In 2018, President Donald Trump launched a significant revision of U.S. trade policy by imposing new tariffs on imported goods, most notably steel and aluminum, asserting a need to safeguard domestic jobs and tackle the trade deficit.
These tariffs predominantly targeted China, a major economic power and the largest source of U.S. imports, further complicating the already intricate relationship between trade and national security.
With the arrival of President Joe Biden, many of Trump’s tariffs remained intact, yet new trade restrictions were introduced to further protect U.S. industries, continuing the dialogue around tariffs that weigh consumer costs against potential domestic job gains.
Amidst these changes, many economists speculated that selected tariffs, especially those affecting the automotive sector, could bolster domestic industry without substantially elevating overall consumer prices.
However, this perspective was challenged when President Trump returned to governance, vowing to implement sweeping tariffs aimed at a range of nations he deemed unfair competitors.
These tariffs broadened their scope to encompass almost all dutiable imports, deviating from the more focused targeting seen in the first term.
Certain commodities, like Canadian energy and potash, enjoy reduced tariff rates, aligning with specific strategic trade interests.
Additionally, special credits were designated for U.S. automakers to mitigate some cost impacts of these tariffs on foreign materials, though these credits are set to expire in three years.
The broad implementation of these tariffs is expected to generate extensive and often conflicting economic consequences for both the U.S. and global economies.
While some domestic industries could find opportunities for growth and competitive pricing due to tariff protections against imports, these advantages may not offset increased costs for consumers or the potential decline in economic vitality for U.S. workers.
Retaliatory tariffs from international partners on U.S. exports could diminish foreign demand for American goods, further harming domestic job markets.
Additionally, U.S. industries relying heavily on imported intermediate inputs will inevitably face increased costs, undermining the notional benefits of protective tariffs.
This analysis from Equitable Growth aims to delve deeper into how tariffs on imported inputs could escalate costs for U.S. industries and labor forces, and investigates the geographic distribution of these costs.
Key areas of data focus on the reliance of U.S. industries on imported inputs, the economic burden imposed by tariffs, and the effects these financial burdens may have on employment, segmented by sector and location.
Without providing direct calculations of cost impacts or employment outcomes related to tariffs, this analysis nevertheless paints a general picture of how tariff-related expenses are expected to affect various industries, buoyed by specific assumptions and data available.
In the realm of economic research, the findings indicate that manufacturing industries are substantially more susceptible to tariff-related costs compared to other sectors, undermining justifications proposed by tariff advocates.
Manufacturing, including the important vehicle production sector, may encounter higher input prices stemming from tariffs that were ostensibly designed to enhance its competitiveness against cheaper foreign imports.
The reliance of the manufacturing sector on imported inputs positions it as the most vulnerable segment, with 19 out of the 25 U.S. industries most affected by tariffs being classified within manufacturing.
This analysis presents two distinct metrics intended to evaluate the prospective impacts of tariff policy: one focusing on the import share of inputs specific to industries and another measuring tariff costs as a percentage of total input costs.
By leveraging these metrics, insights were generated regarding various industries’ vulnerability to tariffs, indicating that most manufacturing sectors might face cost increases ranging from 2 percent to 4.5 percent due to current tariff structures.
While some outlier industries exist, such as the movie and sound recording sector, the overall trend illustrates a dependency on imports that heightens exposure to tariffs.
For example, industries like construction, which also import large quantities of raw materials primarily from China, reveal a lesser but still significant vulnerability to tariff impacts.
Similar trends emerge for the repair and maintenance sector, including auto repair businesses, which absorb the upstream costs of tariffs alongside other industries.
When elevated costs are passed through the supply chain, industries reliant on manufactured goods face increased expenses, which could inflate consumer prices for end products like vehicles and construction services.
Due to rising costs of construction materials, development projects may be delayed or halted, leading to restricted housing supply that in turn pressures housing prices upwards.
Consequently, the ramifications of tariffs are not merely confined to direct costs but also extend into more complex second-order economic effects that warrant further exploration in future studies.
The high exposure of manufacturing and construction sectors carries significant implications for employment since these industries provide jobs for millions of Americans—over 8 million in construction and nearly 13 million in manufacturing by 2025.
Existing labor dynamics, such as union coverage rates—approximately 10 percent in construction and 7.9 percent in manufacturing—could alter how companies manage tariff-induced costs, providing a marginal buffer for those workers.
Nevertheless, it remains uncertain whether existing protections will be adequate against the potential 2 percent to 4.5 percent decline in profitability faced by numerous manufacturing sectors, especially considering reports of increasing job losses amid highly exposed sectors.
Geographically, the tariff impacts may also prove politically sensitive, particularly for Trump’s administration, as regions with substantial manufacturing jobs, such as Michigan, Wisconsin, and Indiana, might experience disproportionate economic strain due to high tariff costs.
This analysis indicates these midwestern states are at greater risk due to their industrial employment compositions, potentially catalyzing economic turmoil among workers in an area that has historically swung elections.
To enhance understanding of tariff effects, further research could extend this analysis by integrating estimates of how tariffs influence final goods alongside measures of retaliatory tariffs from other nations on U.S. exports.
Additionally, the effect of domestic supply chain changes on revenue for U.S. industries due to tariffs and retaliations should be explored, recognizing that the interplay of tariffs and the broader economic environment does not exist in isolation.
Recent legislative changes, like the Republican budget reconciliation law, could also significantly impact the affected industries, creating complexities within sectors that experience overlapping pressures from tariffs and fiscal policies.
Furthermore, analyzing workforce characteristics—including demographics and union representation—will reveal how tariff costs may be transferred to different groups of workers across myriad sectors.
In summary, while this initial assessment highlights the manufacturing sector’s significant exposure to tariffs, alongside construction, mining, and energy, the broader implications for employment and economic stability call for urgent attention.
The effects will ripple through vital industrial sectors and geographies, putting additional strain on workers and their communities.
Consequently, developing a more nuanced understanding of the tariffs’ impact beyond gross economic metrics will require targeted research and insightful analysis moving forward.
image source from：equitablegrowth
