by Zain Jaffer
One of the party platform promises by the GOP if they are elected into office [https://www.gop.com/press-release/icymi-rnc-platform-committee-adopts-2024-republican-party-platform/] is to enact tariffs on foreign goods. The pertinent text of their platform reads as follows:
“1. Rebalance Trade
Our Trade deficit in goods has grown to over $1 Trillion Dollars a year. Republicans will support baseline Tariffs on Foreign-made goods, pass the Trump Reciprocal Trade Act, and respond to unfair Trading practices. As Tariffs on Foreign Producers go up, Taxes on American Workers, Families, and Businesses can come down.”
Some economists however disagree with this approach and feel Americans will suffer higher prices because of this move [https://www.nytimes.com/2018/04/11/business/economy/trump-economists.html]. Imposing tariffs may also backfire and cause trading partners such as China to impose their own roadblocks to American exports [https://www.piie.com/blogs/realtime-economics/2024/trumps-proposed-blanket-tariffs-would-risk-global-trade-war] which would negate any initial benefit from this move.
The goal of course is to bring back manufacturing jobs to the US. Strengthen the Made in America brand. Especially for core goods.
The promise sounds good. More American jobs is definitely a good thing no matter how you look at it.
However bringing back manufacturing to America is more than just a cost consideration. There are several things we need to do and consider. It will not be an easy process, and there will be pain for American consumers as those tariffs will increase retail prices. But selectively applied, those tariffs could be key to convince domestic investors and manufacturers to make more items here.
First of all, global supply chains are extremely huge and complex [https://www.forbes.com/sites/forbescommunicationscouncil/2020/06/08/tangled-why-global-supply-chains-are-so-complex/]. There could be thousands of parts that go into many airplanes, cars, computers, and other goods. Some raw materials can only be sourced outside the United States. Each supplier is generally vetted, qualified, and monitored by purchasing and tech professionals. There are cost, supply, technical considerations. The pandemic for example revealed that having too many suppliers and components abroad impacted the ability of US companies to manufacture their products [https://www.ey.com/en_us/insights/supply-chain/how-covid-19-impacted-supply-chains-and-what-comes-next]. That brought about a renewed effort to “reshore” manufacturing back to the US, which tried to reverse decades of offshore manufacturing that started in the 70s [https://www.cnbc.com/2023/06/01/reshoring-more-domestic-manufacturing-due-to-supply-chain-disruption.html].
In some cases, there are also worker attitudes to consider. The move by the world’s largest chip fabrication company, Taiwan Semiconductor Manufacturing Corporation (TSMC), to bring some of their much vaunted wafer fabs to the US, was racked with some issues. One of those was a perception by Taiwanese engineers, who are used to working long hours and have a Confucian culture, that their US counterpart workers were not as dedicated. However US workers fired back saying that there was a lot of disorganization and open safety issues [https://www.theguardian.com/business/2023/aug/28/phoenix-microchip-plant-biden-union-tsmc].
Then there is the potential for our trading partners, particularly China, to hit back. China buys a lot of our products as well. What happens if they also impose their own tariffs on their American imports, or even ban the purchase of these imports? We already saw that when they banned the use of Apple products for any Chinese government entity [https://www.bloomberg.com/news/articles/2023-12-15/china-s-apple-iphone-ban-accelerates-across-state-firms-government].
Personally I agree with the move to reshore a lot of manufacturing back to the US and create more jobs here. However there will be pain for American consumers as tariffs will make imports more expensive while we are trying to bring those products to be manufactured back here. There is also the strong possibility that our trading partners who are hit with tariffs will hit back with their own tariffs or even a ban.
It will be a long and slow process, but enacting tariffs selectively and judiciously will start the process.
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