, and floating chunks of ice in the sub-Antarctic Indian Ocean.Why America cant tariff its way back to an industrial economyIn the nationalist rights account, the decline of manufacturing employment was the contingent result of bad trade policies: Were it not for the machinations of globalist elites, the past half-century of factory closures could have been averted.But this is false. Americas pursuit of free trade surely influenced the scale and speed of deindustrialization. With a different set of trade policies, manufacturing employment in the US could have been marginally higher today.Nevertheless, the United States was bound to see a massive reduction in manufacturing employment over the past 50 years, no matter what trade policy it pursued.The reasons are twofold: First, as consumers get wealthier, they spend less of their income on goods and more on services. Humanitys appetite for appliances, cars, and other physical objects is more exhaustible than its desire for better health or higher investment returns. In 1960, Americans devoted more than 50 percent of their consumer spending to goods; by 2010, that figure had fallen to 33 percent.Thus, to keep up with shifts in consumer demand, advanced economies need to dedicate more labor to the provision of health care, financial advice, and other services, and less to the production of durable goods.Second, manufacturing is easier to automate than services. Goods production requires the performance of repetitive tasks in a controlled environment. This makes it easier to mechanize than medical care, education, or even food service: Robots are better at assembling standardized products (such as cars) than customizable ones (such as Chipotle burritos).For these reasons, manufacturings share of employment has been falling in all rich countries over the past 50 years. Even in Japan, which has promoted manufacturing through protectionist trade policy and government subsidies, the percentage of workers employed in manufacturing has fallen to just over 15 percent. And this same trend is beginning to surface in China: Despite that nations massive trade surplus, its manufacturing sector went from employing 30.3 percent of all workers in 2013 to 29.1 percent in 2023.According to the Financial Timess Martin Wolf, were the US to entirely eliminate its trade deficit in goods, manufacturings share of US employment would at most return to its level from two decades ago, leaving roughly 85 percent of US workers employed in other sectors. There is little reason to believe that Trumps tariffs will actually succeed in strengthening US manufacturing. To the contrary, they will massively increase the costs of producing goods in the United States, inspire foreign nations to erect new barriers to American exports, and make companies more reluctant to invest in new factories due to economic uncertainty, all of which will hurt domestic manufacturing. But even if the presidents trade policies somehow proved exceptionally effective, they would not bring back the industrial economy of yesteryear. We dont need a time machine to raise working-class living standardsNone of this means that America must resign itself to low wage growth or high inequality. The decline of manufacturing may have been inevitable, but the rise of a more inegalitarian economic order was not. In social democratic Denmark, the decline of manufacturing employment coincided with falling inequality, according to the IMF.And although productivity gains have historically been higher in manufacturing than in services, this has become less true over time. Certain service sectors such telecommunications and transport have seen faster gains in output per worker hour than manufacturing in recent decades.America can build a more dynamic and egalitarian economy without reengineering mass manufacturing employment. Collective bargaining helped factory workers wield leverage over their employers in the postwar period. And it could help all workers do so today, if the US established a system of sectoral bargaining. Demand for manufacturing labor may be inherently limited. But in other sectors, demand for blue-collar labor is artificially constrained by regulation. America has 4.5 million fewer homes than it needs. By eliminating restrictive zoning laws, and providing cheap financing to the housing sector, we can meet one of our nations most pressing economic needs while expanding opportunities for manual workers. And one can tell a similar story about promoting infrastructure construction or the green energy buildout.Increasing the affordability of college and trade schools can further help workers acquire the skills demanded by a modern, services-dominant economy. And a more comprehensive social welfare state can ease the burdens of future labor shocks, such as the one that artificial intelligence threatens to deliver to some white-collar workers. The rights desire to increase mens economic leverage over women is morally objectionable, even if such inequality is conducive to higher marriage or birth rates. All Americans, regardless of gender, are equally deserving of opportunity. But reducing young mens unemployment and increasing their wages would enhance their well-being, while shrinking the number of women who involuntarily forgo marriage and motherhood due to an absence of financially independent partners.But Trumps policies are unlikely to advance any of his movements purported aims. His tariffs are poised to reduce real wages, depress housing construction, and increase unemployment. And his labor agenda aims to restrict collective bargaining rights, rather than expand them.Americans deserve an economy in which blue-collar work is more remunerative, opportunity is broadly shared, and material obstacles to family formation are less profound. But building that economy will require an unsentimental analysis of our economys present, not nostalgia-addled efforts to resurrect its past. See More:
English
Arabic
Spanish
Portuguese
Deutsch
Turkish
Dutch
Italiano
Russian
Romaian
Portuguese (Brazil)
Greek