President Donald Trump is overseeing a significant rise in tariffs beginning in April.  Many predict a rise in prices that will depress markets in the U.S. because buying goods will become prohibitive.  Some even go so far as to anticipate a recession.  However, Peter Navarro, a dedicated Trump-supporter, defended the increase in tariffs in an interview with Shannon Bream.  His defense was surprising and interesting to this writer.  He said that most cars that are “made” in the USA are actually assembled here, not actually manufactured.  The Trump tariffs, he predicts, will lead to the manufacture of many more automobiles in the USA.  His clear implication is that manufacturing of cars is better for the USA than mere assembling of cars.

However, in the interview, Navarro did not explain why manufacturing is better for the economy than the mere assembling of cars.  To understand this matter, we need to consider some of the history related to the changed face of our economy over the past thirty years.  Here we’ll find the key to understanding the way back from the dilution of our economic strength.

The loss of American automobile manufacturing jobs and many other jobs accelerated after President Bill Clinton, prior to leaving office, admitted the People’s Republic of China (PRC) to the World Trade Organization (WTO).  During the first eleven years of PRC membership in the WTO, “almost 6 million U.S. manufacturing jobs were lost and 2.4 million total job losses to competition from China.” 

During the first decade of the 21st century and following Clinton’s unwise decision, the downsizing of manufacturing jobs was regularly depicted as our shift to a service economy, as manufacturing was clearly being moved overseas to take advantage of cheaper labor.  However, many analysts argued that even goods manufactured here would cost less because they would be using parts and materials now manufactured abroad, which cost less than the same parts and materials when they were made in the USA.

However, even as early as 2005, only five years after Clinton brought the PRC into the WTO, then-senator Barack Obama stated in an interview, “The U.S. needed to stop giving tax breaks to companies moving work overseas.”  It seems likely that by offering this criticism, he positioned himself as someone having an understanding of global economic dynamics, and thus as having presidential-level insight.  However, he never accused Clinton as the one responsible for the loss of jobs, and this writer assumes that since the losses took place during the Bush years, he assumed that the voting public would naïvely think his criticism was of President Bush.  

He further justified the need for the USA keeping manufacturing jobs because those jobs help produce a number of other jobs, which is not as true in a service economy.  Additionally, in the same interview, he said he thought service industries do not provide opportunities for workers to move up through the ranks the way those opportunities are available in manufacturing.

Obama noted that manufacturing at home incentivizes the creation of other manufacturing jobs.  In short, he was speaking about the opportunities afforded to individuals of all educational levels by having a broad manufacturing-based economy.  A sense of opportunity should be cherished as crucial to our societal quality of life.

However, by 2013, Obama was being criticized by the left in his own party for not having done enough to bring jobs back to the USA.  Early in his first term of office, his administration managed to pass the American Jobs Act; however, that was merely a variation on many New Deal programs.  That act was a type of New Deal legislation on steroids, where billions went into federal creation of make-work jobs and to strengthen job security, not to bring jobs back from overseas.  Early in his first term, Obama kept speaking about bringing back American jobs that had been moved offshore, but he could not deliver on those expressed aspirations.

It is important to understand this background.  The outsourcing of manufacturing continues to be a concern for the Democrats and their left-wing base, but the left-wing Democrats have been unable to make headway in this regard, whereas Trump, even early in his first term as president, was already showing progress.  Shortly after Pres. Trump began his first term, Forbes noticed: “In the first 21 months of the Trump presidency, nonfarm employment grew by a seasonally adjusted 2.6%.  In the same period, manufacturing employment grew by 3.1%, reversing the trend under Obama when overall employment grew faster than employment in the manufacturing sector.”

Now, in his second term, President Trump is taking more dramatic steps to bring back those lost jobs.  He understands that this issue of jobs lost overseas not only is an economic issue, but also has implications for the social and psychological well-being of our population.  By raising tariffs, he is meeting the problem of outsourcing head on.  If companies fled to the PRC, Mexico, and other countries to cut costs, then high tariffs on their goods will incentivize them to return.  It is policy based on simple cost-price ratios.

Further, it is this writer’s view that a society with significant manufacturing employment is a society where people feel more needed than in a society where they are simply “servicing” the products produced by other people.  It is a more dynamic, hands-on society where promotion means different real time responsibilities.  Also, daily interactions in real time are different.  There is a greater sense of accomplishment in manufacturing jobs for most people than for non-manufacturing work.  People derive great satisfaction from making things.

Teamwork, leadership, satisfaction in performing more tangible activities, creating products from start to finish, and working with one’s hands are fundamentals that engage the population.  The need for these values to be in play in the workplace is deeply united with the wage levels of one’s employment.  Work experience and wages have to be understood as a whole.  President Trump, with his incredible background in business and his lifelong association with other masterminds in the business fields, understands how the status quo of lost jobs must be challenged.

Our manufacturing jobs disappeared by various trade agreements over the years that made it more profitable for firms to move to other countries, especially to the PRC.  The only way to bring back those jobs is to challenge the profitability of those moves by raising tariffs.  There are risks involved, but those are risks we must take.

 E. Jeffrey Ludwig was a former editor of the International Trade Alert, a weekly newsletter of the American Association of Exporters and Importers.  At the present time, he teaches philosophy for a large East Coast university.

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