Trump tariffs will cost high-tech manufacturing jobs: Five takeaways from new research on the effects of U.S. protectionism

Here are five key takeaways from the conversation: 1. Short-term pain precedes long-term manufacturing gains: While tariffs could eventually increase U.S. manufacturing employment, the sector would actually shrink for the next two to five years as supply chains reconfigure, which the latest poor U.S. job numbers from August may indicate. 2. Growth concentrates in low-tech “toy” manufacturing: Employment gains would occur in commoditized consumer products such as toys, while advanced manufacturing sectors like automotive and heavy machinery would contract, such that it would involve a reallocation of manufacturing employment rather than a case of reindustrialization. 3. Trade deficit reduction comes with technological downgrades: Tariffs would shrink America’s large trade deficit in consumer goods but push the U.S. economy down the technology ladder. 4. Canada faces indirect cost pressures, not job losses: As U.S. manufacturing—including different inputs—became more expensive, Canada would face higher costs for imported American goods. 5. Political benefits may outweigh economic logic: The policy creates concentrated benefits for some workers while imposing concentrated losses on others, creating complicated political trade offs. Short-term pain precedes minimal long-term manufacturing gains Steinberg’s economic modeling suggests tariffs would initially harm U.S. manufacturing before eventually boosting employment. “In the short run to the medium run, over the span of the next couple of years to maybe five years, manufacturing employment in the United States would actually fall,” he explained. This temporary decline reflects the costs of reconfiguring supply chains and adjusting to new trade patterns. However, Steinberg noted that “in the long run, employment in manufacturing would in fact go up. It wouldn’t go up a ton, but it would go up a little bit.” The timeline aligns with tariff proponents’ expectations of short-term costs for long-term benefits, though the gains may be more modest than promised. Growth concentrates in low-tech “toy” manufacturing Steinberg’s most striking finding involves which manufacturing sectors would actually grow. His analysis breakdowns manufacturing into four categories based on their position in supply chains and how easily foreign products can substitute for domestic ones. “All of that growth would occur in one subsector, namely what I’ve called the toy sector. This kind of commoditized, easy-to-substitute consumer products kind of low-tech stuff,” he said. “Every other subsector of manufacturing would shrink, including what I think are the sectors that a lot of tariff proponents have identified as being the most important for national security concerns.” This includes steel, automobiles, and heavy machinery—precisely the industries that tariff advocates claim to be protecting for strategic reasons. Trade deficit reduction comes with a technological downgrade The consumer goods subsector where employment and output growth would occur runs a large trade deficit, making it “ripe for re-industrialization” according to the data. Steinberg acknowledged that “tariffs can reduce trade deficits and, as a result, lead domestic consumers to substitute away from imported products towards domestic products.” However, this shift represents what he called “less overall re-industrialization and more within manufacturing reallocation…down the technology ladder.” The United States would thus move away from its comparative advantage in high-tech production and toward lower-value manufacturing. Canada faces indirect cost pressures, not job losses Unlike other trading partners, Canada’s manufacturing exports to the U.S. focus on upstream products like oil, steel, and aluminum—sectors that would shrink under the tariff regime. “Canada runs a trade deficit with the United States in these products. So we actually buy more of these products from the United States than the U.S. buys from us,” Steinberg noted. Canada would face higher costs as American-made intermediate inputs and consumer goods become more expensive due to tariff-induced price increases. “Those things are going to get more expensive, and that’s going to make the cost of production higher in Canada,” he explained. Political benefits may outweigh economic logic The reallocation of manufacturing employment identified in the research creates a complex political dynamic. While tariffs typically create concentrated benefits for protected industries and dispersed costs for consumers, Steinberg’s analysis reveals “narrow, concentrated benefits for another narrow, concentrated loss.” Companies like Caterpillar and John Deere are already laying off workers due to tariff impacts, creating visible job losses in high-tech manufacturing communities. Meanwhile, potential growth in consumer goods manufacturing would benefit different regions and workers. “We’re trading off a perhaps slightly larger number of toaster jobs for a lower number of jobs throughout the rest of the manufacturing sector,” Steinberg concluded, questioning whether this represents sound economic or even national security policy. This commentary draws on a Hub podcast. It was edited using AI. Full program here.