The campaign to restore American manufacturing begins with a false premise: that American manufacturing has disappeared. Advocates of tariffs and dollar devaluation point to the decline in manufacturing employment and treat it as evidence that the United States no longer makes anything. But employment is an input, not a measure of production. The relevant measure is industrial output, which has risen enormously over the long term even as factories have employed fewer workers. That is not evidence of national decline. It is evidence of productivity growth: the ability to produce more goods with less labor.
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The same transformation occurred in agriculture. At the beginning of the twentieth century, a large portion of the American workforce was employed on farms. Today, only a tiny percentage is, yet American agriculture produces vastly more food. No sensible person concludes from declining farm employment that the United States has lost its ability to grow crops. Mechanization, improved processes, better logistics, capital investment, and technological innovation allowed fewer farmers to produce more. Manufacturing followed much the same path. Employment declined partly because American factories became more productive, not simply because production migrated overseas.
Protectionists nevertheless propose tariffs and a weaker dollar as remedies for this supposed industrial emergency. Their argument is superficially attractive: tariffs make foreign goods more expensive, while currency depreciation makes American exports cheaper for foreign buyers. But this picture imagines an American factory only at the moment its finished products leave the loading dock. It ignores everything that must enter the factory before production can begin.
Very few products are made entirely within a single country. A factory located in Ohio may employ American workers and be owned by an American company while relying on German machine tools, Japanese robotics, Taiwanese semiconductors, Canadian metals, Mexican electrical components, and specialized chemicals or replacement parts from several other countries. Even a manufacturer that purchases most of its inputs domestically depends upon American suppliers that use imported machinery, materials, and components. Modern manufacturing is not divided neatly into American and foreign production. It consists of international supply chains connecting highly specialized producers.
A weaker dollar therefore does not merely increase the price of imported automobiles, televisions, and clothing. It raises the cost of the capital goods and production inputs used by factories located inside the United States. The policy is supposed to stimulate domestic investment while simultaneously making the equipment required for that investment more expensive. Existing manufacturers must pay more to replace machines, obtain components, and replenish inventories. Prospective manufacturers face higher startup costs before hiring their first worker or producing their first unit.
Tariffs compound the damage. Currency depreciation first raises the dollar price of an imported input; a tariff then taxes that newly elevated price. The result is a two-stage tax on American production. A tariff protecting one domestic industry also raises costs for numerous downstream manufacturers. Steel protection may benefit steel producers while increasing expenses for American companies producing automobiles, appliances, tools, construction equipment, and industrial machinery. The protected industry’s gains are concentrated, visible, and politically celebrated. The losses are distributed throughout the economy and are therefore easier to conceal.
None of this means that every manufacturing job lost was an economic victory or that trade never disrupts communities. It means that job counts alone tell us between little and nothing about America’s productive capacity. If a factory adopts machinery that allows 500 workers to produce what formerly required 1,000, manufacturing employment falls while output and productivity rise. Attempting to reverse that process would amount to treating inefficiency as a national objective. America does not need to recover a vanished manufacturing greatness. It needs policymakers to recognize the manufacturing capacity that already exists and stop making it more expensive. Tariffs and dollar devaluation would not restore an imagined industrial past. They would increase the cost of machinery, components, and materials while reducing Americans’ purchasing power – and currently, when affordability is the number one issue on the minds of American households.
The logical endpoint of these backward, ill-conceived policies would be a statute capping every American industrial firm at productivity levels not exceeding those of 1975. Bring back all the redundant staffing. Roll out machinery obsolete for half a century (if it hasn’t been melted down or repurposed). Require factories to use more labor, much more energy, and more materials to produce fewer goods at greater cost…and then see where that leaves the American economy. It would undoubtedly create manufacturing jobs, as would outlawing tractors create agricultural jobs. Neither would make Americans more prosperous.
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