By James Scott
The “liberation day” tariffs announced by US president Donald Trump have one thing in common – they are being applied to goods only. Trade in services between the US and its partners is not affected. This is the perfect example of Trump’s peculiar focus on trade in goods and, by extension, his nostalgic but outdated obsession with manufacturing.
The fallout from liberation day continues, with markets down around the world. The decision to apply tariffs on a country-by-country basis means that rules about where a product is deemed to come from are now of central importance.
The stakes for getting it wrong could be high. Trump has threatened that anyone seeking to avoid tariffs by shifting the supposed origin of a product to a country with lower rates could face a ten-year jail term.
The White House initially refused to specify how it came up with the tariff levels. But it appears that each country’s rate was arrived at by taking the US goods trade deficit with that country, dividing it by the value of that country’s goods exports to the US and then halving it, with 10% set as the minimum.
It has been noted that this is effectively the approach suggested by AI platforms like ChatGPT, Claude and Grok when asked how to create “an even playing field”.
Economically, Trump’s fixation on goods makes no sense. This view is not unique to the president (though he feels it unusually strongly). There is a broader fetishisation of manufacturing in many countries. One theory is that it is potentially ingrained in human thinking by pre-historic experiences of finding food, fuel and shelter dominating all other activities.
But for Trump, the thinking is likely related to a combination of nostalgia for a bygone (somewhat imagined) age of manufacturing, and concern over the loss of quality jobs that provide a solid standard of living for blue collar workers – a core part of his political base.
Nostalgia is not a sensible basis for forming economic policy. But the role emotions play in international affairs has been receiving more attention. It has been identified as an “emotional turn” (where the importance of emotion is recognised) in the discipline of international relations.
Of course, that’s not to say that the concern over jobs and the unequal effects of globalisation is misplaced. It is clear that blue-collar workers have suffered in the US (and elsewhere) for the last 40 to 50 years, with governments paying little attention to the decline.
Jon Rehg/Shutterstock
Data on weekly earnings in the US split by educational level show that wages for those without a degree have declined or stagnated since around 1973, particularly among men. This is the cohort that disproportionately voted for Trump. Globalisation has created many benefits, not least to the United States, but these tend to be concentrated among the better educated.
All too often the service-sector jobs that have filled the gap left by declining manufacturing have been precarious. That means low wages, low security, lack of union representation and few opportunities for moving up the ladder. It is unsurprising that there has been a backlash.
Can’t turn back the clock
So will Trump’s tariffs plan address this? The great tragedy is that there is little reason to think that they will.
The loss of manufacturing jobs is partly about globalisation, which Trump is seeking to reverse. But research shows that trade and globalisation are often more of a scapegoat than a driving force, responsible for only a small chunk of job losses (typically said to be about 10%).
The main cause of manufacturing’s decline is rising productivity. Today it simply requires fewer people to make goods due to the relentless increase in automation and the associated rise in how much each worker produces.
If the whole US trade deficit were rebalanced through expanding domestic industries, this would increase the share of manufacturing employment within the US by about one percentage point, from about 8% today to 9% according to US Bureau of Labor Statistics figures. This is not going to be transformative.
The effects of tariffs are also doubled-edged. They will probably shift some manufacturing back to the US – but this could be self-defeating. More US steel production is good for workers, but the higher cost of US steel feeds through to higher prices for the products manufactured with it.
This includes the cars Trump obsesses about. Less competitive prices means lower exports and a loss of jobs. The Lord giveth and the Lord taketh away.
The 1950s were a unique time. By the end of the second world war, the US was a manufacturing powerhouse, accounting for one third of the world’s exports while taking only around a tenth of its imports.
There were few other industrialised countries at the time, and these had been flattened by the war. The US alone had avoided this, creating a world of massive demand for US exports since nowhere else had a significant manufacturing base. That was never going to last forever.
The other point about that time in history is that the economic system had been shaped by colonialism. European powers had used their position of power to prevent the rest of the world from industrialising. As those empires were dismantled and the shackles came off, those newly independent countries began their own processes of industrialisation.
As for the US today, President Trump is mistaken if he really believes that tariffs will bring a new golden age of manufacturing. The world has changed.
James Scott is Reader in International Politics at King’s College London.
Steve Robinson says
The notion that Trump gives a damn about the plight of blue-collar workers is laughable, and feeds into the notion that there is some overriding “strategy” behind Trump’s tariff games. He simply wants the world to think that countries are begging and pleading with him to reverse the tariffs, and he will say it though it is probably a lie. Countries with a consumer base and manufacturing resources are generally led by people who understand that their role is to do what’s best for their own citizens, not bail out the lunatic in the White House.
Pogo says
@James Scott
Amen; trump’s actions make no sense in relation to his lies, i.e., his bad faith declarations and explanations.
The declarations and explanations make perfect sense to a liar, a thief, an extortionist — and its family, and other accomplices:
As stated
https://www.google.com/search?q=trump+profit+from+election
trump is an obvious failure as a legitimate CEO; he is a historically significant success as a gangster, criminal, and sinner.
don miller says
defeatists! as long as Americans take the side of the ones protecting their markets from us, the pain will continue. Since we are not united because of TDS, the other guys with the tariffs higher than us will continue to have hope, will hold out and they will dictate.
Laurel says
Good article!
“It has been noted that this is effectively the approach suggested by AI platforms like ChatGPT, Claude and Grok when asked how to create “an even playing field”.”
We have a very good friend who is an English Professor. She explained to us how it is rather easy to pick out AI generated student papers. Bot chat doesn’t really get it. A simple example would be is to take “U.S.” v. “US” v. “us.” AI reads it as “us.” AI doesn’t really know the difference between an abbreviation, an acronym and a word. This is now how our country is being run: by “big balls” babies who manipulate data, but have no understanding of economics or history.
Ed P says
So the foreign countries that tariff US goods are not acting in bad faith? Is it okay for a “competitor” to tariff the US.? Is stealing intellectual properties and cheating acceptable? Eighty years of unfair trade practices, when is the right time to level the playing field with them? When? If not Trump, who?
Why is it not plausible that Trump simply loves this country and is trying to help middle America? Does being anything other than a “hack”politician , even a felon, preclude someone from being a Patriot? Who is your opposition leader?
Let’s assume the left is correct and Trump really doesn’t care about you and me. Ask yourself that if his actions are successful, wouldn’t we all benefit? Isn’t economic growth our goal, GDP? A strong and vibrant economy is the goal.
Success begets success. Ask yourselves why so many businesses are pleased with the possibilities being exposed.
Foreign leaders realize there is truth in Trumps actions.
No one likes being called out. Why should wealthy countries like France, Germany, Canada or any number of them not pay their agreed upon NATO payments, offer the United States a free trade platform and compete on a level playing field?
Is that partially responsible why they can afford their touted universal health care and the United States can not?
The manufacturing that will return to the United States will be high tech, robotics and AI fueled. New plants will be state of the art, cleaner than their predecessors but employ fewer people. 90,000 manufacturing facilities left, why is it inconceivable that 10,000 could return?
It’s appears the left strategy is rooting for failure.
Gene Perez says
To anyone who can observe the performance objectively, the obvious point of the tariffs is to open negotiations on trade around the world. The negotiations will make the USA great again. Wall Street has benefited from globalism for four decades. Paraphrasing what Scott Bessent said, it’s Main Street’s turn.
BillC says
A secret look inside the Oval Office during the deliberations over “Liberation Day”.
https://youtu.be/YgGvd1UPZ88
Pierre Tristam says
That’s going into Sunday’s Briefing. Thank you BillC.
Dennis C Rathsam says
You folks are not just TRUMP haters….You hate the USA! Instead of bitching, & crying the sky is falling,WHY NOT GIVE TRUMP A CHANCE? Remember, we had the best economy before the China FLU!!!! Can you all bite your tongue & just wait….. If its that bad, & you all are right the mid-terms are coming up. My moneys on TRUMP
YankeeExPat says
I am impressed FlaglerLive has provided it’s readers with a photo of Trump shoveling his bullshit !
Thanks for that mental image Pierre!
Every affected Farmer ,Veteran , Senior, Retiree and Consumer should have this picture in their wallet /pocketbook as their station in life deteriorates daily.
“Elections have consequences” President Barack Obama 2009
Skibum says
Success! The White House is starting to see the president’s efforts pay off big time. Due to the continuing tariff on products manufactured in China and shipped to the U.S., one manufacturer has already publicized plans to cease their company’s production in China! Wow, an early win for America! Oh wait… sorry, that manufacturer is definitely planning on moving its business operations out of China, but oh DAMN IT anyway… they announced that the company will be transferring their manufacturing operations to INDIA! Wow, drumph, what an incredible win for America! You really know how to win a trade war BIGLY!
Laurel says
Chauncey Gardner actually makes much more sense than “the weave.” More likable, and much, much nicer too.
The first time Chauncey came to my mind was when we heard about Puerto Rico being surrounded by “big water.”
Laurel says
I think Chauncey was smarter. At least he knew what he was doing.
Deborah Coffey says
@ Ed P
“Why is it not plausible that Trump simply loves this country and is trying to help middle America?” OMG. It’s that hard for you to see while he’s cleaning out their life savings, taking their healthcare, discriminating against anyone that isn’t White, allowing thousands of factories to now pollute with carbon dioxide, causing the middle class to pay for the tax cuts for the wealthy, causing countries around the world to despise The United States and to complete distrust this liar and criminal. Time to get WOKE, Ed!
Jackson says
Over the last couple days, the U.S. dollar and prices for longer-term U.S. Treasury bonds have fallen significantly.
So what then is happening in U.S. treasury and currency markets? \In short, a crisis of confidence in the U.S. as an economic leader and trading partner.
Trump has made America untrustworthy, like him self.
Just wondering says
I’ve got concerns that something is wrong with the president. I saw the clip where the boom went into his face. Okay. Then I saw it on a loop, over and over again. At a certain point, I noticed he never reacted. He didn’t flinch, pull his head back, step away, put his hands up, block or push the boom away, etc. He just stood there. Does that seem normal? I don’t think so. Is he on some sort of muscle relaxers or anti-anxiety meds that would make him so mellow when something gets in and touches his face? I wonder…..
BillC says
@ Laurel “the weave”… Trump is steering this country like a drunk driver weaving through traffic after last call at the bar. To quote the comedian Emo Phillips:
“I’d like to die in my sleep like my grandfather did, not screaming at the top of my lungs like the passengers in his car.”
Laurel says
BillC: I LOVE Emo Phillips! :D