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Trump's tariffs were supposed to help manufacturers, but instead they’re hurting them
American manufacturing faces challenges due to President Trump's tariffs. Businesses report increased costs and reduced workforces. While the administration cites potential future benefits, current evidence suggests a negative impact. Tariff uncertainty deters investment, and global trade imbalances persist. This situation affects smaller companies significantly.
Washington: Jay Allen is a fan of President Donald Trump, and voted for him on the belief that the Republican would cut taxes and trim regulations, helping his manufacturing business in northeast Arkansas.
But the tariffs at the core of Trump's economic agenda have wreaked havoc on his company, Allen Engineering Corp., which makes industrial equipment used to install, finish and pave concrete. The import taxes have raised the costs of engines, steel, gearboxes and clutches made abroad that Allen needs to build power trowels that can sell for up to $100,000 each.Allen's experience embodies a growing body of evidence that the tariffs that Trump said would help American factories are, in fact, squashing many of them. The problem could get worse as the administration scrambles to craft new tariffs to replace the emergency import taxes that the Supreme Court ruled illegal in February.
Allen said he ran his company at a loss in 2025 because of tariffs. His payroll has fallen to 140 workers from a peak of 205. To get by this year, he has hiked prices by 8% to 10%, even though that might mean fewer sales.
"What's really sad is the unintended consequences of his tariffs are hurting manufacturing in our country," said Allen. "Unfortunately, the working-class people are getting squeezed."
Manufacturing jobs have declined during Trump's first year back
Trump's core rationale for tariffs has been that they would force more factories to open in the U.S. and would generate enough revenue to close federal budget deficits. But that hasn't materialized so far.Factories continue to shed workers, with 98,000 manufacturing jobs lost during Trump's first full 12 months back in the White House. American companies that foot the bill for tariffs are now suing the Trump administration for more than $130 billion in tariff refunds. Meanwhile, the federal deficit is projected to climb over the next decade.
The White House maintains that construction spending is high, more workers are being hired to build factories, new investments are being made and labor productivity in manufacturing is increasing - which could eventually fuel a factory revival.
"It takes time to get production online, and therefore it will be some more time before we fully materialize the benefits of the president's policies," Pierre Yared, the acting chairman of the White House Council of Economic Advisers, said in an email.
Construction is up - but that's due to Biden's bill
Some of the bright spots in construction cited by the White House appear to be the result of programs launched by Joe Biden.Factory construction spending began to accelerate in 2022 with the anticipation of government support from Biden's CHIPS and Science Act, which included big subsidies for computer chip plants. The law was a primary contributor to a historic surge in the annualized rate of construction spending on manufacturing facilities, said Skanda Amarnath, executive director of the economic policy group Employ America.
during Trump's presidency, but the pace remains relatively high largely because of continuing work on Biden-era projects in Arizona, Texas and Idaho, Amarnath said.
Amarnath has also gone through the interviews regional Federal Reserve banks have held with businesses. Those comments show some companies might expand by taking advantage of Trump's tax breaks on investments in equipment and new buildings.
But while the pharmaceutical drug sector might be expanding, the comments show no overall uptick in manufacturing because of .
"You don't get the sense that there is this new manufacturing renaissance under way," Amarnath said.
Uncertainty in tariffs has deterred investments
Based on orders, proclamations and other statements, Trump has taken more than 50 actions on tariffs so far - and that tally doesn't include the tariffs threats he regularly makes on social media or in conversations with reporters, but hasn't formally put in place.The flurry of announcements, reversals, exemptions and legal challenges - as well as Trump's decision to bypass Congress to impose tariffs - has made it difficult for smaller manufacturing companies to plan.
For example, Allen Engineering imports its 75-horsepower diesel engines from Germany. Building them in the United States would require a $20 million investment - a huge risk if the status of the tariffs are unclear.
Are engine-makers "going to spend that kind of money to move production from Germany to the U.S. when they don't know what the landscape is going to be in three years?" Allen said. "I don't know who is going to be in the White House, and what the stance is going to be on these tariffs."
Joseph Steinberg, an economist at the University of Toronto, said research shows that under the best-case scenario "it would take a decade for manufacturing employment to rise above where it was before tariffs were enacted."
But Steinberg said "the current situation is nothing like the 'best case,'" since U.S. trade policy is unsettled and that leaves companies reluctant to expand.
Equipment makers have been hit hard by rising steel costs
About 98% of establishments have fewer than 200 workers, according to Census Bureau data, and don't have the kind of name-brand recognition or lobbying heft to minimize the damage from tariffs that big players like Apple, General Motors and Ford possess.The Association of Equipment Manufacturers in February reported that America's share of global manufacturing severely lags China's. The group has urged tax credits to offset the expense of tariffs, and specifically called for tariff relief on raw materials, parts and components that cannot be acquired domestically at scale.
Steel tariffs have been a particular concern. Trump imposed them last March and hiked them to 50% in June. They were not affected by the Supreme Court decision.
Trump has credited the tariffs with restoring profits at American steel mills. But they have hurt companies that use that steel, like Calder Brothers in South Carolina, which makes equipment to pave asphalt.
"The steel tariffs were the first thing that got my attention," said Glen Calder, the company's president. "My steel pricing jumped 25% two weeks before the tariffs went into effect for domestic steel. The market price just jumped. It has stayed elevated."
Meanwhile, China's trade surplus has grown
Part of Trump's push to expand manufacturing was to help American companies compete against China - a country he plans to visit this spring for talks with its leader, Xi Jinping.But the U.S. manufacturing trade imbalance rose last year under Trump instead of narrowing. Meanwhile, with the world climbed to a record $1.2 trillion.
This trend exposes one of the big problems with Trump's tariff strategy, said Lori Wallach, director of the Rethink Trade program at American Economic Liberties Project. She noted that he largely bypassed Congress and failed to address gaps in the World Trade Organization's rules for the trade frameworks that he negotiated with other countries.
Instead of working with partners to ensure there were penalties for foreign manufacturers with abusive labor practices and unfair subsidies, Trump chose against rallying partners to counter China as a unified group. American manufacturers are at a disadvantage, Wallach argued, because there is not a coalition of nations that can impose penalties for currency manipulation, subsidies and schemes to evade tariffs.
"The general revulsion of this administration to international cooperation means they're trying to do it alone," Wallach said.
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Source: EconomicTimes
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