Trump’s tariffs are as bad as Bidenomics

The logic of the Trump protectionist policy is that a nation can become richer by producing at home products that it could buy more cheaply abroad. Not only does this defy reason, but the administration has presented no evidence showing how the U.S. or any other nation has benefited economically from broad-based protectionist policies.

Certainly there is no evidence that the protectionism of the first Trump administration benefited U.S. industrial production, which rose in 2017 and 2018 in response to deregulation and tax cuts, then fell by 2% under protectionist policies in 2019. Economic growth, which reached a 13-year high in 2018, slumped in 2019 under Mr. Trump’s protectionist policies, and employment in manufacturing as a percentage of total employment continued to fall on a secular basis, as it had before Mr. Trump’s tariffs.

Given our disastrous experience with tariffs in the 20th century, the closest that protectionists come to providing an example of tariff policies generating positive results is their assertion that the U.S. prospered because of high tariffs during the 19th century. But economists and historians have repeatedly shown that the U.S. industrialized faster when tariff rates fell. By the end of the 19th century, it was clear even to President William McKinley, whose famous 1890 tariff proved disastrous economically and politically, that “the period of exclusiveness is past. The expansion of our trade and commerce is the pressing problem. Commercial wars are unprofitable."

Even if Mr. Trump’s tariffs incite foreign companies to “tariff jump" by building more factories and producing more manufacturing output in the U.S., it isn’t clear that America will benefit. We don’t have to speculate on how effective the Trump tariffs will be in creating new jobs, because we have evidence from the first Trump term. In 2018, Mr. Trump imposed tariffs on washing machines, raising the cost consumers paid for these appliances by more than $1.5 billion annually while bringing in only $82 million in customs revenue. Even after netting out the tax revenue, the average annual cost to American consumers of each job created by these tariffs was north of $815,000, roughly 19 times the average annual salary earned in 2018 by production-line workers employed in manufacturing appliances. The situation was similar with Trump’s first-term steel tariffs. Gary Clyde Hufbauer and Euijin Jung at the Peterson Institute calculated that American consumers paid an additional $5.6 billion for steel, so that each job created by these tariffs cost consumers some $650,000, more than 10 times the average steelworker salary.

These examples aren’t outliers. When the Cato Institute’s Scott Lincicome surveyed America’s history with tariffs, he found that the average annual cost to American consumers per job saved or created by tariffs from 1950 to 1990 was, in 2025 dollars, nearly $810,000.

The president’s trade policies focus exclusively on manufacturing, never mentioning America’s massive surplus in the services sector, where wages are now on average higher than in manufacturing. If Mr. Trump’s across-the-board tariffs bring back jobs in manufacturing, where will the workers come from? Forty-three percent of U.S. manufacturers in the recent National Federation of Independent Businesses questionnaire said that they couldn’t find employees to fill existing jobs. In the fictional world that guides trade policy in the Trump administration, real prosperity comes from working in manufacturing plants. Yet workers aren’t eager to do that, and for the past 60 years Americans have educated their children to enable them to work in the service industries, where wages are higher and opportunities greater.

Only 8% of American workers are now employed in manufacturing, which is so mechanized that it produces 2.5 times the output value it did in 1975, when it accounted for 22% of the labor force. If putting high tariffs on clothing at Walmart brings back the cotton mills where our parents and grandparents toiled, who wants those jobs? Should the capital to build these mills be funded by cutting back on artificial-intelligence investment?

The state-directed capitalism of President Biden’s subsidies and Mr. Trump’s tariffs might attract some investments and create hothouse jobs that require perpetual subsidies and protection, but they misallocate productive resources and make the nation poorer. Protectionism also raises consumer prices, dampens competition, and slows innovation and growth. A less efficient country with a lower growth rate and closed markets is less likely in the long run to attract foreign investment.

As Elon Musk has wisely suggested, Mr. Trump can still save us from this bleak future with real reciprocal trade agreements in which we and our trading partners mutually lower our trade barriers. The president’s advisers and Republicans in Congress would serve him better by remembering Thomas Sowell’s advice: “When you want to help people, you tell them the truth."

Mr. Gramm, a former chairman of the Senate Banking Committee, is a nonresident senior fellow at the American Enterprise Institute. Mr. Boudreaux is a professor of economics at George Mason University and the Mercatus Center. This article is adapted from their forthcoming book: “The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism."