If high tariffs persuade manufacturers to leave China, they won’t move to the United States. There’s a much cheaper option next door.
Mexico in particular stands to gain because it is easier and cheaper for U.S. companies to relocate manufacturing there than to build new factories elsewhere for the kind of goods now produced in China. Mexico has the infrastructure from years of NAFTA, as well as ease of transport to and from the United States.
Faced with such facts, Trump may well be inclined to impose tariffs on everyone, everywhere in the hopes that enough economic walls will force a complete rejiggering of the global economic system and lead to a return of a 1950s halcyon moment when, after the global destruction caused by World War II, U.S. manufacturing accounted for nearly half of all world production. To accomplish even a fraction of that, the U.S. would have to impose tariffs far higher than 25 percent.
Trump the Tariff Man would need tariffs of more like 100 percent to make that attractive to companies. He probably would support that. Of course, tariffs in excess of 100 percent would wreak havoc on our economy, and would then require, oh, many trillions of dollars of domestic spending to stave off the decimation, help companies build new supply chains and provide a cushion for citizens facing a doubling of the cost of living.
Contrary to popular perception, the United States is still a manufacturing behemoth, but it tends to make higher-end goods like automobiles, medical devices, industrial equipment and pharmaceuticals. The U.S.18 percent of global manufacturing output, China 20 percent. But because of robotics and automation, U.S. manufacturing requires far fewer workers. And of course, the U.S. also exports a considerable portion of what it makes, and that exporting is also imperiled by a trade war.
The best-case scenario is that tariffs will lead companies to alter their supply chains in ways that aren’t overly painful for companies and consumers. But they also will not return or recreate the manufacturing economy of yore, which in any event has already been replaced in the United States by a vibrant, high-end, lucrative manufacturing of today that does many things but does not create large numbers of jobs.
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