Why Tariffs Won't Bring Jobs Back to America: A Deep Dive into Globalization's Impact

Globalisation has already reshaped America’s workforce – tariffs can’t turn back time.

At a White House dinner back in 2011, Steve Jobs was asked by President Obama what it would take to build iPhones in the United States. Jobs knew where this was going. “Those jobs aren’t coming back,” he replied. Supply chains and ecosystems that sustain manufacturing of hi-tech products like the iPhone take years to develop. The skills, capabilities, and relationships involved take even longer to cultivate. Factories cannot simply be picked up from one place and transplanted into another.

President Trump decided to try, anyway. On “Liberation Day,” he announced sweeping tariffs, not reciprocal but based on the idea of balancing trade deficits. This has thrown the economy into turmoil and sent markets plunging. Under pressure from Wall Street, he delayed the higher tariffs for 90 days but increased them for China. Markets recovered somewhat, but uncertainty remains and might have caused permanent damage baked into the cost of capital.

Much analysis since the announcement about tariffs has focused on the formula used to calculate them, and the flawed understanding of economics that the new policy is based on. The formula for tariffs does not measure what the president thinks it measures. Moreover, it does not make sense for America to produce everything itself. There are products that we buy without expecting the seller to buy something from us. If a country tries to build everything, it cannot specialize, leading to a decline in productivity and a decrease in competitiveness in many areas.

Ceteris Paribus, imposing blanket tariffs will do more harm than good. It is essential to understand the underlying reasons; America is not being “ripped off” by other countries. The competitiveness problem stems from the globalisation of production, specifically the “China syndrome” or China Shock, terms coined by economists David Autor, David Dorn, and Gordon Hanson. Due to a flood of imports from China, an estimated two to three million US manufacturing jobs were lost between 1999 and 2011, with many more lost since, particularly in the Midwest and South.

These job losses were not offset by new jobs in the same regions, leading to lower wages, higher unemployment, and increases in opioid addiction, social instability, and political polarization. Even workers outside manufacturing faced wage stagnation, especially those without college degrees, as the labor market became more competitive and bargaining power weakened. Promises that displaced workers could “learn to code” or transition to tech jobs often failed—many workers, especially older ones or those in distressed communities, found it challenging to retrain or relocate.

With globalisation, Wall Street has benefitted, but not Main Street. America’s trade balance in advanced technology products is also negative, incurring a deficit of nearly $300 billion in 2024 for that category. America has been borrowing to finance deficits and to continue consuming—a fundamentally unsustainable strategy.

Is the imposition of tariffs on the whole world the answer to America’s competitiveness issues? It depends on what America aims to achieve. Is it leverage? Unfettered access to foreign markets? Or bringing back all the jobs that have been outsourced?

On leverage, America might secure some deals, but at the expense of American purchasing power. It might get countries to lower barriers to American exports, but it’s doubtful this will save GM or Ford. As for bringing jobs back, Commerce Secretary Howard Lutnick now states that factories returning to the United States will be run mostly by robots!

Strong-arming countries and companies into investing in America has its limits. Transferring ecosystems around particular products takes years. If the goal is to regain dominance in innovation, development, and manufacturing, slashing research funding across the board is counterproductive. Targeting university research undermines the “commons” that all American corporations benefit from.

The idea of reversing outsourcing to generate wealth for investors is akin to putting toothpaste back into the tube. How long will Trump persist with this? Pressure is mounting from influential actors, and fault lines are appearing within the Republican Party. China’s retaliatory stance complicates matters. Tariffs are unlikely to work for Trump, and continuing this strategy will likely exacerbate inflation, creating further issues for him in the midterms. The divide between Wall Street and Main Street will worsen, and addressing this issue will fall to Trump or his successors.