Tariffs are a frequent topic of discussion in economic and political contexts. Some argue that tariffs can harm global trade and increase consumer prices, while others believe they are vital for bolstering US manufacturing. For the United States, which has experienced challenges related to offshoring and unfair trade practices, tariffs can provide significant benefits to the manufacturing sector. We remain optimistic that tariffs benefit US manufacturers like Prototek. Here are the key reasons:
Protecting US Manufacturers
One of the primary roles of tariffs is to safeguard US manufacturers from unfair competition. Foreign entities often benefit from advantages like government subsidies, lenient environmental regulations, or lower labor costs. By imposing tariffs on imported goods, the US ensures a level playing field, enabling domestic companies to compete on fair terms. For instance, the US steel and aluminum industries have been grappling with the influx of low-priced imports. Tariffs on these materials not only protect American jobs but also bolster domestic production, instilling a profound sense of security in the US manufacturing sector.
Encouraging Local Investment
Tariffs serve as a catalyst for companies to invest in American manufacturing rather than relying on imports. When foreign products become more expensive due to tariffs, businesses are incentivized to purchase materials and products from within the US. This leads to increased investments in factories, equipment, and innovation. For instance, tariffs on imported auto parts have prompted carmakers to source parts domestically, creating jobs and strengthening the supply chain.
Strengthening National Security
Manufacturing is crucial for national security, and defense, technology, and energy are vital to a country’s independence. Relying too much on foreign suppliers for necessary materials can make the US vulnerable during crises. By imposing tariffs, the government helps ensure that key industries, such as semiconductors, steel, and pharmaceuticals, remain strong and self-sufficient.
Creating Jobs
One of the most direct benefits of tariffs is the creation of jobs in the manufacturing sector. As domestic industries expand due to reduced foreign competition, they require more workers, leading to higher employment rates in areas affected by globalization. For instance, following the imposition of tariffs on Chinese solar panels in 2018, domestic solar manufacturers ramped up production, creating thousands of jobs.
Promoting Fair Trade
Tariffs play a crucial role in combating unfair trade practices, such as dumping (selling goods below production costs) and currency manipulation. The US upholds fair trade by imposing tariffs on countries engaging in these practices. This commitment to fair trade not only levels the playing field for struggling manufacturers but also sends a clear message about the US’s dedication to ethical business practices.
Rebuilding the Manufacturing Base
The US has lost much of its manufacturing base as companies moved production abroad for cheaper options. However, tariffs can play a significant role in rebuilding this base by making local production more competitive. A strong manufacturing base is not just about economic stability but also about innovation and maintaining the US’s position in the global market. This potential for rebuilding the manufacturing base should instill hope about the country’s economic future, inspiring confidence in the path ahead.
A Summary of Tariffs from Recent Years.
McKinsey & Company 2024 Analysis of Tariffs
Tariffs on imported goods can help domestic producers by reducing competition, increasing demand for U.S.-made products, and creating jobs.
These tariffs can arise from government investigations into issues such as:
- Unfair trade practices
- Theft of intellectual property
- Cyber attacks
For instance 2018, the US imposed tariffs on $250 billion worth of Chinese imports. These were followed by additional tariffs of $112 billion in 2019, although the US put another $160 billion in tariffs later on hold. In response to US steel tariffs in 2018, the European Union placed a 25% tariff on $3 billion worth of US goods, including aluminum, bourbon, jeans, motorcycles, and steel.
Find more information on the McKinsey and Company website.
Prosperous America - 2024 Study
During Trump’s first presidency, tariffs bolstered the US economy and resulted in significant reshoring, bringing back manufacturing jobs and facilities from overseas in industries such as manufacturing and steel. In 2018, the manufacturing sector saw an increase of 4,000 new jobs.
Read more about the 2024 study.
Prosperous America - Yellen Says China Tariffs Won't Cause consumer Price Increases
President Biden’s Treasury Secretary, Janet Yellen, said that the new Section 301 tariffs on Chinese goods, a series of tariffs imposed under Section 301 of the Trade Act of 1974 in response to unfair trade practices, will not increase consumer prices in 2024. As a PBS NewsHour interview mentioned, the Biden administration has raised tariffs on $18 billion of Chinese goods.
Micael Stumo, CEO of CPA, stated, ‘Secretary Yellen and NEC Director Brainard, the National Economic Council Director, are right: these tariffs will not raise consumer prices. They are important for bringing production back to the US, helping to avoid future inflation, and reducing our reliance on foreign supply chains.’
Read more about this interview.
The Latest Rounds of Tariff Threats
Defecits
Canada
During Trump’s first term, the average annual trade deficit with Canada was $18.7 billion. Under Biden, it increased to an average of $61.5 billion. The trade deficit with Canada rose by 228.9% under Biden and Harris. The lowest annual deficit under Biden was $47.7 billion in 2021, nearly double the highest deficit during Trump’s term, which was $25.8 billion in 2019.
Sources:
- The United States Census Bureau – Trade in Goods with Canada
- The Office of The United States Trade Representative – Summary of Canada
China
2018, President Trump put 7.5% to 25% tariffs on more than $360 billion in Chinese imports. Since then, the US-China trade deficit has dropped from nearly $420 billion to just over $270 billion, according to USA Trade Online data. Since Trump imposed the Section 301 tariffs on China in 2018, a move that President Biden continued, Chinese exports to the US have fallen by 25%, and the deficit with China has decreased by 35%.
Sources:
- The United States Census Bureau – Trade in Goods with China
- The Office of The United States Trade Representative – Summary of The People’s Republic of China
Mexico
During the first Trump Administration, the average annual trade deficit with Mexico was $89.3 billion. Under Biden, this figure rose to $135.7 billion. The trade deficit with Mexico increased by 52.0% during the Biden and Kamala Harris administrations.
Source:
- The United States Census Bureau – Trade in Goods with Mexico
- The Office of The United States Trade Representative – Summary of Mexico
Economic
Canada
Canada benefits from US spending on NORAD defenses and receives protection from the United States Air Force against foreign threats. The US covers about 60% of the costs for NORAD.
Canada uses only 3% of every dollar the US spends on defense. The US defense budget is $916 billion, while Canada allocates $27.2 billion.
Additionally, Canada spends 62% less on defense as a percentage of its GDP than the US. The US spends 3.4% of its GDP on defense, whereas Canada spends only 1.3%.
In 2022, former Canadian Defense Minister Anita Anand announced a plan to invest $4.9 billion in NORAD over the next six years and $38.6 billion over the following twenty years.
A company in the aluminum sector produces 2.2 million metric tons each year, with 900,000 metric tons made in Canada. Canada exports most of its aluminum to the United States. Alcoa’s CEO, William Oplinger, stated that the company may send its Canadian aluminum to Europe to avoid potential tariffs. If the US imposes tariffs on Canadian imports, Alcoa plans to send its aluminum from Australia to the US to reduce the impact.
Sources:
- JP Morgan – How would tariffs impact Mexico and Canada?
- Reuters – Trump’s tariffs could redirect metal flows, Alcoa CEO says
- AP – Canada ready to buy more American products to appease Trump’s tariff threat, ambassador says
China
A 2017 US Trade Representative (USTR) report states that American intellectual property (IP) costs the US economy between $225 billion and $600 billion annually. The report also states that this threatens US national security because the Chinese Communist Party (CCP) targets sensitive technologies like artificial intelligence, self-driving cars, agricultural genetic modification, and telecommunications.
In 2024, China hacked the US Treasury Department and nine telecommunications companies. The COVID-19 pandemic, which caused tens of millions of excess deaths and at least $14 trillion in costs to the US economy, likely started in a lab in Wuhan, China. The CCP continues to deny this.
Additionally, China leases the Panama Canal’s key entry and exit points, which carry 40% of all US container traffic. The CCP could disrupt nearly half of US trade.
Sources:
- AP – A 9th telecoms firm has been hit by a massive Chinese espionage campaign, the White House says
- AP – Chinese hackers accessed workstations and documents in a ‘major’ cyber incident, Treasury says
- AP – Panamá prorrogará concesión portuaria a empresa hongkonesa
- WSJ – Huawei’s Yearslong Rise Is Littered With Accusations of Theft and Dubious Ethics
- WSJ – CIA Now Favors Lab Leak Theory on Origins of Covid-19
- Reuters – In Iowa corn fields, Chinese national’s seed theft exposes vulnerability
- Reuters – Microsoft probes if DeepSeek-linked group improperly obtained OpenAI data, Bloomberg News reports
Mexico
Imports from Mexico have hurt the steel and aluminum industries in the United States. Since President Biden took office, imports of steel conduit from Mexico increased by 577%. As a result, the US steel industry has struggled, and US Steel, a historic American manufacturer, even considered selling itself to a foreign company.
Zekelman Industries has closed its plant in Long Beach, California, and laid off 150 workers. This company is North America’s largest independent manufacturer of steel pipes and tubes. This closure was caused by Mexico’s low-priced steel being dumped in the US market. In October 2024, Zekelman Industries filed a federal lawsuit against Mexico for violating trade agreements.
A bipartisan coalition introduced legislation to increase steel tariffs to 25% until Mexico honors the 2019 trade agreement in March 2024. If the flow of Mexican steel continues, it could lead to serious problems. An analysis by the Coalition for a Prosperous America (CPA) shows that up to one million American jobs are at risk. Much of the Mexican steel imported into the US comes from China, allowing Chinese steel manufacturers to enter the US market without tariffs.
Sources:
- Prosperous America – Letter to POTUS Regarding Steel and Aluminum
- Reuters – US Steel posts muted quarterly results amid Nippon deal snag
- Prosperous America – Michael Stumo: Biden Administration Drops the Ball on Mexico’s Steel Surge
- Zekelman Industries—Zekelman Industries Files a Federal Lawsuit Against the Republic of Mexico for Breaching the Trade Agreement and Dumping Steel in the US.
- Congress.gov – S.3917 – Stop Mexico’s Steel Surge Act
- Prosperous America – Mexico’s Violation of Steel Import Agreement is Threatening Local US Economies
The Bad
Manufacturers in the United States may face higher costs for raw materials, whether they buy them from international suppliers or work with local companies. This increase is due to global supply chain changes, rising transportation costs, and possible tariffs on imported goods. As a result, companies must carefully evaluate their sourcing strategies to keep costs in check while also considering the benefits of supporting local industries and helping the domestic economy.
The Good
More businesses are looking to reshoring, which means moving manufacturing back to the United States instead of using overseas suppliers. This change helps improve the supply chain, respond better to local demand, control quality more effectively, and cut shipping costs. By producing closer to their customers, companies can react quickly to changes in needs and market conditions while supporting local economies and creating jobs.
The Best
Prototek provides several advanced manufacturing services, including additive manufacturing, CNC machining, sheet metal fabrication, and casting. We focus on quick turnaround times, prototyping, and low-volume production solutions.
Our team of experts ensures that the parts we deliver match your requirements. We work with various materials, such as metals, plastics, and composites. In addition to manufacturing, we offer assembly, finishing, and testing services to improve your supply chain.
Prototek can manage both single parts and large production runs, customizing our services to fit your requirements. Our customer service team ensures a smooth experience from the initial consultation to delivery.
So, no matter what’s happening, Prototek can be an asset as a manufacturing partner.
Conclusion
Although tariffs can have downsides, they are essential in supporting U.S. manufacturing. By ensuring fair competition, encouraging local investment, and protecting key industries, tariffs help keep American manufacturing firms in a competitive global economy. The U.S. must use tariffs strategically to maintain industrial power and secure its economic future. The discussion on tariffs will continue, but the advantages are clear for manufacturers, workers, and supporters of a strong domestic economy.
