Ed Gresser, PPI’s Vice President and Director for Trade and Global Markets, published his trade fact of the week to show how the IEEPA tariffs may be intended to support U.S. manufacturing, but actually the tariffs are more likely to hurt manufacturers.
Imports of business inputs – “intermediate goods” like chemicals and metals, raw materials like energy and metal ores, and capital goods such as power equipment — are substantially larger than imports of consumer goods. So the Trump tariffs are likely to raise U.S. production costs even more than they raise mall and grocery prices. …
With this in mind, some specially protected “manufacturing sectors” might gain. But U.S. manufacturing in general will have higher costs and probably get relatively smaller. The earlier round of Trump tariffs provides some guidance here: per a 2023 U.S. International Trade Commission study, the 2018 steel and aluminum tariffs over three years raised the two metals’ output by $2.2 billion, but simultaneously shrank the U.S. auto parts, machinery, toolmaking and other metal-using industries by $3.5 billion. On a larger scale, since the metals and “301” tariffs on Chinese goods in 2018/2019, manufacturing has fallen from 10.9% to 9.9% of U.S. GDP. Real manufacturing output growth and employment totals, meanwhile, have slowed from the annual $40 billion and 100,000 net jobs averages of the post-financial crisis Obama years to $30 billion and 30,000.