Using Forecasts to Determine If Tariffs Are Boosting U.S. Manufacturing
Bringing Back Jobs or Accelerating Decline?
The debate over tariffs and their impact on U.S. manufacturing has resurfaced with renewed urgency. Proponents of tariffs argue that trade protectionism will revive domestic industry, narrow the trade deficit and restore lost factory jobs.
Tariffs don’t just affect abstract trade statistics—they shape the cost of everyday goods, the competitiveness of U.S. firms, and the livelihoods of millions of workers. The question is whether protectionist policies can deliver promised benefits, or whether they risk imposing hidden costs on households and businesses alike.
To cut through the rhetoric, I turn to the data. By using forecasting models to project where trade balances, employment levels and producer prices would have been without the tariffs, we can test whether the policies are delivering on their promises or whether they are backfiring.
I applied a Holt-Winters exponential smoothing model, a forecasting method that extends exponential smoothing to capture both long-term trends and repeating seasonal patterns, with historical data (January 2015 – November 2024) to project U.S. goods trade deficit values for December 2024 through July 2025.
November 2024 is a suitable endpoint for compiling historic data trends because the market had already begun anticipating the tariff policies of the incoming government, with stockpiling starting as early as the next month.
Figure 1 shows that the actual cumulative deficit in goods trade from February 2025 through July 2025 is $45 billion larger than the forecast goods trade deficit trend. If we instead use January 2025 as a starting point, the cumulative goods deficit is $95 billion larger than the forecast.
Using the same methodology for manufacturing employment, I made two forecasts starting in April 2025 (to align with Liberation Day tariffs). One uses recent employment trends (since January 2023), and one uses longer term historic trends (since January 2015).
Actual manufacturing employment trends align with the recent decline since January 2023. Forecasts in Figure 2 show 2,000 fewer manufacturing jobs in August 2025 when compared to projections based on 2023–25 trends. Compared to longer term trends, there are about 108,000 fewer manufacturing jobs based on 2015–25 trends.
The administration’s efforts to “bring back jobs,” therefore, do not seem to be having their intended effect. At best, the efforts have had little to no impact on the downward trend in manufacturing employment. At worst, they have accelerated the pace of decline.
A likely reason the ongoing trade war is hurting manufacturing employment is that most U.S. imports are input goods that companies need for production. Between 54% and 56% of U.S. imports consist of industrial supplies, materials and capital goods that manufacturers use in the production process.
Using the same forecasting model with 2023–24 data, I forecast the trend in producer prices for the manufacturing industry. Actual producer prices in July are about 2.5% higher than forecast, and the gap in costs seems to be widening (Figure 3).
The evidence is clear: Tariffs have not boosted U.S. manufacturing. Instead of narrowing the goods trade deficit, tariffs have led to a cumulative deficit that is larger than what was forecast. Rather than reviving factory employment, tariffs have led to deeper job losses relative to both recent and long-term trends. And far from easing production costs, tariffs are driving them higher, with producer prices running above forecast.
These outcomes point to one unavoidable fact: Most U.S. imports are not consumer goods, but inputs, materials and capital equipment that manufacturers depend on to compete. By raising the cost of those inputs, tariffs have placed U.S. producers at a disadvantage, accelerating the very decline they were designed to reverse.
For U.S. producers to thrive, tariffs must give way to policies that truly promote growth. For example, the full and immediate expensing provisions included in the One Big Beautiful Bill Act reduce the cost to manufacturers of purchasing equipment and machinery. That’s where the conversation should go next.