Trump Wants More Tariffs. Is That a Good Idea for US Manufacturing?

As he seeks a second term in office, the Republican candidate has been vocal about his readiness to once again implement tariffs. He has highlighted several proposals during his campaign. They include new tariffs of up to 20% [he initially mentioned 10%] on all foreign imports and 60% on all Chinese imports. Additionally, he has suggested imposing 100% tariffs on countries that move away from the U.S. dollar.

Kamala Harris has been more circumspect in her position on tariffs. However, while the Democratic candidate hasn’t outlined a formal position, and has even attacked Trump on the topic, the Biden administration has shown its own willingness to impose tariffs. Not only has it kept many of the tariffs imposed during the Trump administration, but earlier this year the Biden administration boosted tariffs to the tune of $18 billion on a host of Chinese imports, including electric vehicles, semiconductors, steel and critical materials.

Who Wins? Who Loses with Tariffs?

“Tariffs are essential, some form of protection is essential,” says Jeff Ferry, chief economist for Coalition for a Prosperous America, a national bipartisan organization that represents domestic producers. In a commentary released earlier this month, he pointed out that tariffs “were an integral part of America’s rise to modern prosperity in the 19th century.” Done right, tariffs “can play an important role in rebuilding our manufacturing base.” 

That includes taking a sector-specific approach, he said. The commentary pointed to the 2018-2019 tariffs on washing machines and furniture as examples. “We have in the U.S. today two washing machine factories (Samsung and LG Electronics) that we did not have in 2018.”

And while those are relatively small sectors, steel is not: “We’ve had around 15 new steel mills … and they’re all creating good jobs. That’s an example of how a sector tariff can work,” he says.

A separate study by his organization concluded that a universal tariff on all U.S. imports, combined with income tax cuts, “would generate economic growth of $728 billion and 2.8 million additional jobs.”

On the flip side, you have Miles Free, director of industry affairs at the Precision Machine Products Association. PMPA represents the interests of manufacturers that use aluminum, steel and other metals hit with tariffs. While the association consists mainly of U.S.- and Canada-based manufacturers, its members also operate facilities internationally. Free says his organization’s members didn’t like the Trump-Biden metals import charges.

“Tariffs on steel imports negatively impact PMPA members and other downstream U.S. steel-users. Our members source almost all their steel from domestic suppliers, but what matters most is the price difference between what we pay for steel and what our global competitors pay, as steel is a significant input cost for our products.”

“We are at a huge disadvantage compared to our competitors around the globe — thanks to the tariffs.”

He also points to a report from the Tax Foundation, which states that the Section 232 tariffs on steel and aluminum, enacted during the Trump administration and continued during Biden’s, “raised the cost of production for manufacturers, reducing employment in those industries, raising prices for consumers, and hurting exports.”

And from the Institute for Supply Management: “Speaking for supply management people, we are not advocates for tariffs from a business standpoint,” says Tim Fiore, ISM (Institute for Supply Management) Manufacturing PMI Business Survey Committee chair. “Subsidies, tariffs, rebates … we are in search of the perfect market, which is a supply demand market, and anytime you throw in an artificial factor like this, it messes things up.”

He doesn’t completely decry tariffs. “There’s clearly times when tariffs are probably appropriate … I am a believer in the strategic use of tariffs as appropriate for that purpose to keep people out of your market.”

Regarding Trump’s statements on new tariffs, Kevin Dempsey, president and CEO, American Iron and Steel Institute, suggests it may be too soon to make an evaluation, given that they appear to be less than a complete policy proposal. That said, “Tariffs can be a useful tool. It would depend on the circumstances,” he notes. In the case of China, Dempsey points out that China continues to produce steel at levels much higher than domestic demand.

“Even though their demand is dropping, they're keeping production at very high levels and just exporting larger and larger amounts of steel into global markets. Some additional action is going to be needed on China,” Dempsey says.  “Tariffs are, frankly, one of the only tools really available.”