Tariffs won’t bring a boom in American manufacturing

It isn’t easy to pin down the purpose of the Trump administration’s sweeping tariff agenda. Sometimes the president uses tariff threats to intimidate and gain leverage with trading partners. Other times it seems his main motivation is to bring in new tax revenue to pay for tax cuts and other priorities.

But the goal most commonly cited by Trump administration officials is bringing manufacturing jobs back to America—reindustrializing the nation. As Vice President JD Vance put it during a speech in Michigan earlier this month, “If you want to be rewarded, build in America. If you want to be penalized, build outside of America. It’s as simple as that.”

That the tariffs have been widely unpopular hasn’t dissuaded the administration from this pursuit. Stock investors are clearly spooked: The markets plummet every time Mr. Trump proposes a new or higher tariff and rise when he delays or cancels them. Consumer economic sentiment recently hit a 29-month low, and consumers’ expectations about future conditions fell 15% this month, the largest decline since the pandemic. A February survey of small-business owners showed the largest decline in plans to expand since April 2020.

Commerce Secretary Howard Lutnick has said that the tariffs will be “worth it” even if they trigger a recession, because on the other side of any potential pain, great gains await us. Doubtful. Our analysis suggests that large-scale reindustrialization is highly unlikely to occur. Even countries with large trade surpluses have experienced declining shares of factory jobs. There is good reason to expect we’d be no different.

The reindustrialists in the Trump administration appear to believe, against all evidence, in the power of two basic mechanisms: first, that the tariffs will lead to more-balanced trade, and second, that more-balanced trade will reverse the long-term decline in the share of manufacturing jobs.

The problem with the first belief is that trade wars don’t reduce trade deficits. While tariffs may lower imports, retaliation by trading partners—which is already well under way—lowers exports. Tariffs also tend to raise the value of the dollar relative to our trading partners’ currencies and make our exports less competitive. That’s why during the trade war in the first Trump term, the trade deficit as a share of the economy stayed around 3%, about where it is now.

Second, we see declining shares of factory jobs in advanced economies around the world, including in Germany, a country with large and persistent trade surpluses. Between 2000 and 2024, Germany’s trade balance as a share of its gross domestic product grew from a deficit of 1.5% to a surplus of 5.8%. During this same period, the country’s share of factory jobs fell from 20% to 16%. A 2021 study found that the decline in manufacturing job shares was similar in both U.S. and German industrial hubs despite the stark differences in national trade balances.

It’s also important to recognize that about 45% of U.S. imports are inputs that go into our own manufacturing production. An import tax on these inputs hurts domestic manufacturing. Why have American car manufacturers pleaded with the administration not to impose tariffs on steel? And why has Alcoa, the largest U.S. aluminum producer, sought a waiver from tariffs?

Even if U.S.-manufactured exports increased enough to close the trade deficit—an extremely unlikely event—and if employment grew proportionately, our manufacturing-workforce share would climb only from 8% to 9%. Not exactly transformational.

We see no credible path toward full-scale American reindustrialization that Mr. Trump envisions, but we enthusiastically support measures to encourage domestic production—especially of renewable energy and clean-energy products, from grid-scale batteries to store intermittent clean energy to electric vehicles, heat pumps and wind turbines. For strategic and national-security reasons, domestic semiconductor production is also important. Because of the uncertainty of near-term returns, private markets have historically underinvested in these energy sources and products.

The historical record is clear about two things. First, spurring domestic investments of the types we’ve just described isn’t only possible; it’s already happening, supported by tax credits, subsidized loans and grants from the Inflation Reduction Act, the CHIPS Act and the Bipartisan Infrastructure Law. Factory construction more than doubled from 2019 to 2024 after adjusting for inflation.

Second, we know of no example in the history of advanced economies of sweeping tariffs having the positive effects the Trump team believes are waiting for us on the other side of this tariff push. It's still early enough for Trump officials to recognize their mistakes. But if they fail to do so and continue to double down on their unpopular agenda, we may find ourselves testing Mr. Lutnick’s assertion that a recession will be worth it.

Mr. Bernstein served as chairman of the U.S. Council of Economic Advisers, 2023-25. Mr. Baker is a co-founder of the Center for Economic and Policy Research.