Trump's Tariffs: Truth or Fiction?

President Trump’s tariff strategy, aimed at revitalizing American manufacturing, continues to spark debate across economic and political circles. While the intent is clear, the broader implications raise important questions about its alignment with long-term economic trends.

Manufacturing in Decline

The U.S. manufacturing sector has steadily shrunk over the past five decades, falling from 23% of GDP in 1970 to just 9.7% in early 2025. Job losses have followed suit, prompting concern among policymakers and workers alike. Yet this decline is not unique to the United States. Similar patterns are evident in Canada, Germany, and Japan.

Structural Shifts in Mature Economies

Economists point to a natural evolution in advanced economies: agriculture gives way to manufacturing, which in turn is overtaken by services. In the U.S., the service sector has expanded from 71.8% of GDP in 1997 to 83.7% in 2025, driving employment growth and contributing to a low unemployment rate of 4.1%. While this figure suggests economic strength, it also signals potential inflationary pressure due to tight labor markets.

Strategic Exceptions vs. Broad Tariffs

Certain industries, such as steel, agriculture, and pharmaceuticals, carry national security weight. However, targeted investments and regulatory reforms may be more effective than blanket tariffs. Canada’s post-pandemic vaccine strategy, which relied on coordinated public investment rather than protectionist measures, offers a compelling case study.

Hidden Costs of Protectionism

Tariffs often come with unintended consequences. The U.S.-China trade tensions between 2018 and 2020 led to an estimated $48 billion in added costs for American consumers and manufacturers in 2019 alone, according to the Federal Reserve. These figures highlight the ripple effects on domestic supply chains and consumer prices.

Diplomatic Fallout

Beyond economics, tariffs risk straining relationships with key allies. Canada, for instance, may respond with reciprocal measures, potentially harming industries on both sides of the border. Trade disputes can also spill into broader foreign policy arenas, complicating international cooperation.

A Balanced Path Forward

The evidence suggests that embracing the service economy while selectively supporting strategic manufacturing sectors may offer a more sustainable path. This approach not only aligns with economic realities but also preserves diplomatic goodwill — particularly with close partners like Canada.

Read my full op-ed on The Hill Times:

Trump's tariffs are a collision with economic reality - The Hill Times