By now economists are reasonably confident that Trump Tariffs were never designed to moving manufacturing jobs to the US. If that was the policy target, one would/could have gone about it in an effective fashion. Indeed there are many reasons why Trump Tariffs wont have the promised economic effect.
- Trump is obsessed with bilateral trade balances. Even the right wing Cato Institute tried to explain the futility of the concept and elementary trade theory clarifies the point. But that confuses Trumps intentions; his point is not the US trade balance. His point is to blame specific countries for unskilled workers plights in the US. US Commerce Secretary “We are using “trade deficit” as a shorthand way of saying job creation.”
- Reducing the trade deficit will not return the US to the manufacturing employment of the 1970s. US wages have increased since then and no one in the US is willing to work for Chinese or Vietnamese wages. So, even if Trump chose prohibitive tariffs (forcing the US to produce certain products in the US), firms would not use the same number of workers as in the 1970s — they would substitute ample capital to increase labor productivity to the point where they would be able to pay the going US wages. Whats next? Prohibiting artificial intelligence in the production processes?
- Nicholas Kristof laid out nicely decades ago that tariffs wont reduce the trade deficit. He provides some wonderful examples.
- The recent articles about companies moving production from China to (Chinese subsidiaries in) Vietnam show that the jobs won’t return to the US but instead move to lower wage countries.
