Trump wants more trade tariffs - what would that achieve?

Donald Trump loves tariffs. Making things more expensive if they come from foreign countries is at the heart of his bid for a second term in the White House.

“Tariffs are the greatest thing ever invented,” he said in September 2024 at a town hall event in Michigan.

Trump has promised that he will impose an across-the-board tariff of up to 20 per cent if he becomes US president again.

He will hit Chinese imports with tariffs of 60 per cent or more. He has even proposed a 200 per cent tariff on cars from Mexico.

This is familiar ground for Trump, who put tariffs at the heart of his economic programme during his 2017-21 presidency. He imposed tariffs on a wide range of goods, from imported steel and aluminium to solar panels and washing machines.

Trump claimed this policy would address the trade imbalance with China and raise revenues. He also claimed it would boost 'Made in America' supply chains and bring manufacturing jobs back to the US.

Did Donald Trump's protectionist policies work?

Our research suggests that these protectionist policies did not have the desired effect. On the contrary, we found that imposing tariffs actually made the US even more reliant on foreign suppliers.

They failed to stimulate the domestic job market and raised costs for US consumers. They also provoked retaliatory tariffs from trading partners including China, the European Union (EU), Canada, Mexico, India and Turkey.

China for example, responded by trebling tariffs on American cars. The EU filed a dispute with the World Trade Organization. It also substantially raised tariffs on US exports including Harley Davidson motorcycles, jeans, and bourbon whiskey.

Trump’s tariffs did not lead to a boost for US manufacturing either.

US manufacturing supply chains evolved to have fewer suppliers, as Trump intended. However, this often forced out US firms, rather than their overseas competitors.

In fact the share of contracts held by non-US suppliers increased slightly from 2014 to 2020.

We found that US manufacturers appeared to reduce their global reach. At the same time, they increased their dependence on a select few foreign companies. This is further evidence that Trump’s tariffs failed to produce the intended outcome.

Why don't import tariffs encourage local manufacturing?

Our research also suggests that 'reshoring' – bringing production and manufacturing back to a company’s home country – is not feasible without an established ecosystem of suppliers, intermediaries, and customers.

So introducing trade barriers without adequate support to develop regional supply chains is unlikely to result in stronger local economies or more jobs.

Essentially, for reshoring to work, the domestic economy needs to have the capacity to match demand. But the US (like the UK) has lost manufacturing capability in many areas. Rebuilding that capacity is not going to happen overnight.

Establishing a new industry requires the right blend buildings, skilled staff, and supply chains. Each industry also requires a tailored and granular approach.

This should include education, training, and other aspects of import substitution with tariffs. Getting the right skills and labour is often the trickiest part and may require immigration.

Even this may not work in the most complex industries. The Biden administration has introduced generous incentives to encourage chip manufacturing.

Yet Taiwan still massively dominates the market, raising questions over whether the US could ever compete effectively.

Can tariffs on imported goods bring back manufacturing jobs?

Other industries that can use automation and robotics in manufacturing might be easier to reboot. This includes chemicals and transportation equipment.

However, these industries may not generate the expected number and range of jobs. And often reshoring strategies involve higher investment in automation, machinery and robotics, rather than jobs.

Trump's focus may have been on bringing back manufacturing jobs to the US. The truth is that many of these jobs may be gone forever.

Overall then, imposing tariffs without putting adequate domestic support mechanisms in place has led to US manufacturers increasing their dependence on foreign suppliers. It has also reduced their dependence on local suppliers.

Despite this, Trump has pledged to go even further in applying tariffs if he is re-elected.

And he is not the only politician who favours tariffs. They may be associated with right-wing politics, but they have also spread to the centre-left.

Joe Biden's administration may have relaxed tariffs on imports from the EU, Canada, and Mexico. However, the trade barriers against China have continued.

The impact of a trade war

Canada recently imposed 100 per cent tariffs on Chinese cars. At the same time, it imposed 25 per cent tariffs on Chinese steel and aluminium. The EU has also imposed tariffs on Chinese goods.

This trend appears to be driven by a widespread view among politicians that tariffs can be an effective economic tool.

As a result, the impact of Trump’s policies could potentially extend into Canada, Europe, and subsequent US administrations. This is likely to create a worse situation for wider North American supply bases.

One of the few voices speaking out against tariffs belongs to former US vice-president Mike Pence. He recently proposed scrapping tariffs, saying they just made imported products more expensive and hurt domestic consumers.

Pence, who was once Trump's right hand man in the White House, also argued that tariffs failed to improve prosperity in the US. However, his old boss clearly disagrees.

The US Presidential election remains on a knife-edge. If Trump wins a second term in office, it seems certain that imposing international tariffs will be high on his 'to do' list.

If their impact is anything like last time, they will be of little benefit to the US economy. And they will do little to help the voters who depend upon it.

This Core Insights article is adapted from a piece originally published by The Conversation.

Further reading:

Did Trump's tweets move the currency markets?

Why firms need to start measuring Scope 3 emissions now

How can the UK become a high-wage high-skill economy

Why The Rock trumps politicians for leadership

Mehmet Chakkol is Associate Professor of Operations Management at Warwick Business School. He teaches Operations Management on the Global Online MBA and Full-Time MBA. He also teaches on the Undergraduate Programme.

Mark Johnson is Professor of Operations Management at Warwick Business School. He teaches Supply Chain Management on the Executive MBA, Accelerator MBA, and Global Online MBA. He also teaches on the Undergraduate Programme.

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