Two multiracial men inspecting the electrical components of an industrial refrigeration system. They are wearing hardhats, safety glasses and safety vests. The mid adult man holding the digital tablet is African-American, in his 30s. His coworker is black, Hispanic and Asian, in his 40s.
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President Trump says he wants more manufacturing in America, and he is trying to use tariffs to get it. His most recent target is the furniture industry: Last week he threatened to impose tariffs on “any Country [sic] that does not make its furniture in the United States.” While this may be music to the ears of manufacturing enthusiasts, his plan is unlikely to work. U.S. manufacturing has been struggling since the Great Recession, and tariffs will not fix what ails it.
Trump thinks tariffs can solve all manner of problems, including revitalizing U.S. manufacturing, which he thinks is important for national security. Manufacturing employment has recovered a bit since the Great Recession, but it is still lower than it was: Today there are 12.7 million workers, higher than the 2010 low of 11.4 million but still below the 13.8 million in September 2007.
A recent analysis from economists Ricardo Marto and Hoang Le at the St. Louis Federal Reserve shows that the modest employment recovery from the depths of the Great recession was slow. It was largely driven by food manufacturing, which made up 19% of the employment increase and 49% of the increase in establishments. Transportation equipment, beverage and tobacco products, and chemicals were the other big drivers (see figure below). Among the states, Florida and Texas experienced the biggest gains in both manufacturing employment and establishments from 2014 to 2024.
Growth in employment and establishments
Federal Reserve Bank of St. Louis https://www.stlouisfed.org/on-the-economy/2025/aug/sluggish-renaissance-us-manufacturing
As the Trump administration sees it, we cannot defend ourselves against China and other foes if we do not make more ships, computer chips, pharmaceuticals, steel, batteries, and military equipment in America. But other than transportation equipment and chemicals, the fastest-growing U.S. manufacturing industries are not what most people think of when they think of national security.
Food manufacturers include Tyson Foods, PepsiCo, and General Mills. These are fine companies making good products, but they do not make the things that win wars. It is unlikely that tariffs that protect steel producers and fabricated metal manufacturers from international competition will be enough to accelerate the tepid growth of these industries.
Of course, given enough time and high enough rates, perhaps tariffs could accelerate production in Trump’s favored industries. But at what cost? A new study by Gary Glyde Hufbauer and Ye Zhang published by the American Enterprise Institute estimates just that. They note that U.S. manufacturing employment has been declining for over 60 years, long before China’s rise as a manufacturing leader. They find that bringing more manufacturing back to America to reverse this sustained decline will not be cheap.
Hufbauer and Zhang estimate it would cost U.S. purchasers of manufactured goods $605 billion annually to fully eliminate the manufacturing trade deficit using tariffs. This is the sum of the higher cost of imports due to the tariffs ($348 billion) plus the higher cost of the more expensive new domestic production ($257 billion). The greater demand for domestic manufacturing induced by the tariffs will generate roughly 2.7 million manufacturing jobs. Dividing the $605 billion higher costs by the 2.7 million new jobs means each new job will cost about $225,000 per year indefinitely, or until the tariffs are reduced or removed. And this is a lower bound. The per job cost could be as high as $550,000 per year depending on what percentage of the tariffs are passed through to U.S. purchasers rather than absorbed by foreign exporters.
Eliminating the trade deficit in manufacturers is not a realistic goal over Trump’s term. It takes years to build new factories, train and hire new workers, and get production lines running. Firms will not make these investments until they know tariffs are here to stay, and with several active lawsuits arguing the tariffs are illegal, that is far from clear. This uncertainty is already having an impact. The September Institute of Supply Management Purchasing Managers Index (ISM PMI) for manufacturing was below 50% for the seventh straight month, indicating contraction, and respondents said tariffs are impacting operations. Investment in manufacturing structures has also declined for the last three quarters.
Still, even if firms want to increase production in response to the tariffs, they face another obstacle. Manufacturing productivity growth has been weak since the late 2000s. From 1987 to 2007, labor productivity in manufacturing grew by 3.4% annually. From 2010 to 2022 it shrank by -0.5% per year on average, as shown in the figure below from the Federal Reserve Bank of New York.
Manufacturing Labor Productivity
Liberty Street Economics, Federal Reserve Bank of New York https://libertystreeteconomics.newyorkfed.org/2024/07/the-mysterious-slowdown-in-u-s-manufacturing-productivity/
A recent study argues some of this productivity decline is due to mismeasuring quality improvements of goods. Yet even with these adjustments productivity growth since 2009 is still weaker than it was previously. Weak productivity growth constrains America’s ability to increase manufacturing output. Tariffs may reduce demand for imported manufacturers and increase demand for domestic ones, but they do not improve American manufacturers’ ability to make things quickly and cheaply.
One area where America lags not only China but Korea, Singapore, Germany, and other countries is the use of robots to increase manufacturing productivity. China has a factory that can make 500,000 iPhones per day. You do not get that much output without a lot of automation. According to data collected by the International Federation of Robotics, China has 392 industrial robots per 10,000 workers. Korea has 1,012, while Germany has 415. The United States only has 285.
China’s lead over America is increasing, too. China leads the world in the number of industrial robots installed per year. From 2020 to 2023, it installed more than 250,000 annually. Over that same period, American manufacturers installed about 40,000 robots annually. The future of manufacturing is not a bunch of people standing on a production line doing the same thing over and over again. Those jobs are not great anyway; I did it. If America wants to outcompete China in key industries such as ships and military equipment, we need to focus on automation. Robots must do most of the work while humans design the machines and keep them running.
Not only will tariffs not improve America’s manufacturing industry, right now they are hurting it. Tariffs are raising the cost of key inputs such as steel and other components, and the unpredictable nature of their implementation has made it difficult for companies to make plans. Some of the other things the Trump administration is trying to do will help, such as permitting reform that makes it easier to build new factories and increase energy production, but so far, these helpful policies are not enough to overcome the drag from tariffs.
Tariffs impose substantial costs on American consumers and businesses in the form of higher prices and fewer choices. National security concerns may justify higher tariffs, but that debate should happen in Congress, not the Oval Office. Moreover, there must be evidence that tariffs actually help U.S. manufacturing. Right now, the evidence says the opposite. If the Trump administration is serious about helping U.S. manufacturers, it should focus on regulatory reforms that will boost productivity, not tariffs.
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