Can Trump’s Steel, Aluminum Tariffs Revive US Manufacturing Dominance?

Workers assemble cars at Ford's Assembly Plant in Chicago on June 24, 2019. Jim Young/AFP via Getty Images

President Donald Trump recently imposed 25 percent steel and aluminum tariffs to restore fairness in global trade and protect domestic producers.

The United States’ dependence on manufacturing as a source of growth has waned over the years. Today, manufacturing accounts for about 10 percent of GDP, down from 13 percent 20 years ago—and as much as 25 percent of GDP in the 1950s, according to an analysis published in November 2024 by Coalition for a Prosperous America, a nonprofit representing domestic manufacturers, using World Bank data.

The administration might be striving to return to the times when industrial output contributed more to America’s growth prospects.

As the worldwide economy braces for these levies to go into effect next month, industry experts and economic observers are debating the efficacy of the president’s trade pursuits.

The White House, meanwhile, may be looking at recent data and broader market developments.

In January, the Institute for Supply Management’s Manufacturing Purchasing Managers’ Index—a monthly survey signaling the sector’s prevailing economic direction—registered its first expansion since October 2022.

New orders surged at a faster pace, while the survey showed a rebound in production and employment.

Industrial production, according to the Federal Reserve, increased at better-than-expected levels in back-to-back months.

Additionally, the capacity utilization rate—a measure of how much of a factory’s production ability is being used—rose to 77.8 percent in January, the highest since August.

Economists have been reluctant to attribute these positive data points to the White House’s tariff plans, waiting for more persistent numbers before making conclusions.

The overall industry has responded favorably to the new administration’s actions.

“Our union welcomes President Donald Trump’s efforts to contain the global overcapacity that has for too long enabled bad actors like China to flood the global market with its unfairly traded products, resulting in surging imports into the United States, especially from Mexico,” said David McCall, the president of the United Steelworkers, in a statement.

Kevin Dempsey, the president and CEO of the American Iron and Steel Institute, said steel has been negatively affected by “unfair trade practices” across the globe, welcoming Trump’s comprehensive strategy for restoring fairness.

“Due to foreign government subsidies and other trade-distorting government policies, global overcapacity in the steel industry reached 573 million metric tons in 2024,” Dempsey said in a statement to The Epoch Times.

“This overcapacity, if unaddressed, can fuel surges in injurious imports into our market, and the problem of steel overcapacity is not limited to any one country or region of the world.”

Manufacturing Expects to Benefit

The year ahead could be a boon for the U.S. manufacturing sector, says Bill Adams, Comerica Bank’s chief economist.

He noted that the industry has been anemic over the past two years despite hefty federal and state investment in manufacturing.

According to Adams, manufacturing leaders anticipate Trump’s tariffs will benefit them.

“Manufacturing business surveys show many of the industry’s leaders think they have more to gain than lose from protectionist economic policies,” Adams said in a note to The Epoch Times.

“Manufacturers’ increased risk appetite will likely contribute to more capital spending and inventory accumulation in 2025.”

The president’s efforts have been meant to shield the U.S. manufacturing industry from unfair foreign competition and counteract other countries’ measures that have flooded the world’s largest economy with cheap, subsidized products.

However, experts are encouraging officials not to declare an early victory as there might be bumps along the way.

Experts Assess Nuts and Bolts of Trump Tariffs

Economists have perused the president’s first round of steel and aluminum levies in 2018 and 2019 to assess the potential positive or negative effects of the new administration’s tariff plans.

Indeed, there has been a treasure trove of research and data examining the Trump tariffs, which were continued by his successor, and highlighted the advantages and disadvantages of these trade endeavors.

On the inflation front, Federal Reserve economists concluded in a 2019 paper that ballooning input costs outweighed the positive contribution for protected industries.

“We find that U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment as a positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs,” they wrote.

“Higher tariffs are also associated with relative increases in producer prices via rising input costs.”

President Donald Trump signs a series of executive orders, including 25 percent tariffs on steel and aluminum, in the Oval Office on Feb. 10, 2025. Andrew Harnik/Getty Images

New Fed minutes from the January policy meeting revealed that monetary policymakers are worried about upside inflation risks from these tariff plans.

However, data show that, in the aggregate, the first edition of tariffs did not raise overall consumer prices. They did boost prices slightly for specific products, including steel and aluminum.

United States International Trade Commission determined in a March 2023 report, titled “Economic Impact of Section 232 and 301 Tariffs on U.S. Industries,” that changes in the average domestic price of steel and aluminum rose 0.7 percent and 0.9 percent, respectively.

In a research report, Adam Turnquist, the chief technical strategist at LPL Financial, says the new batch of metal tariffs could have minimal effect on inflation but could ignite “detrimental knock-on effects for downstream applications,” including automobile production, building and construction, and manufacturing.

“This also comes at a time when many industrial and precious metals are already rising,” Turnquist said. “A lot of these gains have occurred over the last few weeks as buyers have begun to reprice tariff risks across the metal spectrum, not just on aluminum and steel.”

According to Ewa Manthey, a commodities strategist at ING, the tariffs would raise aluminum prices in the United States in the short term, which would affect producers and consumers.

However, trade strife would be bearish for aluminum prices because it would slow global economic growth and result in higher-for-longer inflation trends.

“With growth in the United States likely to slow on the back of tariffs and with China already struggling to revive its economy, demand for industrial metals is likely to weaken,” she said in a note.

New data have revealed elevated price pressures for the manufacturing sector.

The February New York Fed Manufacturing Index showed that activity advanced and surpassed market expectations.

The monthly survey also confirmed that input costs increased at the fastest pace in two years and selling prices climbed at a significant level.

Still, the administration’s tariffs, particularly as they target China, “are 100 percent necessary,” says Justin Evans, the CEO and founder of Evanswerks, a contract engineering and manufacturing firm.

“China is not our friend, and China has been gaming the system against the United States for 25 years,” Evans said in an interview with The Epoch Times.

“A traditional economist is 100 percent right that tariffs, in the long run, can hurt the United States. That economist needs to understand that there’s nuance in this situation, and leveraging tariffs against China is actually in the best interest of the United States long term.”

As for the labor market, whether these efforts will rejuvenate manufacturing employment remains to be seen.

The White House noted that Trump’s initial global tariffs on steel created more than 4,000 new jobs during his first four years in the Oval Office. Industry payrolls have declined by about 100,000 over the past year to around 12.76 million.

A key challenge will be automation, which is prevalent in the manufacturing industry.

“Automation is the only choice for the future,” Evans said, adding that re-educating workers to do more creative jobs would be a superior option than to “give them our grandfathers’ jobs from the 1950s.”

What the Public Thinks

In January, a Navigator Research report found that many think the president’s levies will hurt consumers.

Fifty-seven percent of Americans say the new tariffs will affect costs, and 51 percent believe they will hurt U.S. consumers more than foreign countries.

Forty-three percent believe it would be “worth it” if new tariffs help boost American manufacturing and protect domestic jobs.

Similar findings were revealed in a recent survey by industrial machinery and equipment supplier Bid on Equipment, with 46 percent of respondents believing the administration’s tariff plans will revive domestic manufacturing.

The poll also showed that more than two-thirds (68 percent) say higher costs are the primary barrier to purchasing more U.S.-made products.