Tariffs will squeeze manufacturers and jobs may not follow
Add Axios as your preferred source to
see more of our stories on Google.
Tariffs are meant to boost U.S. manufacturing and jobs, but the issue is complicated.
Why it matters: In the short run, U.S. manufacturers are going to hurt from these tariffs, and whether they lead to more jobs in the long term is an open question.
Zoom in: U.S. manufacturers may produce their products here, but they also import a lot of things to make their goods.
- That includes motor vehicle parts, electrical and electronic components, and nonferrous metals (excluding aluminum). A significant share come from Mexico, Canada and China, as a paper from Deloitte out Wednesday notes.
Between the lines: If Trump's tariffs are broad-based, those "intermediate input" costs will rise. Manufacturers are already worried about this and have been in a bit of a holding pattern.
- The Institute for Supply Management said yesterday the manufacturing sector fell into contraction in March, as its index of activity dropped to 49 from 50.3 (50 is the line between expansion and contraction).
Zoom out: The uncertainty is massive.
- "I've been following this super closely since early November. I've talked to literally hundreds of companies," says Jim Kilpatrick, a partner at Deloitte who specializes in supply chains. "I've never felt my crystal ball was as cloudy as it is right now."
The intrigue: The notion that we can bring this work home and create a surge in employment is likely misguided.
- The U.S. manufacturing sector has gotten very advanced and highly automated. It isn't a "shoulder-to-shoulder" factory kind of business.
By the numbers: From January 2020 to February 2025, real GDP in the sector rose nearly 11%, to $3.1 trillion from $2.8 trillion in 2025 dollars, per data from the Bureau of Economic Analysis.
- In other words, more stuff got made at home.
Meanwhile: Employment in the sector isn't moving.
- In January 2020 there were 12.75 million workers in manufacturing. In February 2025 that number was 12.76 million, hardly budging, per data from the Labor Department.
- The most labor-intensive manufacturing, such as in the apparel industry, has remained overseas.
Context: The growth in manufacturing has been in sectors that use advanced technology to build things, where you have relatively few but highly-skilled workers, Kilpatrick says. Think autos, clean energy, defense.
- Labor-intensive factory work that some might envision coming back to the U.S. is still much more profitably done overseas.
- Kilpatrick argues that tariffs should focus on those advanced industries, instead of blanketing all kinds of imported goods.
The other side: "Fearmongering by the media and Democrats about President Trump's America First economic agenda isn't going to change the fact industry leaders have already made trillions in investment commitments to make in America," White House spokesman Kush Desai said in an email.
- He also said trade concessions from other countries "would help level the playing field for American industries and workers," and said tariffs didn't impact growth or inflation in the president's first term.
