Every time Trump raises tariffs on a series of products, he always gives a specific reason: to protect American manufacturers from the impact of a large influx of imported products. However, some economists believe that whether tariffs can achieve this goal is still unknown. Some people even doubt whether Trump's tariffs are high enough to curb the inflow of foreign goods. Other economists have warned that Trump's tariffs come with high costs and may accelerate the decline of manufacturing.

Trump is wildly increasing tariffs, claiming it is to "protect American manufacturing"

Recently, Trump announced that he plans to impose a 100% tariff on brand-name or patented drugs unless related companies build factories in the United States. He also further stated that heavy trucks imported from outside the US will be subject to a 25% tariff, and certain home goods will face a 50% tariff. When mentioning this tax decision, Trump said it was to protect American domestic companies.

Theoretically, this idea makes sense: for American consumers, tariffs would make overseas goods more expensive, and rising prices would suppress consumer demand, making it easier for domestic producers to compete. This idea has been the main theoretical basis for Trump's comprehensive tariff measures this year.

However, some economists question whether these measures have achieved the intended purpose, i.e., bringing back manufacturing jobs that have been moved overseas for decades. They say that the effectiveness of Trump's tariff policy is somewhat weakened, and his tax actions on medicines and furniture may not trigger the large-scale domestic production he hopes for, as many companies have already obtained exemptions through other means.

For example, the production of patented drugs is capital-intensive, and imposing a 100% tariff on them could theoretically encourage companies to produce in the US. However, many multinational companies, such as Pfizer and Merck, already have factories in the US, so they may qualify for exemptions. In addition, many patented drugs come from the EU, but the EU has reached an agreement with the US to set a tariff cap of 15% on EU goods.

Some companies have already received exemptions because they built factories in the US

As for heavy trucks, about 78% of heavy trucks in the US are imported from Mexico, and 15% from Canada. According to the "USMCA" agreement reached during Trump's first term, goods from these two countries that can prove to mainly contain American components are basically exempt from tariffs. So far, due to the existence of this agreement, many cars and car parts imported from Mexico and Canada have been exempted from the 25% tariff.

Economist Ryan Sweet from Oxford Economics said that due to these exemptions, the effect of the tariffs will be greatly reduced, and their impact will be less than it appears to be.

When it comes to home goods, economist Neil Shearing from Capital Economics told The Wall Street Journal that these tariffs have no substantial impact on the macro economy. Due to high labor costs in the US, imposing a 50% tariff on cabinets, bathroom cabinets, and similar products may still not be sufficient to bring production back to the US. Perhaps Trump will only see some companies making commitments to invest more in the US.

Additionally, some economists said that in addition to the impact of exemptions, the increased cost of raw materials caused by tariffs could result in the final outcome of this trade war being contrary to Trump's expectations. According to data released by the US Department of Commerce on September 25, the share of manufacturing in the US GDP was only 9.4% by June, and it was 9.7% at the end of 2024.

Manufacturing in the US is shrinking rapidly

Ed Glaeser, an economic researcher at the Institute for Policy Studies, said that for decades, the share of manufacturing in the US GDP has been declining. With Trump's imposition of a series of tariffs, this downward trend may now be accelerating, as the cost of producing things in the US has increased too much. Trump originally hoped that tariffs would protect American manufacturing, but the final result may disappoint him, even going against his intentions.

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