Analysis - Global Trade Alert

Executing Trump’s campaign pledges on tariffs won’t restore manufacturing in the Rust Belt—or elsewhere for that matter

cBrief 4: Game On

Many American politicians contend that Chinese imports delivered a blow to manufacturing jobs, especially in the Rust Belt states. President Trump wants to fix the employment loss by raising import tariffs. Simulating the job, wage, and inflation effects of his three most prominent campaign pledges for tariffs on the politically sensitive manufacturing sector reveals clear policy trade-offs. Hitting Chinese imports with 60% tariffs achieves most of the intended manufacturing job creation but the employment gains come at the expense of considerable inflation-adjusted household losses. Targeting Canadian and Mexican imports in addition creates few new manufacturing jobs and reduces inflation-adjusted wages much more. Many manufacturing firms use foreign parts and components, so subjecting all U.S. imports to higher tariffs yields no extra jobs but does raise the cost of living further. Swing-state Rust Belt locations realize little benefit following each tariff hike.

Simon Evenett 20 Jan 2025

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