Revealed: Meaning “made in America”
George and Lisa Winton of Swanney, Georgia, discuss the foundations of the Winton Machine Company and the meaning of “made in America.”
According to the Trump administration, tariffs are the solution to many problems in America.
More revenue. More work. Fairer trade transactions.
“I always say ‘customers’ is my most beautiful word in the dictionary,” Trump said at a rally shortly after taking office in January. “The tariffs will make us rich like hell. It will bring back the business in our country that left us.”
But economists aren’t convinced that tariffs will pan out to become a panacea, especially if the Trump administration appears to be treating them as a bargaining tool. Employment growth could lose its luster, they told USA Today, saying consumers are stuck at higher prices.
While targeted tariffs help certain industries stay competitive and support national security, “comprehensive tariffs to uniform trade deficits across countries are not a strong economic growth recipe,” says Erin McLaughlin, senior economist at the Conference Committee, a nonprofit business research group.
Will tariffs lead to more US factories?
Trump said the tariffs would cause factories to “fight back” against the US
“You see it already happening. We’re charging our domestic industrial bases,” Trump said on April 2.
Economists are particularly unsure, as the Trump administration has a random approach to trade policy. Already, the administration has adjusted tariffs on the UK and China, and says other transactions are ongoing.
“It takes time to build factories, hire and train workers. It takes years of investment to make money in manufacturing,” says Nancy Chian, professor of economics at Kellogg School of Management in Northwestern. “If demand appears to be changing, or if the economic environment appears to be very unstable, no one is going to do that.”
Experts say it’s especially true when they expect tariff rates to continue to fall, as did businesses in China. The current rate is 30% after reaching 145%.
“We’re looking forward to seeing you in the process of exploring the importance of our efforts to help you,” said Erin McLaughlin, senior economist at the Conference Committee, a non-profit business research group. “30% will see if it causes supervision. I don’t know. That may not be high enough.”
Even if companies decide to shift production from China, tariff rates will be higher than most countries – experts may say that moving production to a lower-reducing country is more affordable than moving production to the US
“They’re a part of the economics professor at Case Western Reserve University in Ohio, who served as White House staff in both the Obama and Biden administrations,” said Susan Helper, an economics professor at Case Western Reserve University in Ohio, who was a member of the White House. But “That doesn’t necessarily mean that (the manufacturer) will come to the US. Maybe they’ll go to Mexico, maybe Vietnam.”
Others say tariffs could hinder certain companies from expanding production in the US by increasing the costs of imports. A 2022 report from the Department of Commerce shows that nearly a third of intermediate inputs from US manufacturers are imported from other countries.
The data already suggests that some manufacturers are refraining from investing, and see how tariffs will unfold.
The country’s value of privately manufactured construction remained close to record levels, but fell by 0.6% per month in April and 0.9% in March, according to the Census Bureau. The National Manufacturers Association website says high interest rates, rising construction material prices and economic uncertainty will threaten growth in the coming months.
“We’re looking forward to seeing you in a new business,” said Jeff Bischoff, Chief Sales Officer at Lexington, Kentucky designer builder Gray. “Companies are just willing to make decisions about their major investments if they don’t know what their input costs will be.”
Other companies are canceling their expansion plans completely amid uncertainty. International recycling groups have stopped plans to build a $300 million recycling plant in Erie, Pennsylvania, according to Erie Times-News, part of the USA Today network.
Michael Strain, director of economic policy research at the American Enterprise Institute, a conservative think tank, hopes to reuse “some” that is linked to tariffs.
“In theory, there’s the feeling that you can make everything you need here. But that would have to revert a lot of the way you do business today. “It takes years, if not decades to achieve. And yet there are some things you can’t make here.”
Will more manufacturing create more jobs?
Even if manufacturers move production to the US, it is not clear that it will result in a large-scale influx of manufacturing.
Companies re-shore will face higher operating costs: labor is more expensive in the US than in other countries, and tariffs will extract the costs of imported inputs that are dependent on factories.
To cut costs, economists say they expect businesses to move more and more towards automation.
McLaughlin of the conference committee said he thinks it makes sense to line up some of the more technically sophisticated manufacturing on the ground.
Still, she’s not sure the director will produce a lot of work.
“Modern American factories are probably not what we all imagined, and perhaps not even what our administration would imagine,” she said. “They may not employ that many people because of robotics, advanced equipment use.”
Some worrying tariffs can actually encourage manufacturing employment by increasing the costs of doing business.
That’s how tariffs were deployed under the trade war during Trump’s first administration, according to one paper. Federal Reserve economists found that Trump’s first term tariffs increased employment in manufacturing protected by tariffs by 0.4%, but these profits were offset by jobs lost due to rising input costs (2%) and retaliatory tariffs (1.1%)..
“The University of Chicago has created a great opportunity to help people understand how they are doing,” said Rodrigo Adao, an associate professor of economics at the University of Chicago. “It brings a little question mark forward.”
A May 21 report from Wells Fargo Economists found a meaningful increase in factory work “will not be shown as unseen in the near future.”
The report says that meaningful employment growth is possible in the long term, but it will require at least $2.9 trillion in net new capital investment to add 6.7 million manufacturing jobs and bring the sector back to its historic peak.
“Even with current tariff policies stuck, the full rebound in manufacturing employment appears to be intensely baffling,” reads a report led by Sarah House, senior economist at Wells Fargo.
Lower deficits, higher costs
Trump in April confirmed that tariffs could collide with consumer wallets.
“Perhaps kids will have two dolls instead of 30 dolls. And maybe two dolls will cost them a few dollars than they normally do,” he said at the Cabinet meeting on April 30. “But we’re not talking about things we have to get out of the way. They have boats packed with things, many of which are not all of that, and things we don’t need.”
Trump’s comments came when tariffs on China were 145%. They then fell to 30% during a 90-day suspension, but even lower tariff rates mean prices will rise. Federal Reserve Chairman Jerome Powell on June 18 said he expects “a meaningful amount of inflation will arrive in the coming months.”
The latest inflation report showed that the impact of tariffs is more restrained than expected, but economists say higher prices are likely here by the summer. Major retailers like Walmart have already warned that they will raise prices soon to offset tariff costs.
A May survey from the New York Fed found that about three-quarters of businesses in total will pass on a cost-rising plan from tariff plans at least some of those higher costs, allowing them to pass on higher costs for their customers. More than half of manufacturers and service companies said they hiked prices within a month of experiencing rising costs.
“The tariff fees will have to be paid, and some of it will fall to the final consumer,” Powell said after a June Fed meeting. “That’s what companies say. That’s what data says. …So we know it’s coming.”
Tariffs will reduce the federal deficit by $2.8 trillion over the next decade, but will reduce economic output by 0.6% and reduce household purchasing power by increasing inflation by 0.4 percentage points in 2025 and 2026, according to a June report from Congress’s Budget and Budget Office.
Another June report from Yale Budget Lab found that tariffs were set to increase consumer prices by 1.5% in the short term.
According to the Budget Lab, consumers can expect shoes and apparel prices to rise by 33% and 28% in the short term, and 18% and 15% in the long term, respectively. Food prices are expected to rise 2.2% in the long term, while vehicle prices will rise 11.9%.
Other economic risks
The economists lowered the chances of a recession after China and the US agreed to lower tariff rates during the 90-day suspension on May 12, and agreed to expire in August.
Ryan Sweet, chief economist at Oxford Economics, said his estimates fell from 50% to 35% after the suspension was announced. Goldman Sachs soaked between 45% and 35% in May and 30% in June. JP Morgan puts the odds below 50%, but Barclays completely dismissed the risk of a recession.
Before Trump announced the sweeping fees on April 2, the risk is still rising compared to the odds of the recession. For example, JP Morgan put the odds for the recession at 20% in January. Goldman Sachs said 15% in December.
Looking forward to it, GDP growth is expected to be 0.6 percentage points lower in 2025 due to tariffs this year and retaliation from other countries, with the US economy expected to be 0.3% lower in the long term, according to Yale Budget Lab.
“In the short term, they will make life even more difficult for consumers, workers and manufacturers,” said Qian of Northwestern. In the long run, if tariff increases are held, “There are more manufacturing in the US, but they do cost a lot more. It’s hard to see how American manufacturers and American workers are losing.”
