A year ago President Trump declared “Liberation Day,” unleashing the highest tariffs in more than 80 years in an attempt to end a system under which, he argued, “foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories and foreign scavengers have torn apart our once-beautiful American dream.” To prove that he was turning the tide, he offered one impressive statistic: In one month, he said, “We created 10,000 — already, in a few weeks — new manufacturing jobs.”
Perhaps Mr. Trump should have knocked on wood because as more information became available, the Bureau of Labor Statistics revised that number downward. In a full accounting, during the first full month of his second term, the United States lost 2,000 manufacturing jobs. Losses continued almost every month, totaling 100,000 manufacturing jobs since January 2025.
…..
When governments try to reverse the trend, they mostly succeed only in shifting jobs from one industry to another rather than expanding manufacturing overall. Tariffs on steel, for example, may protect jobs in steel production, but they cost jobs in downstream industries such as automobiles by raising costs and undermining global competitiveness.
Subsidies for targeted industries — Mr. Biden’s preferred approach, particularly for microchips and green energy — have similar trade-offs. They help the favored industries but they also drive up construction and equipment costs across the board, making it harder for companies in other arenas to compete. So instead of creating more jobs overall, the subsidized industries just crowd out unsubsidized ones.
Efforts to revive manufacturing are rooted in nostalgia. Once upon a time, manufacturing jobs provided a reliable pathway to the middle class, offering a wage premium to workers without a college degree. In 1970,roughly 80 percent of manufacturing workers had no more than a high school education. Today that figure is closer to 40 percent.
Manufacturing jobs also used to pay more than nonmanufacturing jobs with similar skill requirements. Not anymore: Today people in nonmanagerial manufacturing jobs average $30 an hour as compared with $32 for truck drivers, $33 for wholesale trade workers and $38 for construction workers. Trying to push more people into manufacturing jobs is therefore more likely to harm the middle class than help it.
Unfortunately for manufacturers, things could get worse before they get better. After his reciprocal tariffs were voided, Trump doubled down on his protectionist policies by levying more duties under a different statute. In some cases, these tariffs, which will expire in July, are even higher than the ones they replaced. Kacie Wright, one of the owners of Houghton Horns, a musical instrument retailer based in Keller, Texas, tells Reason her business was “paying a flat 15% on everything from the European Union” under the old regime, but is now charged a total of 16.5 percent.
Clark Packard justifiably calls April 2nd, 2025, “a day of economic lunacy, not liberation.” A slice:
Earlier today, my Cato colleagues Scott Lincicome, Alfredo Carrillo Obregon, and Chad Smitson published a terrific blog post providing data and analysis on what the tariffs have produced over the last year. It is not a pretty picture. They document a lobbying bonanza driven by companies desperate to secure carveouts, which helps explain why the supposedly sweeping global tariff regime has become riddled with exemptions. Trade policy uncertainty has increased dramatically. The US tariff system has grown significantly more complex and opaque. Rather than isolating China, the tariffs have accelerated a countertrend: other countries deepening trade and investment ties, including China, with each other as a way to reduce their exposure to erratic American trade policy, with tariffs changing more than 50 times in the last year, according to the Tax Foundation (rate increases, rate cuts, exemptions, inclusions, pauses, etc). Research has shown that American consumers, individuals and firms, absorbed about 90–95 percent of the tariffs’ cost, despite the administration’s repeated statements to the contrary.
Industrial policy refers to government officials channeling resources to particular industries that the market would not. Arguments like national security or protecting “strategic” industries from competitors are often used to justify the policy. Whatever one thinks of these excuses, industrial policy is funded by taxpayers when the chosen instrument is subsidies, funded by consumers when the tool is tariffs, and always funded by the other domestic firms quietly crowded out as capital flows toward their politically favored competitors.
Every dollar directed by bureaucratic decree is a dollar that’s no longer directed by people spending their money on what most deserves it. Which, of course, is what makes markets work.
To be clear, the World Bank’s reversal wasn’t because a new generation of economists finally cracked open the historical record and discovered that state-led industrialization works. It’s because the World Bank’s most powerful shareholders, the United States and Western Europe, turned toward openly and aggressively practicing industrial policy.
With a cascade of green industrial subsidies during the Biden and Obama administrations, and protectionist tariffs and “golden shares” under the Trump administration, it became impossible to lecture developing countries about the dangers of letting governments pick winning businesses. In other words, the intellectual reversal followed the political reversal, not the other way around.
Jason Sorens tweets: (HT Scott Lincicome)
The tariffs failed, period. Investors know it. Economists know it. The American people know it. The only people who don’t know it are a few holdouts in the White House and @oren_cass.
Scott Winship warns of a prominent protectionist pundit’s recklessness with data.
In 2024 sociology professor Tibor Rutar checked the robustness of these findings and analyzed additional sources and data that Hickel had not. Rutar concludes:
“The data mostly do not support the part of the critical narrative that suggests the spread of capitalist economic institutions was calamitous for living standards. Instead, they mostly corroborate a narrative, according to which living standards were poorer before the transition to capitalism and started improving afterwards”.
Before even considering causal empirics, correlational data is quite suggestive of what we already know about economic freedom and standards of living. Ample correlational data is available courtesy of the Fraser Institute’s Economic Freedom of the World report.
In countries with greater economic freedom, citizens enjoy substantially higher incomes. Those in the freest 25% of countries earn, on average, about 6.2 times as much as those in the least free.
