Tariffs will harm America, not induce a manufacturing rebirth

More than 90 years ago Franklin Delano Roosevelt surveyed the wreckage of the Great Depression. He pointed to one of its causes: sky-high tariffs had put America on the “road to ruin” by inviting retaliation and suffocating investment. It was a painful lesson, and it took decades of sustained global effort, led by America, to bring tariffs down and let commerce flourish. From our vantage in 2025 the perils of protectionism should still be abundantly clear. Tragically, if Donald Trump gets his way, America risks repeating the errors of the past.

There is uncertainty about how far Mr Trump will actually go in his second term. Investors and diplomats alike were relieved that he refrained from slapping universal tariffs on all imports on his first day back in office. But make no mistake: the man who declared tariff to be the most beautiful word in the dictionary is determined to ratchet up protection. He sees tariffs as a simple tool to achieve multiple objectives: shrink America’s trade deficit, rebuild its manufacturing might and generate a gusher of revenue for the government. On every count he is wrong.

Mr Trump’s dalliance with tariffs in his first term already shows that they did nothing to narrow America’s trade deficit. One reason is that the dollar tends to strengthen when tariffs are applied.  A monomaniacal focus on the trade balance has no bearing on the economy’s real strengths. Just look at Germany and China today, both running giant trade surpluses and both mired in lacklustre growth.

The record from recent tariffs also proves that they do not magically create jobs in American factories. Manufacturing as a share of American employment has fallen since Mr Trump’s first tariffs went into effect.   However, data from Mr Trump’s first term demonstrates that the real cost of tariffs is borne, to a large extent, by American consumers through higher import prices. 

The most optimistic assumption about Mr Trump’s professed love for tariffs is that he mainly wants to deploy them for negotiating leverage. It is true that America, as the world’s biggest market, has plenty of weight to throw around. But tariffs are just as likely to tie America in knots. Once implemented, they are hard to retract, and their potency diminishes through repeated use.

Mr Trump and many of his supporters have taken to lionising the late 19th century as the golden age for America’s economy, a period when tariffs were high and growth was strong. That is a distorted reading of what really happened. Scholars have found that tariffs sheltered less-productive companies and raised living costs, and that it was other factors, including a growing population, the deepening rule of law and the success of non-traded goods that fueled America’s growth.