President Trump’s simultaneous trade wars with Canada, Mexico, China and the European Union amount to a huge economic and political gamble: that Americans will endure months or years of economic pain in return for the distant hope of re-industrializing the American heartland.
It is enormously risky. In recent days, Mr. Trump has acknowledged, despite all his confident campaign predictions that “we are going to boom like we have never boomed before,” that the United States may be headed into a recession, fueled by his economic agenda. But in public and private he has been arguing that “a little disturbance” in the economy and the markets is a small price to pay for bringing manufacturing jobs back to America.
His closest political partners are doubling down on the strategy. “President Trump’s economic policies are simple,” Vice President JD Vance wrote on social media on Monday. “If you invest in and create jobs in America, you’ll be rewarded. We’ll lower regulations and reduce taxes. But if you build outside of the United States, you’re on your own.”
The last time Mr. Trump tried something like this, during his first term, it was a failure. In 2018 he put 25 percent tariffs on steel and 10 percent tariffs on aluminum, maintaining that he was protecting America’s national security and that the tariffs would ultimately create more jobs in the United States. Prices jumped, and there was a temporary increase of about 5,000 jobs nationwide. During the pandemic, some of the tariffs were lifted, and today the industry employs roughly the number of Americans it did then.
More worrisome, though, were the raft of studies that followed showing that the country lost tens of thousands of jobs — upward of 75,000, by one study — in the industries that were dependent on steel and aluminum imports. The output per hour for American steel makers had also dropped, while productivity for manufacturing overall in the United States rose.
The experiment Mr. Trump is attempting now is far larger. And the retaliatory tariffs that are being imposed on U.S. manufacturers — with the Europeans aiming at Kentucky bourbon, as well as boats and Harley-Davidson motorcycles made in swing states like Michigan and Pennsylvania — are exquisitely designed to cause pain in places where Mr. Trump’s supporters will feel it the most.
“If Trump is serious on what he is saying about sticking with these tariffs, he is betting his presidency on their success, and on the patience of the American people, at a moment when the people do not appear in a patient mood,” said William Galston, a scholar at the Brookings Institution.
Mr. Trump is unlikely to be dissuaded. He has argued for tariffs for decades, convinced of their power to end what he contends is an era in which the United States has been bled by its allies and adversaries alike. While many of his top economic aides, led by Treasury Secretary Scott Bessent, were never known for advocating broad tariffs in the past, they all know that obeisance to Mr. Trump’s view of geoeconomics is the price of holding a place of power and influence in the administration’s economic club.
“To the extent that another country’s practices harm our own economy and people, the United States will respond,” Mr. Bessent said last week in a speech to the Economic Club of New York. “This is the America First trade policy.”
The reality is that Mr. Trump’s arguments for imposing tariffs are all over the map, as a series of business executives have complained — never on the record — after visiting the White House in recent weeks. Michael Froman, the U.S. trade representative from 2013 to 2017 and now the president of the Council on Foreign Relations, distills Mr. Trump’s arguments into three categories.
“When the president thinks about tariffs, he is usually thinking about three things: leverage, revenue and re-industrialization,” Mr. Froman said on Wednesday.
“The leverage is working, for now,” he said. Mexico and Canada have come up with plans for reducing the amount of fentanyl crossing the border, even if they are handing Mr. Trump programs that they implemented previously but have repackaged or revived in response to his demands. Oddly, Canada has been hit by some of the hardest tariffs, even though very little of the fentanyl entering the United States comes over the Canadian border. (Canada’s departing prime minister, Justin Trudeau, said last week, “What he wants is to see a total collapse of the Canadian economy, because that’ll make it easier to annex us.”)
But Mr. Froman contends that the White House is already seeing diminishing returns from its strategy. “You can do this once or twice and bring people to the table,” he said, “but at some point the countries say we are going to retaliate,” as Canada and the European Union now have.
Mr. Trump also loves the idea that tariffs bring in revenues. In his Inaugural Address he spoke admiringly of President William McKinley, who pushed for huge tariffs in the 1890s, and he argued that the period was a high point for American economic policy. “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Mr. Trump said on Jan. 20. “For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties and revenues. It will be massive amounts of money pouring into our Treasury, coming from foreign sources.”
But again, the facts do not always sort out that way. While the U.S. government brought in more than $60 billion in tariffs from China in Mr. Trump’s first term, it also compensated American farmers who were hit by retaliatory tariffs imposed by Beijing. That cost nearly as much.
The final justification Mr. Trump offers for tariffs is that they will bring jobs back to the United States. It is a concept rooted deep in his psyche and his political history; he expresses little interest in examining empirical studies that may muddy the picture.
Of course, as much as Mr. Trump would like to see all products made in the United States, there is a reason nations trade with one another. Some have a comparative advantage to make certain products. Others are at a different stage of development. And sometimes nations do not want to get stuck producing low-tech products when they could move up the ladder. The towns north of Boston dominated the country’s shoe industry throughout the 1800s; today they are better known for software startups, law firms and some of the nation’s most expensive real estate.
But in Mr. Trump’s worldview, as he himself acknowledged in a 2016 interview, it is traditional manufacturing that matters. The 1950s, he said, were his ideal, when American manufacturing and power reigned supreme.
He is unimpressed when economists attacking his tariff plans point out that car parts may move a dozen times over the border with Canada before final installation in an American-produced vehicle, which will be more expensive because of his tariffs on Canada. Or that sophisticated designs for the most advanced semiconductors will be beamed back and forth to Taiwan Semiconductor, the world’s most successful chip maker, before the chips themselves are produced in Taiwan — even if the intellectual property inherent in the design is American.
One thing Mr. Trump and his predecessor, Joseph R. Biden Jr., have in common is a desire to bring that chip making back to the United States. Mr. Biden’s approach was the CHIPs Act, which passed with bipartisan support and designated more than $50 billion in federal funds to jump-start investments in the most advanced chip fabrication plants. The concept actually began in Mr. Trump’s first term, though at the end of his speech to Congress last week, he dismissed it.
“Your CHIPS act is a horrible, horrible thing,” he told lawmakers. “We give hundreds of billions of dollars, and it doesn’t mean a thing. They take our money, and they don’t spend it.”
The solution is tariffs, he has concluded. If the chips themselves are made in the United States, they will be tariff-free.
His problem is one of timing. It takes years to build the most advanced chip facilities. (Intel has just delayed by at least four years one factory that it initially promised would open in Ohio in 2025 or 2026.) And even when they are built, the United States will still be dependent on Taiwan for about 80 percent of its most advanced semiconductors.
It is not clear whether voters will be willing to wait that long for results.