President Trump promised that his trade war would usher in a new industrial renaissance. Factories, he said, would “come roaring back” as tariffs forced consumers to buy American and as foreign producers were pushed to the sidelines. In April of this year, on what he called “Liberation Day,” he announced that higher tariffs would “supercharge” the domestic industrial base, drawing a direct line between protectionism and an imagined revival of American manufacturing employment. Since then, manufacturing employment has declined by 37,000 employees nationwide.
Michael Strain of the American Enterprise Institute has just published a new essay at VoxEU/CEPR that takes Trump’s claims head-on. Strain argues that the promises behind this second Trump trade war are not merely exaggerated, but fundamentally wrong. The evidence suggests that, far from reviving manufacturing employment, tariffs are more likely to shrink it. And even if they did not, the entire fixation on manufacturing jobs is misplaced.
The economic logic is not difficult to understand. Tariffs raise the price of imports, which might in theory redirect demand toward domestic producers. But they also raise the cost of production for American firms that rely on imported inputs. A tariff on steel, for example, may provide a modest cushion for steelmakers, but for every one worker employed in steel production, there are scores employed in industries that use steel to make appliances, cars, batteries and machinery. When input costs rise, those industries hire less, not more. Added to this are the inevitable foreign retaliations against American exports, which erode demand for U.S. goods abroad and push manufacturing employment lower still.
Strain draws heavily on the evidence from Trump’s first trade war to demonstrate the point. Studies by economists such as Flaaen and Pierce, Autor and co-authors, and Javorcik all converge on the same result: When tariffs go up, manufacturing jobs do not return (see table 1 below). Instead, employment falls, job creation slows and labor demand weakens, especially for lower-skilled workers. Tariffs, in short, act as a tax on both consumption and investment, and the net effect is contractionary.
But Strain’s essay does not stop at the short-run employment calculus. He challenges the very premise that American manufacturing is in decline or that it deserves special policy protection. Manufacturing employment has indeed fallen as a share of the workforce, but that trend is the inevitable result of rising productivity (see figure 1 below). The United States produces more manufactured goods today than ever before, and it remains the world’s second-largest manufacturing nation, far ahead of every country but China. The refrain that “America doesn’t make things anymore” is simply false. What has changed is not output, but the number of workers required to produce it.
This reality undercuts the nostalgic appeal of Trump’s trade rhetoric. If the goal is to recreate the employment patterns of the 1950s, the only sure way to do so would be to throttle productivity growth—a strange and self-defeating strategy for any nation serious about prosperity. Nor are manufacturing jobs uniquely good jobs worth fighting to preserve. Since 2018, average wages in services have outpaced those in manufacturing. Many factory jobs are more dangerous, more physically taxing and less appealing than positions in today’s expanding service sectors. Importing low-wage, low-value-added manufacturing jobs back into the United States would not raise American living standards; it would lower them.
The broader intellectual scaffolding of protectionism rests on two other shaky claims. One is that American workers have endured decades of stagnation. But Strain points out that since the early 1990s, real wages for typical workers have risen substantially, with purchasing power up nearly 45%. There have been interruptions, most notably after the financial crisis and during the pandemic, but the idea of a long-term decline in worker well-being does not survive serious scrutiny.
The other claim is that granting China permanent normal trade relations in 2000 and supporting its entry into the World Trade Organization in 2001 were catastrophic policy errors. Here, again, the story is more complex. U.S. imports from China had been climbing for decades before those decisions, and while the so-called China shock did cost the U.S. some manufacturing jobs, other sectors gained through exports. Over the longer horizon, those gains offset much of the loss.
What Trump’s tariffs offer, then, is a mirage. They are justified by a false diagnosis of decline, applied to a sector that is not in crisis, and designed to solve a problem (falling manufacturing employment) that is neither reversible nor, in economic terms, especially troubling. Worse still, tariffs bring real harms: higher costs for producers and consumers, less investment, reduced employment, fractured supply chains and weakened global alliances. Strain warns that in practice, they make America poorer and less secure.
The nostalgia driving this protectionist moment is powerful but misplaced. It rests on a longing for an imagined past when factory jobs guaranteed middle-class security and national strength. That past cannot be recreated, and efforts to do so will only undercut the opportunities of the present. A more productive course would be to invest in the sectors and skills that actually generate prosperity today, and to prepare for the disruptions of tomorrow, from artificial intelligence to robotics.
The real tragedy of Trump’s trade war is that it diverts attention and resources from these forward-looking goals. Instead of opening new avenues for opportunity, it tries to turn back the clock. And as Strain shows, the result is not a stronger industrial base, but fewer jobs, higher costs and a weaker economy.