Trump’s Tariffs: Will They Revive U.S. Manufacturing?

President Donald Trump aims to rejuvenate American manufacturing through newly announced tariffs, but experts caution that the complexities of the global economy present significant hurdles.

On Wednesday, Trump declared comprehensive tariffs, which include a uniform 10% levy on all imports. Targeted tariffs are even higher, with rates set at 34% for China, 20% for the European Union, and 32% for Taiwan.

During the announcement, Trump asserted that “jobs and factories will come roaring back,” vowing to “supercharge our domestic industrial base” by opening up foreign markets and dismantling trade barriers. He anticipates that increasing domestic production will enhance competition and subsequently lower consumer prices.

According to Harry Moser, president of the nonprofit Reshoring Initiative, the U.S. has lost approximately 6 million manufacturing jobs over the past four to five decades due to companies relocating their operations overseas in pursuit of lower costs. Moser described the tariffs as a promising initial step but emphasized the importance of addressing a strong dollar and enhancing the domestic workforce as more effective long-term solutions.

Moser also expressed a preference for more modest tariffs, suggesting, “Smaller would be easier to defend, but still enough to drive reshoring and foreign direct investment that exceeds our current capacity to build and staff factories.” He anticipates that Trump’s aggressive tariff strategy will provoke international negotiations.

“As long as he convinces other countries that he will persist in attacking the issue, they may agree to elevate their currency or reduce tariff barriers on U.S. products,” Moser noted, adding that these nations might even encourage their companies to establish factories in the U.S.

Nonetheless, various challenges remain before companies consider returning to manufacturing in the U.S. Chief among these is the uncertainty surrounding the tariffs’ longevity and impact.

Edward Mills, a policy analyst at Raymond James, remarked, “Given the unpredictable nature of the path forward and the long lead times associated with building industrial capacity, we anticipate that most companies will approach this announcement with caution.” He added that while additional capacity could be created where possible, the lack of clarity on long-term policy complicates larger investments.

Panos Kouvelis, a professor in supply chain, operations, and technology at Washington University in St. Louis, added, “Such investments require justification, especially when uncertainty looms. While companies might be inclined to invest, they will likely adopt a conservative approach to see how the situation unfolds.”

Kouvelis’ research on Trump’s past tariffs indicated minimal impacts on reshoring and job returns, revealing negative consequences for manufacturers facing increased raw material costs, diminished demand, and reduced capacity. The story for finished goods remained mixed, largely dependent on consumer demand.

According to Christopher Tang, a distinguished professor at UCLA Anderson School of Management, the new tariffs are considered “fluid and fickle” as they are enacted via executive orders rather than established through Congressional approval.

“Many companies are uncertain about how to adapt their supply chains in the context of unclear trade policies and projections for the next four years,” Tang explained. “Since these adjustments represent significant investments, companies cannot shift direction abruptly.”

Chris Snyder, an analyst at Morgan Stanley, views the tariffs as a “positive catalyst” for reshoring; however, he does not foresee a substantial influx of projects relocating to the U.S. in the immediate future. He estimates likely investments to focus on small, rapidly executable initiatives, potentially boosting output by around 2%.

“Discussions with corporations reveal a pervasive uncertainty regarding policy direction over the next few months,” he added.

Furthermore, consumer confidence has dipped, a factor that could influence businesses’ decisions on reshoring timelines, according to Manish Kabra of Societe Generale. He noted that the Conference Board’s consumer confidence index fell to a 12-year low in March.

“In times of low confidence, global firms with plans to invest in the U.S. may hesitate,” Kabra advised. “Without addressing this crisis of confidence, investment initiatives will likely decelerate and not occur at a rapid pace.”

Experts warn that a successful resurgence of manufacturing in the U.S. requires careful consideration and advancement in various areas.

“The U.S. is currently unprepared for significant reshoring. We lack the necessary infrastructure, workforce, and must also evaluate American willingness to work in factories,” Tang stated. “Proceeding hastily could lead to considerable risks.”

While he anticipates that some companies may indeed return because of the newly imposed tariffs, significant barriers persist. Executives often feel pressured to demonstrate short-term financial success, and managing an American workforce can prove complex.

“There are comprehensive regulations and costs that can deter companies from returning,” Tang noted.

Investment in training the American workforce is also critical, highlighted Moser.

He warned that Trump’s tariff strategy “will not succeed without a nationwide commitment to significantly enhance recruitment and training for skilled manufacturing roles and engineering.” Moser advocates a shift from a focus on “college for all” to fostering “a great career for all.”

Snyder from Morgan Stanley remains optimistic. He believes that when companies are poised to initiate their next projects, they will increasingly consider the U.S. as a viable option.

“The U.S. is in a better position now than it has been in the last 50 years to attract new factories,” Snyder remarked. He added that the pandemic-induced slowdown in manufacturing starts could create a sense of urgency for companies to finalize plans.

Since the election, companies have pledged approximately $1.4 trillion in investments, translating to around 200,000 new jobs, according to Kabra of Societe Generale.

Hyundai leads the charge with a substantial $21 billion investment in U.S. facilities, prominently including a $5.8 billion plant located in Louisiana.

Experts predict that the automotive sector is poised to reshore, notably given Trump’s implementation of a 25% tariff on imported vehicles and additional taxes on essential auto components.

Manufacturers of gas-powered vehicles will need to assess their strategies, considering they already possess a highly streamlined supply chain, according to Kouvelis from the University of Washington.

“The gas-powered car industry faces challenges with inflexible supply chains and lacks sufficient incentives to adapt,” he affirmed.

Conversely, the electric vehicle sector may exhibit a different trend, as these vehicles typically comprise fewer components, with the battery being the most significant. This aspect makes these manufacturers more inclined to shift production to the U.S., Kouvelis indicated.

“The U.S. market is too profitable to ignore, especially given that competitors with advantages, such as those from China, are largely kept at bay,” Kouvelis stated.

According to Snyder, electric vehicles are among those industries likely to consider relocating; however, they will require increased capacity. He posits that industries needing to expand, rather than merely relocate operations from abroad, will be inclined to return, including sectors such as industrial equipment and semiconductors.

Although the semiconductor and pharmaceutical industries were exempt from the recent tariffs, experts predict they could still be targeted in future policies. There is also a consensus that both sectors will experience some degree of reshoring.

Incentives for semiconductor manufacturers to return to the U.S. have emerged following the enactment of the CHIPS Act in 2022, which provides financial support and tax breaks for domestic facility construction and expansion. The most significant number of reshoring jobs have been documented in the computer and electronic products industry in 2024, according to the Reshoring Initiative.

“These are advanced technology sectors, characterized by significant automation, thus requiring fewer workers,” Tang explained.

Regarding pharmaceuticals, Kouvelis suggests that only portions of the supply chain might return to U.S. soil.

“The primary question is whether tariffs will be imposed on final products or upstream chemicals. Currently, sourcing active ingredients from China is essential,” Kouvelis asserted.

Nevertheless, formulation and packaging can be executed in the U.S., potentially avoiding tariffs if structured appropriately, he noted.

“For a thorough reshoring of the supply chain, aggressive tariff applications across all supply chain components are necessary,” Kouvelis concluded.

Already, some pharmaceutical companies, like Eli Lilly and Johnson & Johnson, began expanding in the U.S. prior to Trump’s presidency.

Correction: Trump announced 32% tariffs on Taiwan. An earlier version misstated the percentage.

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