Why Trump tariffs won’t bring US manufacturing jobs back

Following Julie Harrison's advice earlier this week on how Australian companies can deal with expected US trade policy shifts, Walter Adamson argues tariff walls will do little to help American manufacturers. When it comes to jobs, there are more powerful influences than the placebo of protectionism, and smarter policy options at hand.

The notion that tariffs can restore American manufacturing jobs is a persistent yet flawed belief. While it’s politically appealing to frame trade barriers as a solution to economic decline, the reality is far more complex. Technological advancements—particularly automation and AI—are reshaping industry at a pace that no tariff can counteract. The evidence is clear: manufacturing productivity is rising, but employment is not.

Yet, the idea persists. Why?

Perhaps because it’s easier to blame foreign competition than to confront the disruptive force of technology. But if policymakers continue down the protectionist path without addressing the real issue, the U.S. risks falling behind in the very industries it seeks to protect. Here’s why history is not on the U.S.’s side in its tariff broadsides.

Observing the Economic Landscape: Tariffs vs Technology

Let's examine the core assumption: tariffs bring back manufacturing. Historical data suggests otherwise. The U.S. imposed aggressive tariffs on steel and aluminum under the previous Trump administration, yet manufacturing employment remained largely unchanged. Between 2018 and 2020, manufacturing jobs in the U.S. increased by just 0.5 per cent, despite billions in tariffs. Meanwhile, automation adoption surged.

Michael Keating, an economist writing for John Menadue’s Public Policy Journal, points out that U.S. manufacturing employment has been in decline since 1979, yet manufacturing production has remained strong. This disconnect highlights the real issue: it’s not that jobs are going overseas—it’s that fewer jobs are needed due to technology.

As Robert Atkinson, president of the Information Technology and Innovation Foundation (ITIF), explains:

“Tariffs are a political placebo. They don’t cure the disease; they only distract from the real issue—automation is replacing jobs, not China.”

Atkinson’s argument is backed by research. A 2020 study from MIT and the Federal Reserve found that 85 per cent of job losses in manufacturing since 2000 were due to automation, not trade. The math is simple: factories today produce more goods with fewer workers, thanks to robotics, AI, and advanced production systems.

Analysis: Why tariffs fail as a job strategy

1. Bayesian probabilities: The low likelihood of success

Using Bayesian analysis, we calculated the probability that tariffs genuinely contribute to job restoration. The results? Only a 16.4  per cent chance that tariffs were responsible for any observed employment increases. This aligns with historical trends—tariffs may cause short-term shifts, but they do not create long-term, sustainable job growth.

If the data is so clear, why do tariffs remain a political tool? Because they create the illusion of economic protection. In reality, they often accelerate offshoring, disrupt supply chains, and increase costs for domestic manufacturers.

2. Chaos Theory: The unintended consequences of trade barriers

Economic policies rarely operate in isolation. Chaos theory tells us that small changes can trigger significant, unpredictable effects—what’s known as the “butterfly effect.”

Take, for example, the steel and aluminium tariffs imposed in 2018. Instead of boosting American steel jobs, these tariffs increased costs for U.S. manufacturers that relied on imported metals. As a result, companies like Harley-Davidson and Caterpillar shifted some production overseas to remain competitive.

The unintended consequence? The very policy designed to protect American jobs pushed companies to relocate operations elsewhere.

3. Agent-based modeling: How businesses and consumers adapt

Agent-based modeling (ABM) helps us understand how individual entities—businesses and consumers—react to policy shifts. The results of the simulation revealed four possible scenarios:

• Scenario 1: Businesses absorb costs → This leads to wage stagnation and reduced hiring.
• Scenario 2: Businesses pass costs to consumers → This fuels inflation and weakens demand.
• Scenario 3: Businesses relocate to avoid tariffs → This accelerates offshoring, the opposite of the intended effect.
• Scenario 4: Government intervenes with subsidies → This offers temporary relief but increases fiscal deficits.

In all cases, tariffs failed to generate the broad-based job growth policymakers hoped for.

The better alternative: Investing in automation-compatible jobs

If tariffs don’t work, what’s the alternative? The answer lies in embracing, rather than resisting, the forces of technological change.

1. Reskilling the US workforce for automation

The most effective long-term strategy is not to fight automation but to prepare workers for it. Instead of subsidising failing industries, governments should be funding workforce training programs in AI, robotics, and advanced manufacturing.

• Germany has successfully integrated automation without mass layoffs by heavily investing in apprenticeship programs.
• South Korea leads the world in robot adoption per worker, yet maintains a robust manufacturing workforce due to upskilling initiatives.

If the U.S. wants to compete, it must rethink how it educates and trains its labour force.

2. Encouraging nearshoring instead of offshoring

Instead of punitive tariffs, a smarter strategy is to incentivise regional supply chains. Companies often offshore because of cost savings, but policies that support nearshoring (moving production to nearby countries like Mexico or Canada) can keep jobs closer to home while maintaining competitiveness.

According to a McKinsey report, nearshoring is already happening—companies are shifting operations to avoid supply chain disruptions. Policymakers should accelerate this trend through tax incentives and trade agreements.

3. Public-private partnerships to drive innovation

Finally, in all countries, government and industry must collaborate to foster manufacturing innovation. This means

•  Funding AI-driven manufacturing research.
• Supporting domestic semiconductor production.
• Creating incentives for industries that blend human labor with automation.

As economist Dani Rodrik argues:

“The future of manufacturing jobs isn’t about bringing back the past; it’s about creating a new kind of industrial policy—one that aligns with technological reality.”

Conclusion: A call for smarter economic policies

Tariffs may win political points, but they fail as an economic strategy. Instead of relying on outdated protectionist measures, policymakers should focus on technological adaptation, workforce reskilling, and smart trade policies.

The world isn’t going back to the 1950s factory model. The question is: will America resist the future or embrace it?

The answer will determine the nation’s economic standing for decades to come.

Walter Adamson is a systems thinker enhanced by AI capabilities, analysing complex interdependencies to drive innovative solutions for strategy, productivity and business performance. You can connect with him on Linkedin here.