Trump's Tariffs and the Renaissance of American Manufacturing | Opinion

On April 2, "Liberation Day," President Donald Trump raised tariffs and effectively ended the world's post-war liberal trading order. By the time the sun had set that evening, he had imposed, with the stroke of a pen, elevated levies on 58 countries and the 27 member states of the European Union in addition to an across-the-board 10 percent duty on products from other countries.

Trump imposed the tariffs because, as he stated, Americans should manufacture the products Americans buy.

American manufacturing has been in decline for decades. In 1945, the United States accounted for more than half the world's factory output.

Today, U.S. output has dropped to 15.1 percent. A report from U.N. Industrial Development Organization last October predicted that the U.S. share of manufacturing will decline to 11 percent by 2030.

In contrast, China's share of manufacturing is now 31 percent. The U.N. thinks China by the end of this decade will account for 45 percent.

Like them or hate them, high tariff walls are necessary for the U.S. factory sector to recover.

Yet building a tariff wall is only half the story. America needs a Marshall Plan-like effort to help Americans start and grow factories behind Trump's raised tariff barrier.

Tax credits for plant and machinery should be part of that plan.

"Instead of repealing the tax-credit provisions of the Inflation Reduction Act as some propose, how about redirecting them toward revitalizing American manufacturing and bringing critical supply chains back to the U.S.?" asked Jonathan Bass of Argent LNG.

Before entering the energy business, Bass started a company making home furnishings.

"When I began my business, I purchased my first pieces of machinery on an American Express lease program, which was geared to helping small factories grow," Bass told Newsweek. "I could take advantage of that program because of an available investment tax credit. We now need the same type of infrastructure in place to help 90,000 entrepreneurs start factories across America."

In addition, Bass suggested a tax credit to buy American-made products.

Across-the-board tax cuts are also needed. It appears Congress will make permanent the reduced rates authorized by the Tax Cuts and Jobs Act, signed on January 1, 2018. That's the bare minimum. Reducing rates would encourage investment.

Factory owners need more cash. Washington has pushed banks to make credit available for all sorts of purposes. Why not loans to rebuild American manufacturing?

Walmart can help by buying more from U.S. factories. A bank will lend 85 percent of a purchase order from that store. Think of those bank loans as American dollars that immediately create American jobs.

"Trump needs to continue ensuring that the entire U.S. business climate—in particular tax and regulatory policies—becomes much friendlier to productive investment," Alan Tonelson, a trade expert who blogs at RealityChek, told Newsweek.

History says tariff walls do not last long.

"There is no transition period," Bass pointed out. "We don't have much time to make this work."

Trump probably knows that; it's one reason he is racing to attract foreign investment for factories on American soil. Among other things, new factories will create jobs for Americans.

And not a moment too soon. Today, around 8 percent of American workers hold manufacturing jobs. That's down from more than a quarter in 1970.

Yet the United States does not have workers for all the new foreign-owned factories Trump has announced. Of particular concern is the $100 billion plan of Taiwan Semiconductor Manufacturing Co. to build five additional chip facilities in the Phoenix area.

What is needed is a crash effort to train Americans, something former President Dwight D. Eisenhower did with his National Defense Education Act of 1958, triggered by the Soviet Union's launch of Sputnik in the previous year.

Tariffs will not only encourage new factories; they will also keep existing ones in America. Consider IKEA's only factory in the United States. In 2019, citing the high cost of raw materials, the Swedish furniture company announced the closure of the plant and the transfer of production to Europe.

"We made every effort to improve and maintain the competitiveness of this plant," said its site manager, Bert Eades, in a statement, "but unfortunately the right cost conditions are not in place to continue production in Danville, VA for the long-term."

The "right cost conditions"? If American tariffs were higher at the time, IKEA would still be making furniture there—and employing 300 workers and paying $500,000 each year in taxes to that city in southern Virginia.

As Bass said, "Trump with his tariffs is not making America great again—he is saving it."

Gordon G. Chang is the author of Plan Red: China's Project to Destroy America and The Coming Collapse of China. Follow him on X @GordonGChang.

The views expressed in this article are the writer's own.