Of all the illogical, wildly incoherent and downright bizarre aspects of President Donald Trump’s tariff war, there is perhaps nothing more inexplicable than the White House’s fixation on restoring and reshoring American manufacturing.
It’s hard to think of a worse idea than creating vast economic dislocation to make America a global manufacturing hub.
It’s a goal that is not only unachievable; it’s a terrible idea that ignores America’s key comparative advantage as a provider of global services. This reality, however, has not penetrated the Trump administration’s myopic economic thinking. To listen to the White House talk about tariffs and trade is to hear a message on manufacturing that would have made more sense in the 1970s or 1980s.At a news conference in January, Trump declared that America will “impose new tariffs so that the products on our stores [sic] will once again be stamped with those beautiful words, made in the USA.” Just this week, Deputy Chief of Staff Stephen Miller declared that Trump’s tariffs will “make America the manufacturing capital of the world.”
In testimony before Congress, U.S. Trade Representative Jamieson Greer went even further, stating the president’s view that he wants America “to be a hub for manufacturing and production” and sees trade deficits with other countries as “a manifestation of the loss of the nation’s ability to make, to grow, to build.” According to Greer, “We need to reshore manufacturing.”
No, we don’t.
It’s hard to think of a worse idea than creating vast economic dislocation to make America a global manufacturing hub.
Let’s start with some basic data that seems to have no home in the White House. Manufacturing is a mere 10% of the U.S. GDP and has been steadily declining for years (by comparison, health care is 17.5% of GDP, real estate is around 14% percent and professional and business services account for around 13% of GDP).
The reason is simple: It’s cheaper to manufacture goods overseas, where labor is less expensive. Moreover, automation has steadily decreased the number of American workers needed to produce goods. Even if the White House could reshore manufacturing to the United States, it would hardly produce an employment renaissance.
What is most problematic with Trump’s manufacturing obsession is that it ignores the real engine of U.S. economic growth — services.
Indeed, when Commerce Secretary Howard Lutnick declared recently, “We’re going to bring manufacturing back. … Foreign goods may get a little more expensive, but American goods are going to get cheap,” he had this precisely backward. Bringing back American manufacturing by raising tariffs that make foreign exports more expensive will not make goods cheaper. Instead, because of labor costs alone, goods manufactured again in America would become significantly more expensive (according to one estimate, manufacturing the iPhone in the United States would run the price up to $3,500). However, what is most problematic with Trump’s manufacturing obsession is that it ignores the real engine of U.S. economic growth — services.
Service industries, including financial and legal services, health care, education and accounting to real estate, tourism, information technology, software development and media and entertainment, make up 70 percent of the U.S. economy. And they are also a considerable element of America’s export economy. In 2022, services represented 30 % of all U.S. exports.
Yet, this crucial element of the U.S. economy has gone largely unmentioned in Trump’s tariff war. The administration loves to talk about America’s trade deficit but only in terms of manufacturing. It seems the White House is almost embarrassed to talk about the fact that America has a nearly $280 billion trade surplus in services.
One can only assume it’s because Trump can’t conceptualize a product that doesn’t say “Made in the USA”… or perhaps because his understanding of the U.S. economy is stuck in the past — when American companies made cars and televisions or other tangible consumer products. Whatever the reason, Trump’s obsession with manufacturing is the economic equivalent of missing the forest for the trees. The fact is, even if the U.S. could bring more manufacturing back to the United States, there’s little evidence that it’s what Americans want. If they did, perhaps there wouldn’t have been 482,000 unfilled manufacturing jobs in February.But perhaps the most frustrating element of Trump’s manufacturing focus is that it largely ignores what happened over the last four years in the manufacturing sector. To listen to MAGA-world is to believe that manufacturing in America was decimated during the Biden years. In fact, nearly 800,000 new manufacturing jobs were created during Biden’s presidency (by contrast, the U.S./ health care sector created more than 2.5 million new jobs between the spring of 2020 and March 2024). This likely doesn’t register with Trump because these manufacturing jobs weren’t in industries like steel or automaking but in semiconductors, battery storage and clean technology. The growth in these industries wasn’t accidental. It was a byproduct of significant pieces of legislation passed in Congress, such as the 2022 Infrastructure Law and the CHIPS and Science Act — both of which had bipartisan support. The worst part of Trump’s tariff strategy is its incoherence and the acute financial uncertainty it has created. The new manufacturing industries look very different from those of Trump’s younger days (when he seemed to have formulated his views on trade and tariffs). Rather than producing cars and iPhones or sewing together Levi’s jeans, manufacturing companies today are working with advanced technology, which is befitting an industrialized economy like ours that has left the belching smokestacks of yesteryear behind us. And they are doing more with less. Even as manufacturing employment has fallen dramatically, production has continued to rise.In effect, Trump is trying to revive declining U.S. manufacturing industries at the expense of the ones that are increasingly the most innovative and lucrative. Moreover, his tariff strategy completely ignores the service sector, representing America’s most potent comparative economic advantage on the global stage. To be sure, the worst part of Trump’s tariff strategy is its incoherence and the acute financial uncertainty it has created. After yesterday’s announcement of a 90-day pause, why would any business want to make a new investment or hire new workers when they don’t know if tariffs will go into effect? But the real problem with Trump’s tariffs is that his obsession with them reflects a complete misunderstanding of how the economy operates. Voters chose Trump over Kamala Harris because they were concerned about pocketbook issues. The problem is they’ve turned the reins of power over to a president who has no economic clue.
Michael A. Cohen is a political writer and a fellow with the Eurasia Group Foundation. 
