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CNN
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President Donald Trump is on a mission to restore American manufacturing prowess by using his favorite tool: massive tariffs on foreign imports.
“The higher it goes, the more likely it is they’re going to build,” Trump told leading CEOs last week at The Business Roundtable, referring to tariffs. “The biggest win is if they move into our country and produce jobs. That’s a bigger win than the tariffs themselves.”
Reindustrializing America could create many jobs and revive communities crushed by the shutdown of factories as blue-collar jobs were shipped overseas.
Tariffs could help encourage some investment in domestic manufacturing. Yet economists and trade experts say that a more dramatic revival of US manufacturing would take considerable time – far more than what’s left in Trump’s second term.
That’s because while tariffs can kick in with little notice, factories can’t be put into operation overnight. It can take years – and billions of dollars – to build cutting-edge factories to assemble cars, appliances and computer chips.
“The sort of reindustrialization that’s being talked about isn’t the product of months or years,” said Joe Brusuelas, chief economist at RSM. “It’s the product of decades.”
This appears to be a crucial obstacle in Trump’s efforts to make manufacturing great again.
CEOs need clarity on not only where tariffs will be tomorrow but where they’ll be years from now. Otherwise, they can be reluctant to spend billions of dollars to relocate factories to the United States, where labor costs are typically much higher.
“We make decisions around aluminum production that have a horizon of 20 to 40 years,” Alcoa CEO Bill Oplinger said at a conference last month. “We would not be making an investment in the United States based on a tariff structure that could be in place for a much shorter period of time.”
These days, CEOs have little confidence where tariffs will be at the end of the week – let alone the end of the decade, or even multiple decades away.
If Trump were to keep high tariffs in place for his entire second term – and that’s a big if – there’s no guarantee his successor would do the same starting in January 2029.
“Do you build a widget plant in America when you don’t know if the next president will kill the tariff?” Alan Blinder, economics professor at Princeton University, told CNN in an interview.
Of course, term limits are a reality of the White House.
Presidents often set in motion long-term policies, not knowing whether the next president will double down on them or undo them.
“I don’t want to argue against doing something that may take ten to fifteen years,” said Blinder, who served as the vice chairman of the Federal Reserve in the 1990s. “But don’t do stupid things that take ten to fifteen years to come to fruition because those are the ones that are likely to get erased by the next administration.”
Blinder pointed specifically to tariffs that would undermine decades of integration in North America by the auto industry.
In the closely interconnected North American economy, auto parts often cross the border multiple times before a car lands at a dealership in the United States. There is no such thing as an all-American car.
Trump has argued that automakers can avoid his tariffs by moving factories back to America.
“He told them they should get on it, start investing, start moving, shift production here to the United States of America, where they will pay no tariff,” White House Press Secretary Karoline Leavitt said earlier this month. “That’s the ultimate goal.”
But that’s easier said than done.
It can take years between when an auto factory gets announced and cars start rolling off the assembly line.
Blinder, the Princeton economist, said that even if tariffs can break up North American supply chains, there would be consequences.
“It would be costly to Americans. They would get inferior cars at higher prices. And it would probably take a decade or two to get there,” said Blinder.
White House spokesman Kush Desai acknowledged that boosting US manufacturing would be a “step-by-step process.” He said that while eventually the goal is to expand manufacturing production capacity, the initial focus is on ramping up existing facilities that are underutilized due to “unfair dumping” of cheap steel and aluminum.
“Since President Trump was elected, industry leaders have responded to President Trump’s America First economic agenda of tariffs, deregulation, and the unleashing of American energy with trillions in investment commitments that will create thousands of new jobs,” Desai said in a statement to CNN. “President Trump delivered historic job, wage, and investment growth in his first term, and is set to do so again in his second term.”
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said it’s hard to know precisely how long it would take to reshore manufacturing at the scale Trump has talked about because it’s never been attempted in a globally integrated country like the United States.
“But it cannot happen quickly,” Lovely said. “It would take well beyond the next four years.”
Lovely added that while high tariffs will likely incentivize some new investment in the United States, there will also be pain as farmers and other exporters lose customers, lay off workers and go bankrupt in the trade war.
“This is not going to reindustrialize America,” Lovely said.
Some supporters of Trump’s trade strategy acknowledge it will take time to reverse the loss of manufacturing jobs, but they argue that it’s a worthy effort anyway.
“We’ve been rowing in the wrong direction on trade and industrial policy for 30 or 40 years. And no, it’s not going to change overnight. But that’s not an excuse to do nothing,” Mark DiPlacido, a policy adviser with conservative group American Compass, told The Washington Post earlier this month.
Market and economic pressures
Yet it’s unclear how much patience Americans will have, politically or economically, for a sustained trade war.
Trump’s trade war is barely a month old, and it’s already facing pressure from some in Washington and on Wall Street.
Investors are frustrated with the on-again, off-again nature of the tariffs. The uncertainty has sparked concerns of an economic slowdown or even a recession.
The benchmark S&P 500 lost $5.3 trillion in market value between its record high on February 19 and the market close on March 13, when it closed in a 10% correction.
The mood is darkening on Main Street, too.
Small business uncertainty about the economy surged to its second-highest level in records that go back to 1973. Consumer sentiment plunged in March to two-year lows, the latest in what Apollo Global chief economist Torsten Slok has described as an “alarming” deterioration in consumer confidence.
Even some pro-Trump economists are growing worried about the state of the economy.
“I am really concerned about consumer confidence. That’s a bad sign. It means people are going to stop spending,” Stephen Moore, a senior visiting fellow at The Heritage Foundation, told CNN in a phone interview.
Moore, a former senior economic adviser to Trump, added that he’s “concerned” about the stock market drop and fears the US economy is likely to shrink during the first quarter.
Although Moore acknowledged that the risk of a recession has gone up, he is hopeful pressure on the economy will subside as tariffs go away.
“I do not believe a recession is inevitable. If we get a trade deal done, we could see a big snapback,” Moore said.
Of course, that implies tariffs don’t last long enough to convince automakers and other manufacturers to dramatically reshore jobs.
