Trump’s Tariffs Won’t Restore Manufacturing Jobs, Data Shows

 

Roy Maurer By Roy Maurer May 4, 2018
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The Takeaway

  • U.S. officials hope the tariffs on aluminum and steel will redirect buyers to U.S. manufacturers.
  • Manufacturing infrastructure is so changed that the workforce and factories might not support increased demand.
  • Current workforce skills are more complex--and in greater demand--than what's required to produce still and aluminum, experts say.


The Trump administration's proposed tariffs on aluminum and steel are unlikely to bring back the manufacturing jobs lost in recent decades, and could instead cost tens of thousands of U.S. jobs, according to economists.

Since the 2016 election campaign, President Donald Trump has vowed to use protectionist trade policy, including levying tariffs—taxes on imports—to revive U.S. manufacturing employment. In 1960, about 25 percent of U.S. workers worked in manufacturing. Today fewer than 10 percent do, according to government data.

In March, the U.S. placed a 25 percent tariff on foreign steel and a 10 percent duty on aluminum from abroad. The tariffs are specifically directed at China, the country's biggest trading partner, while other large suppliers such as Canada, Mexico and the European Union have been exempted for the time being, though marked for import quotas and other restrictions, the White House said.

The hope is that buyers will shun the more expensive foreign suppliers and increase demand on U.S. manufacturers to supply the steel. But it may not work out that way.

Mark Zandi, chief economist for Moody's Analytics, believes that instead of restoring U.S. jobs, the proposed levies will have the opposite effect. "Steel and aluminum tariffs will cost American jobs," possibly up to as many as 190,000 jobs, in sectors like manufacturing and agriculture, he said.

A study commissioned by the Consumer Technology Association and the National Retail Federation put U.S. job losses at 134,000, including about 67,000 U.S. agriculture jobs, due to Chinese retaliation. "Our view is that tariffs and trade wars are a measurable loser for the U.S. economy," said David French, senior vice president of government relations at the National Retail Federation.

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Changes in Manufacturing

The U.S. lost about 5.5 million manufacturing jobs between 2000 and 2017, according to a new study report from the University of Chicago. But during those same years, output from U.S. factories increased, indicating that improvements in productivity are a big driver for the decline in employment. Fewer workers are needed to produce more, and that's not going to change.

"Manufacturing firms, some facing pressure from China and other lower-cost, overseas competition, have automated low-skill, routine tasks and became more reliant on robots and college-educated workers to boost production," explained Erik Hurst, professor of economics at the Booth School of Business at the University of Chicago and co-author of the report.

Greater technology adoption and more-efficient production techniques mean fewer workers are needed, agreed Paula Harvey, SHRM-SCP, vice president of HR at Schulte Building Systems, a metal-building manufacturer based in Hockley, Texas.

"We use scanners and a lot of computerized technology and tools here," she said. "Our welders work under all sorts of specifications, way more technical than it used to be. We have to hire highly skilled machine operators and welders, and we're finding a lack of those types of people. So, we invest in upskilling our current workers."

Hurst and his fellow researchers found that while foreign competition played an important role in the decline of U.S. manufacturing employment during the 2000s, imposing tariffs or other trade barriers against suppliers like China will not have the desired effect of increased employment in the U.S, especially for workers with lower levels of schooling.

That's because previous job losses were highly concentrated among lower-skilled positions often filled by employees with less education, and the manufacturing sector is hiring more highly skilled workers, Hurst said.

In the late 1970s, nearly 30 percent of employed men with less than a high-school diploma worked in manufacturing. By last year, it was less than 15 percent.

Conversely, the share of workers ages 25 to 29 working in manufacturing with a bachelor's degree rose 5.5 percentage points in the past two decades to 26.6 percent. That was a larger increase and a higher rate of college education than found in the retail or construction industries, and a faster rate of growth than for the workforce overall, the researchers found.

Hurst's research also found that manufacturing has become much more capital intensive since 2000. The specific facilities whose closings accounted for much of the trade-related job loss during the 2000s were "likely using 20th century, more-labor-intensive technology," he said. "Should trade barriers be erected, the new manufacturing plants that would be created in the U.S. would almost surely use more capital-intensive, 21st century technologies than the plants that were wiped out by trade shocks."

In sum, tariffs are the wrong way to go to bring back U.S. manufacturing jobs, the research report concludes.

And Harvey agrees. "Tariffs are not the way to bring back jobs," she said, clarifying that this was her opinion and that she was not speaking for her company. "The problem with tariffs is that you're just slapping people's wrists—it's more of a Band-Aid on a deeper, systemic problem. The U.S. moved its manufacturing abroad years and years ago, we've already lost the facilities and the workers, and it's not coming back in the same way."

Fortunately for Schulte Building Systems, "our brand is strong, and we have people that want to come work for us," Harvey said. "But we're finding that some of our positions are being recruited by competitors. So we keep a good eye on wages and make sure are staying competitive."

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