5 hours ago

Tariffs can help US workers. But Trump’s doing them all wrong

In the run-up to the 2024 election, a lot of people were ringing alarms about Donald Trump’s tariffs. Kamala Harris called Trump’s policies a “tax on the American people” and warned of sky-high prices. According to the Nobel prize-winning economist Joseph Stiglitz, they are “very bad for America and for the world”. His fellow Nobel laureate Paul Krugman called them “small, ugly, and stupid”. More recently, the whirlwind tariff drama of the past two months – first a 25% tariff on Mexico and Canada, then a 30-day “pause” on that policy, a plan to raise tariffs on steel, aluminum and agricultural goods, plus an across the board tariff hike on China – has generated yet more frenzied debate about the danger of tariffs.

Observers aren’t wrong to criticize the US president’s policies. His proposed tariffs seem unlikely to improve what ails the US economy. Worse, applying tariffs as broadly as he’s proposed, and without any supplementary industrial strategy, does risk needlessly raising prices while acting like a big corporate giveaway. Yet, despite what elite economists say, tariffs can be sound, and progressive, economic policy.

In fact, liberals might be surprised to learn that during his administration Joe Biden actually raised the highest tariffs in recent American history: a 100% tariff on Chinese electric vehicles. Why? Because tariffs work.

Tariffs are, simply put, taxes on certain imported goods, paid by the importer. The goal is to make foreign products more expensive than their Made-In-USA counterparts. This is why people refer to tariffs as “walls” that help “protect” domestic industry from global competition. Right now, China quickly and efficiently produces fleets of electric vehicles that are – thanks to the low cost of Chinese labor – a lot cheaper than the EVs made in the United States. Without tariffs, it would be impossible for US-made models to compete. Since making electric cars was a big goal for Biden, his administration raised an eye-watering tariff that would double the price of any Chinese-made import.

The EV example is useful because it demonstrates the difference between Biden’s tariff policies and Trump’s.

Trump has, for the most part, not focused on raising tariffs on particular imported goods but instead on all goods coming from certain countries. Mexico and Canada face across-the-board tariffs; China was already facing 10% tariffs, doubling to 20%. But raising the prices of all products from these countries doesn’t help develop any particular line of US manufacturing. Tariffs like these are both too broad and too small to make a positive impact. A 20% tariff on all Chinese goods might make it more expensive for Americans to continue to buy certain things from China. But nothing in that policy encourages Americans to buy American-made products; they might just as well find a Vietnamese supplier to avoid the tariff while continuing to reap the benefits of cheap labor. Moreover, it’s possible that some Chinese manufacturers will simply eat the additional costs and sell their goods at slightly slimmer profit margins. Or, equally likely, they will try to avoid the tariffs by having other companies assemble their products in neighboring countries before sending them to the US. As is, Trump’s country-based tariffs seem more like a geopolitical tool than an economic one. Frankly, they don’t make much sense if the goal is to bring factories home.

Trump’s steel and aluminum tariffs are closer to the mark. By making all steel imports (regardless of national origin) subject to the same tariff, the policy could succeed in making US steel comparatively cheaper for domestic buyers.

people at a stand full of toys at an expo. the stand says ‘China pavilion’

Yet even this wouldn’t make US steel bigger or better, or make its production more efficient. Nor would it necessarily raise the wages of steel workers. Pure and simple protectionism will benefit existing US steel manufacturers, but no one much beyond that. Without the government stepping in to develop new manufacturing – encouraging the adoption of the latest techniques to make a superior product, actively building new demand for American steel, or providing social guarantees for steel workers – tariffs alone risk protecting a sick industry without much upside.

So what would a labor-forward tariff program look like? It would combine tariffs with big investments in infrastructure to help steer industry, and the country, into better economic health.

For steel, such a fix isn’t hard to imagine. The US benefits from being a continental-sized country, with hundreds of thousands of bridges, school buildings, libraries, miles of rail and highway. All of those things are made with steel. And all of them are falling apart. Major new investments in infrastructure upgrades would provide the tariff-protected steel industry the new demand needed to grow, and provide the requisite scale for industrial dynamism.

In exchange, steel firms should be required to provide family-sustaining wages and benefits, and promise to stay neutral in union elections. Not only this, but the government should have some say in actually directing the production process. New steel plants should be built in places that need jobs, not isolated tax-free industrial parks, but in the very same areas that were obliterated by deindustrialization. That is, production should be directed, first and foremost, toward public use and social ends.

Some might wonder: why bother with such an expensive experiment?

Manufacturing is still a huge part of the US economy and it is among the only sectors that consistently provides high wages for a large base of workers. Protecting that industrial foundation is essential not only for those workers, but for the health of other sectors too. When a factory closes, it’s not just the high-wage blue-collar workers who are thrown out of jobs. So are all the middle-income truck drivers who deliver the goods. And all the high-skilled mechanics who fix the machines. Not to mention the servers and cooks who staff now empty local restaurants. The only businesses that grow in the wake of a factory closing are those related to opioids and alcohol.

Since Nafta was signed, tens of thousands of factories have closed in the US. Millions of largely union jobs have been lost. This fact alone explains so much of the populist revolt against globalization. And while it’s unlikely that we could ever return to the industrial output of 1946, is it that hard to imagine returning to 1994? If Pearl Jam is still making albums, can’t the US still make steel?

Rebuilding our manufacturing capacity will be a big part of building a better country. And tariffs – deployed wisely with big investments – are an indispensable tool for doing so.