Trump’s Tariffs Aren’t Going to Work How He Thinks They Will

The evidence for all this is pretty thin, and it represents a strange brew of ideological tendencies. The Trump administration’s protectionist policies go against decades of “free trade” orthodoxy about the promise of open borders and globalization, pushed for decades in the U.S. by neoliberal policymakers on either side of the aisle. Meanwhile, the administration’s vision for what happens after those tariffs go into effect—the mechanisms by which the U.S. will actually reindustrialize—is pure neoliberal market utopia: nudged in the right direction, companies will start building the factories that will restore American greatness.

So far, this isn’t going very well. In March, the Institute for Supply Management’s Purchasing Management Index—a monthly survey of corporate leaders indicating manufacturing performance—dropped 1.3 percentage points below February levels to 49 percent, indicating that manufacturing activity is contracting rather than growing. Like the oil and gas executives now furious with Trump, those in the chemical products, electronics, metals and machinery business (to name a few) expressed worries about the uncertainty being bred by Trump’s approach to tariffs. Survey respondents reported that already-implemented tariffs are eating into profits, and that customers are “pulling in orders due to anxiety about continued tariffs and pricing pressures.”

At a basic level, tariffs make stuff more expensive. Companies have spent decades structuring production around the expectation that goods can flow relatively freely across certain borders. Long-term corporate planning has factored in other countries as reliable places to make and sell products, and to source parts and machinery.  GM assembles about 30 percent of the cars it sells in the U.S. in Canada or Mexico, but roughly 40 percent of the parts used to make all cars assembled in the United States are made in other countries. Some can cross borders multiple times before landing on the sales lot as part of a finished vehicle. Tariffs might signal that they should make more stuff in the U.S., but that can’t happen overnight. Transforming supply chains and re-allocating production is costly and time-intensive, requiring not just billions of dollars worth of investments in new plants but workers who are trained to staff them.