Tacos Anyone? Trump’s Tariff Tantrums

Bill Barclay 
On September 2, 1987, a full-page ad appeared in the New York Times, the Washington Post, and the Boston Globedenouncing the failure of U.S. political leaders to stand up against the countries – Japan and Saudi Arabia  were named – that were “ripping us off.”  The answer: tariffs.  
 
The ad was signed by Donald J Trump.
 
Today Trump’s tariff tantrum’s target is, of course, China.  And the ostensible reason for China tariffs is to bring manufacturing – and maybe coal mining – back to the United States.   Today he has – or at least has assumed in the face of a flaccid Congress – the power to throw various tariffs against the wall, 50% one day, 100% another, then retreat the next day.  The back-and-forth pattern has created what financial markets are calling the TACO trade (“Trump Always Chickens Out,” an epithet that enrages Trump).  
 
In 2000 U.S. manufacturing represented 25% of the global total; China was only 6%.  Today the United States, with 4.2% of global population, accounts for 16% of global manufacturing by value and China, with 17% of global population, produces almost 32%.  More significantly, in 2000 China’s leading manufactured export was textiles; today textiles are not even in the top 10.  (For a deeper analysis of China’s rapid rise in the global political economy, see Bill Barclay, “Dangerous Inflection Point: Is China's Growth Model Exhausted?.”
Is this a reason for concern?  And, if so, what should/could be done about it?
 
We can begin by looking in greater detail both at manufacturing itself and at the components of the U.S. manufacturing trade deficit with China. The United States is not the only country where manufacturing has been declining. The manufacturing share of  GDP and employment has dropped in both Germany and Japan (although it remains above that of the Unites States), and the global GDP share of manufacturing at about 20%.  .   
 
Manufacturing jobs are at stake in Trump’s trade war with China – in both countries,  While the US employs only 12.7 million workers in manufacturing to the more than 100 million in China, productivity in US manufacturing is more than 6 times that of China.
 
This productivity disparity is primarily driven by the large labor-intensive manufacturing sector in China – textiles, furniture, footwear, etc.  Although Commerce Secretary Lutnick claimed that Trump’s tariffs would result in US workers producing shoes, t-shirts and more, this is extremely unlikely: average textile worker wages in the US, as low as they may be, are 3 – 4 times those in China, and more than 30 times that of a Bangladesh textile worker, the second largest textile exporter.  The US textile trade deficit with China was about  $100 billion in 2023.  
 
No, nothing Trump can do will bring large scale textile manufacturing back to the U.S. – nor should we want it to.
 
So, let’s look at some examples of more advanced manufacturing – like the ubiquitous cell phone. In 2024 the US trade deficit with China in goods was $295 billion – and almost 15% of that was Apple with 90% of its products assembled in China. Trump has recently raised the possibility of a 25% tariff on China-assembled iPhones. We’ve seen this movie  before – in 2017, during his first term, he Trumpeted that Foxconn, the iPhone Apple iPhone assembler in  China, would build a $10 billion plant in Wisconsin. The only result was a short-lived mask pandemic-era production facility, now mostly unused and never built. 
 
Could we make -  or more accurately, assemble - iProducts in the US?  Probably, if we were willing to pay 2 – 4 times their current price. And even then, the parts, largely manufactured in Germany, South Korea and elsewhere would be subject to Trumps tariffs. 
 
But manufacturing is important for commercial innovation, technological progress and long-term environmental sustainability.  There are other types of leading-edge manufacturing that contribute to these goals and in which the US could actually be competitive – with the right industrial policies. For example, remaking our transport system – cars, trucks and trains – into a driver of the energy transition.   But that would require acknowledging the reality of climate change.  Today China produces 70% of all EVs and over 60% of Li-ion batteries essential to EVs.  We have a long way to go.
 
And the question, especially for advanced manufacturing, is how the facility will be operated?  Trump sees large numbers of men (“manly jobs”) working on the factory floor. But high-tech manufacturing demands high-tech skill capabilities – including robots. The United States ranks only seventh in robot manufacturing density, behind Japan, China, and Germany.  One last point: it is  often argued that manufacturing provides high wage jobs, but that confuses correlation and causation.  There is nothing inherent in manufacturing jobs that dictate high pay: today a Danish worker at MacDonald’s is paid more than a Kia auto assembly line worked in Alabama.  The difference? The Danish worker is in a union.
 
The possibility for a manufacturing renaissance in the US is real – but very unlikely to be realized  by Trump’s approach to tariffs.  In fact, his rejection of climate change and unwillingness to understand the  thrust of high-tech manufacturing will likely cost the US manufacturing industry, especially the auto production and parts sector going forward.  
 
Oh, I forgot – we’ll be the crypto capital of the world – crypto plus coal –a vision for the future.  
 
Think I’ll make some TACOs for dinner.
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Bill Barclay is a political economist and lives in  Ventura, CA.  He was a founding member of DSA and the Chicago Political Economy Group (cpegonline.org) and is on the steering committee of the North Star Caucus of DSA.