Trade policy changes alone won’t bring manufacturing back (2025)

John Paul Hampstead

Tue, Apr 8, 2025, 10:21 AM 5 min read

President Donald Trump has implemented a reciprocal tariff scheme that raises tariffs on imports from other countries that place tariffs on U.S. goods. The stated goal is to level the playing field for American manufacturers and bring factories and jobs back to the United States.

The plan targeted industries like steel, aluminum, automobiles and consumer electronics – areas where the U.S. has seen significant manufacturing job losses in recent decades. But it also affected commodities like cocoa and bananas, which are unlikely to be grown in the U.S. in significant numbers, suggesting that at least some of the tariffs are intended to be used as bargaining chips by the administration to get movement on other issues. Because the tariffs have been imposed for different reasons depending on the trading partner and commodity, it’s difficult to talk about their effects, intended or otherwise, as a whole.

This is JP Hampstead, co-host of theBring It Home podcastwith Craig Fuller. Welcome to the 20th edition of our newsletter, which puts trade policy in the broader context of a comprehensive industrial policy.

While tariffs can provide some short-term protection for domestic industries, I believe they’re insufficient on their own to reverse the long-term decline in U.S. manufacturing. The reality is far more complex, as outlined ina recent article on X by entrepreneur and Bring It Home podcast guest Molson Hart.

Hart explains that, while labor costs are a significant factor, they are not the only reason manufacturing has moved overseas. The United States faces several key challenges in reshoring manufacturing. First, there is a considerable lack of manufacturing infrastructure and domestic supplier networks.

Over the years, the U.S. has also experienced a loss of essential manufacturing knowledge and skills within its workforce, further complicating efforts to bring production back. Additionally, the costs associated with energy, transportation and regulatory compliance in the U.S. are comparatively high, posing another barrier.

Hart also notes that automation is reducing the number of manufacturing jobs even as output increases. So even if production returns, it may not bring back a proportional number of jobs.

Personally, I think the “if the factories come back, they’ll be full of robots anyway” argument is overblown. Yes, automotive assembly workers are approximately five times as productive today as they were in the 1950s. The largest automotive plant in the United States by number of assembly workers is Toyota in Georgetown, Kentucky, which employs approximately 9,500 people. It’s a much smaller scale in people terms than Ford’s River Rouge plant, which employed in excess of 100,000 in the 1930s, but anyone who says 9,500 manufacturing jobs aren’t worth pursuing because the numbers are too small is disconnected from reality. It turns out that the median household income in Georgetown is about $78,000 per year, 25% higher than the rest of Kentucky.