Are the tariffs creating new U.S. jobs? Maybe.
It is very difficult to write about the tariffs concisely. All week I’ve been trying to write “Manufacturing & Tariffs: Winners & Losers”. It seems simple enough. Data show that new Chinese manufacturing orders are down. The United States aluminum industry added 300 new jobs since June. And GoPro will make some cameras in Vietnam, instead of China.
China loses and the United States and Vietnam win… right? Done, in fewer than 50 words.
Sadly, it’s not that simple. These three examples are snapshots in time. They don’t give the entire story. But when I elaborate, I end up in the weeds. I don’t think I can list all the winners and losers in 1 million words, let alone in the 1,000 words I can realistically expect you to read. Plus, the situation evolves so quickly, that by the time I published 1 million words, my information would be out-of-date.
In the next 700 words, I will try to answer the question — Are the tariffs creating new U.S. jobs? This article looks at the aluminum tariffs and the tariffs on Chinese imports. It will show you who some of the winners and losers are and why the data are misleading.
A study released on December 11th reports that the aluminum industries created 300 new jobs since the aluminum tariffs went into effect on June 1st.
That sounds simple enough. Aluminum manufacturing jobs are returning. It’s cause and effect. Aluminum tariffs led to higher U.S. output of aluminum products, which created 300 new jobs.
However, we need to include the number of jobs lost because of the tariffs to see the real impact on U.S. employment. The Trade Partnership and Tariffs Hurt the Heartland reported that American companies have paid $690 million in aluminum tariffs to the federal government since June. What we don’t know is how many jobs were lost because companies had to pay a huge tax bill instead of employee wages.
Eric Boehm did the math and determined that each aluminum job created costs U.S. businesses $2.3 million. So yes, 300 jobs were created. They came at a large cost. And we still don’t know how many jobs were lost as companies struggle with higher prices and larger tax bills. Companies will look for cost saving strategies. Mid-Continental Nail laid off 150 of its 500 workers since the tariffs were imposed because of higher costs and lower sales.
Is the 10 percent tax on Chinese imports bringing manufacturing jobs back to the United States? There is limited new job data available. However, some companies have told me that they are trying to move some of their manufacturing back. Some can’t. Some are trying to be transparent with their customers as they decide what their next steps are, and others are ignoring the situation, hoping the trade issues are resolved before it affects them.
New U.S. manufacturing jobs will be created, but they will be limited and the cost of those jobs is unknown.
Some of my clients are trying to make products for the U.S. market in the United States. Here the tariffs will lead to a few new jobs. Products for non-U.S. markets will still come from China where companies can take advantage of years of relevant experience and lower labor costs.
Other clients have considered more U.S. production, but are unable to find places to manufacture domestically. When companies moved their operations overseas, U.S. factories were closed and repurposed, limiting U.S. manufacturing capacity. New factories must be built, which takes time and is expensive. But, if the tariffs last long enough more jobs might be created.
Finally, some companies have said that they will move part of their manufacturing out of China. It will go to Vietnam and not the United States. Non-Chinese, East Asian countries are well positioned to benefit from the tariffs. When this happens, companies will have higher costs, American consumers will pay more for the same product, and no new American manufacturing jobs are created.
The Chinese import tariffs will create an unknown number of jobs. They will also raise costs for companies and prices for American consumers. How much are those jobs worth? So far tariffs and counter-tariffs have been applied to $300 billion worth of goods. The Trade Partnership estimated that the first $100 billion of goods with new tariffs would result in a net loss of 134,000 U.S. jobs.
Tariffs kill jobs. To be more precise, tariffs kill jobs and raise prices for consumers. — Stuart Anderson, Executive Director of the National Foundation for American Policy
Seeing the Forest, Losing Sight of the Trees
When we think about tariffs, specific people or companies are the trees and the broader U.S. economy is the forest. There are lots of headlines about factories opening or closing because of tariffs and the enormous sums companies are paying the federal government to import goods. These catchy headlines don’t tell the whole story.
It is so difficult to concisely explain who is winning and who is losing because there are millions of trees in the forest and no two trees are exactly the same. Some trees are faring better than circumstances would project and others are faring worse. It is too early to see the health of the overall forest, so instead we gravitate toward the trees, which is complicated and misleading.