President Trump is a slick politician and a masterful spin artist. He’s exceptional at portraying his policy’s “success” by focusing our attention squarely on its visible beneficiaries. That’s why he often unveils his latest tariffs in made-for-TV spectacles where he’s encircled by jubilant workers at revived factories that directly benefit from his protectionist policies.
Thankfully, Bastiat’s parable exposes this clever marketing ploy for what it is: cheap sophistry. For every reshored job and “Made in America” product comes at the hidden cost of whatever else we could’ve made with those resources (where that “whatever else” is something more valuable to the economy). These costs are, by definition, difficult to measure. And unlike a ribbon-cutting ceremony at a newly opened factory, they’re impossible to showcase. But they’re very real, and very damaging to the economy. The late Henry Hazlitt aptly distilled Bastiat’s insight in his classic work, Economics in One Lesson: the art of economics consists in looking beyond the immediate, visible benefits of a policy on one group to consider its long-run, “unseen” consequences on the entire economy.
Keep your eyes peeled, and you’ll detect shards of this fallacy scattered all over the White House Rose Garden from the president’s “Liberation Day” extravaganza. You’ll also find it littered all over cable news. Indeed, viewing today’s headlines through Bastiat’s lens reveals that many of the president’s most cherished trade war “victories” are a mirage.
In May, Trump’s Commerce Secretary Howard Lutnick vowed to stick it to China by bringing iPhone assembly jobs “back” to America. “The army of millions of human beings screwing in little screws to make iPhones, that kind of thing is going to come to America!” he gushed.
Would this bolster our economy, as Trump and Lutnick argue? Quite the opposite. Hiring an “army of millions” of Americans to assemble iPhones means drawing them away from jobs we actually excel at, like designing iPhones, developing new software, and countless others. If a $25,000 job assembling iPhones replaces a $125,000 job designing them, America isn’t $25,000 richer – we’re $100,000 poorer. Dave Chappelle is right: Americans want to buy iPhones, not make them.
The Federal Reserve’s Beige Book, which collects both quantitative and qualitative reports from businesses across the country, tells a consistent story. In Cleveland, “some manufacturers and auto dealers reported passing along 100 percent of tariff increases to customers, while others said that they are slow[ly] raising prices in response to tariffs.” In Chicago, “manufacturers attributed higher raw materials prices to tariffs and several said that they had passed on those increases to customers.” In Richmond, a glass manufacturer reported that its supplier was driven out of business by the tariffs, forcing consolidation among remaining suppliers, eliminating regional jobs, and driving prices higher.
Survey data from Cleveland shows that 87 percent of manufacturing firms report increased costs due to tariffs and the uncertainty surrounding them. For firms that receive at least half of their materials from imports, 75 percent reported that they would pass at least a majority of the tariffs on to consumers. None reported that they would absorb the full cost themselves.
Philip Luck, former deputy chief economist at the State Department, put it succinctly: the president promised “millions and millions of jobs” from the tariffs, but those promises are completely out of step with reality.
[Matthew] Lynn alleges that tariffs are working as intended. If that’s the case, we should see American manufacturing employment surging. After all, the entire point of the tariffs is to reshore American manufacturing jobs—something President Trump and his administration have been remarkably clear about.
So how’s that going?
According to the Bureau of Labor Statistics, the manufacturing sector has lost jobs for the past five months. The jobs report for September found 6,000 fewer manufacturing jobs, which brings the total job losses in manufacturing to 59,000 since April’s “Liberation Day.” The Institute for Supply Management finds similar figures, with eight consecutive months of contracting manufacturing employment.
These aren’t statistical blips, and they’re not the result of “fake data.” They form a pattern. Manufacturing job openings have plunged by over 100,000 since Trump took office. Factory hiring in May fell to its weakest rate since 2016, including the pace of hiring during the COVID pandemic.
Our readers know the private economy is the engine of wealth creation, while most government employees are in the business of redistributing that wealth. The Biden Administration went on a government hiring boom, so a reversal is what President Trump promised and won’t hurt the economy.
This doesn’t mean the labor market is booming. The November report continues the trend from before the government shutdown that private employers aren’t laying off workers in large numbers but they also aren’t hiring all that many. The question is why?
Some blame the adoption of artificial intelligence that replaces workers, or at least caution from CEOs as they wait to see how AI affects the economy. But AI still hasn’t been widely adopted, so AI can’t be the dominant explanation.
Our main suspect is the impact of tariffs and the uncertainty Mr. Trump’s willy-nilly border tax policies have caused. The Supreme Court may soon overturn his emergency tariffs as illegal, and many CEOs want to see how that case turns out and how Mr. Trump responds. Investment and hiring may also turn up next year as the tax cut provisions of this year’s tax and spending bill kick in.
One big statistical reason to suspect that tariffs are hurting jobs is the trend in manufacturing. Remember when tariffs were supposed to produce a U.S. manufacturing boom? It hasn’t happened. In January BLS reported 12,755,000 workers in all manufacturing industries. The number rose by a few thousand through April, but then began to fall each month and in November hit 12,697,000. That’s a net loss of 58,000 jobs, including 19,000 in the last three months.
Further evidence comes from the industries affected most by Mr. Trump’s tariffs of 50% on steel and aluminum and 25% on autos and auto parts. Employment in motor vehicles and parts fell 15,000 since January, while it remained flat in steel-making and aluminum manufacturing. This doesn’t count the job losses in downstream manufacturing firms that use steel and aluminum. Some renaissance.
If Mr. Trump wants a manufacturing revival, he’ll drop his border taxes, and let his other tax policies help hiring and investment.
DBx: As the WSJ‘s Editorial Board would be among the first to admit, there’s nothing inherently desirable about a nation having more manufacturing output or more manufacturing jobs. (Nearly everyone who pleads for policies to create more manufacturing jobs works in the service sector – including Donald Trump and Howard Lutnick.) But if creating more manufacturing output and jobs in the U.S. is the goal, Trump’s tariffs do not seem to be achieving their end.
Jason Furman tweets: (HT Scott Lincicome)
I can’t wait for the stories about why everyone was all wrong about the economists being all wrong about the tariffs.
Ian Vásquez reports that human freedom remains below its pre-covid-hysteria levels.
George Leef reviews Max Bazerman’s Inside an Academic Scandal: A Story of Fraud and Betrayal. A slice:
But with the big higher-education push starting in 1965, “publish or perish” became a mass phenomenon, and the huge numbers of aspiring academics overwhelmed the system. Hundreds of new journals sprang up, frequently with very lax standards for screening out dubious work. That laxity was hilariously exposed by Alan Sokal in an article stating that gravity is merely a social construct, written in fashionable academic gibberish that fooled the editors into taking it seriously.
Moreover, colleges and universities created many new academic “disciplines” where rigor took a backseat to publishing ideologically correct papers on topics like “implicit bias.” Our institutions were employing an army of professors whose main job was not to teach a body of knowledge but, rather, to produce research in avant-garde fields such as Women’s Studies. The result was an outpouring of extremely dubious scholarship—a prodigious waste of resources.
Here’s an analogy. Suppose that a country, acting on the belief that art is a public good that should be given government support, set up a system to subsidize the production of art. After a time, the country found that it was paying for a huge outpouring of absurd artworks, which it would then spend more money to store in warehouses. (The Dutch actually did that, as we read in this article.) Similarly, suppose that a country, acting on the belief that higher education is a great public boon, decided to subsidize college degrees and academic research. The United States has done that, with predictable results: far more degrees and scholarship than previously but with steadily falling quality.
Professor Reuven Brenner drives the point home in a 2024 Wall Street Journal article entitled “Art Subsidies and U.S. Higher Ed.” Brenner writes, “As the costs of the [Dutch] program increased, the agency asked applicants to prove they had sold $4,000 worth of art privately and to donate up to four works to the government each year. It requires little imagination to design wonderful fraud opportunities for all parties involved with such programs in place—which they did.”
When people have to spend their own money for something—art, education, or anything else—they are usually vigilant to make sure they get their money’s worth. But when the government buys or subsidizes things, quality control declines or even disappears as scammers see easy pickings.
Reiner’s intense anti-Trump politics had nothing to do with his death. There is no reason to think that the alleged killer was motivated by political considerations at all. By suggesting that Reiner’s “Trump derangement syndrome” was connected to his death, Trump is introducing a false notion. Note that this was the ostensible reason for the sanctioning of comedian Jimmy Kimmel, who incorrectly stated the motivations for the killing of conservative figure Charlie Kirk. Trump should have avoided making the same mistake.
He should also have avoided dwelling on his personal feud with a man who was just murdered in gruesome fashion. If he didn’t feel like saying anything nice about Reiner, he could have opted to say nothing at all.
