Can Tariffs Bring American Factories back to Life?

Takeaways

• President Donald Trump implemented tariff policies to restore manufacturing in America.
• Many of America's manufacturing jobs went overseas in the 1980s or were replaced by automation.
• Manufacturing moved due to the pay differentials among countries. But the U.S. is still one of the world's leading manufacturers—the country just produces more valuable products.
• Experts say that his efforts to impose import taxes are unlikely to achieve one of their stated goals: restoring manufacturing to a central role in the U.S. economy.

Economists say that President Donald Trump’s campaign to impose tariffs on trading partner countries for a wide range of products will not bring back manufacturing jobs, which were once the backbones of the blue-collar working class. 

As Trump enters the next phase of his administration’s trade wars, experts are warning that his efforts to impose far-reaching import taxes are unlikely to achieve one of their stated goals: restoring manufacturing to a central role in the U.S. economy.

In the mid-20th Century, the U.S. dominated the manufacturing sector, employing more people than any other industry. In the 1950s, manufacturing employed a quarter or the civilian workforce. Free trade agreements, however, have allowed many industries to relocate overseas since the 1980s. Automation has also reduced the number workers needed in remaining factories. Only 7% of workers are employed in manufacturing today, a number that has remained constant since the Great Recession.

Tariffs are designed to encourage businesses to relocate their plants to the United States, in order to avoid paying import duties that are typically passed on to the consumer. Many economists believe this approach may work for certain businesses. However, it is unlikely to bring back those days when the majority of items in a home could be marked “made in USA”.

US Workers Make More than Workers Elsewhere

The U.S. still ranks as a major global manufacturer, ranked No. China is No. 2 in the global manufacturing rankings. However, it's more expensive to make things domestically, depending on how much labor is involved in the production process.

According to an Apollo analysis, the average U.S. manufacturing employee earns just under $70,000 per year, while a Chinese manufacturing worker makes just over $13,000 and an Indian manufacturing employee only makes about $2,300.

This means that it may still be cheaper to manufacture many products overseas and pay tariffs than to relocate the factory to America and pay higher salaries.

If businesses decide to build factories on the U.S. soil, they are likely to be highly automated and create few jobs.

"It's unlikely to accomplish the goal that Trump is looking for," said John Veitch, dean of the School of Business and Management at Notre Dame de Namur University,.

Bring Back Manufacturing? It never Left

In the debate about industrial policy, it’s easy to forget that the U.S. makes a lot of stuff. It is a leader across multiple high-tech sectors, including aerospace, medicine and weapons. The U.S. may have lost manufacturing jobs since the 1980s but its output in terms of value has increased.

Farouk Contractor is a professor of Economics at Rutgers who says tariffs could be a part of a coordinated plan to boost manufacturing of certain high-tech industries, such as computer chip. Joe Biden’s predecessor tried to do this with the CHIPS Act legislation which promoted the construction in the U.S. of semiconductor factories.

Contractor said it might not even be desirable to bring back lower-tech production. The U.S. is losing the most jobs, especially in textiles. Many hours of hard labor at sewing machines result in products that are not very profitable.

Contractor said, “High-end and high-value products can be imported to the U.S. because their value is not in labor but rather in thought.” “So, if you’re making a highly automated and highly sophisticated item, like computer chips, the labor cost doesn’t really matter, because the value is not in labor, but in thought,” Contractor said.

Veitch explained the exchange by calculating the hours of work. In one hour, an American worker could work at a company that manufactures auto parts and create a complex component worth $400. In the same hour, a worker in Cambodia or Vietnam could work in a T-shirt factory and create a garment worth $10.

"You've taken one hour of American labor, and instead of producing a t-shirt, you produce something you sold to somebody else that will bring you back 40 t-shirts," Veitch said.

Correction for April 9, 2025 In an earlier version of this article, John Veitch was incorrectly referred to as John Veitch.