Tariffs Either Can't, Won't, Or Shouldn't Re-shore Manufacturing Jobs

Forbes

2 days ago

Sanctions Political Trade War
getty
Despite the unanimous ruling from the Court of International Trade, the Supreme Court will likely decide whether the International Emergency Economic Powers Act empowers President Trump to levy global tariffs. As this process will take time to play out, economic uncertainty will persist for the foreseeable future.
What isn't uncertain is the adverse consequences that these tariffs will have. One oft-cited justification for the tariffs is the need to reinvigorate domestic manufacturing in the U.S. While this justification has no merit, something we return to later, the tariffs are not confined to products whose production can be re-shored. Products, especially agricultural products, that cannot be produced domestically are also targeted.
Take coffee as an example. Hawaii is the only state in the country that produces coffee. During the 2023-24 growing season, Hawaii produced about 17 million pounds of coffee, which is down 26% compared to the 2022-23 growing season. This may sound like a lot, but we consume 1.62 billion pounds of coffee every year. Therefore, the U.S. can domestically produce only about 1 percent of our annual coffee consumption.
Tariffs or not, we will have to continue importing 99% of our desired coffee if we want to continue enjoying our daily cup of Joe (actually, for the average person, it's 3 cups). Much of the coffee we consume is from Latin America, which would face a 10% tariff, but imports from Vietnam (the 2nd largest global grower) face a potential 46% tariff and imports from Indonesia (the 4th largest grower) face a 32% duty. Even if all imports were subject to the 10% tariff minimum, the imposition of Trump's tariffs equate to an additional $820 million cost that all coffee drinkers will have to pay.
Coffee is far from the only example. Spices, a commodity we often take for granted, are also generally grown in other countries because they cannot be economically produced in the U.S.
For instance, cinnamon is primarily grown in Vietnam, Sri Lanka, and Indonesia with essentially no production in the U.S. Beyond a popular flavoring for coffee and ingredient in many baked goods, there are several potential health benefits linked to cinnamon including being an antioxidant, helping manage blood sugar, and having anti-inflammatory properties. The same constraints apply to the black pepper, which is mostly grown in tropical regions such as Vietnam, Indian, and Brazil. The U.S. currently imports virtually all our domestic consumption.
Since the U.S. cannot source our own cinnamon or black pepper due to the climate required to grow these commodities, consumers will either have to pay the higher tariffs or reduce their total consumption of these desired spices, whether from a retailer or a restaurant. Overall, the U.S. imported $2.4 billion in spices in 2024. Since spices are traded on a global market, it is likely that the cost of the tariffs will be passed on to U.S. consumers. Consequently, even a 10% tariff could impose a $240 million cost on U.S. consumers. Given the origin of most spices, the actual costs would likely be significantly higher.
While the reshoring excuse clearly makes no sense for agricultural products that we cannot produce referred to as 'unavailable nature resources,' it does not follow that the reshoring argument is valid simply because the products can be produced in the U.S. In fact, leveraging the global trading system enables companies to invest in creating higher-valued jobs in the U.S.
Take the iPhone as an example. Apple designs and engineers its iPhones at its headquarters in Cupertino, California. These tasks require highly skilled workers and create high paying U.S. based jobs. According to Glassdoor, Apple Engineers earn an average total pay of nearly $180,000 annually.
President Trump seems to ignore these jobs and is focusing on the physical manufacturing of the iPhone. For instance, he stated in a Truth Social post 'I have long ago informed Tim Cook of Apple that I expect their iPhone's that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S.'
The average salary for a smartphone assembler is around $36,000 a year ($18 per hour). Therefore, despite the large number of high paying jobs the company creates, the President wants Apple to create more low paying jobs in the U.S. To get his way, the President is willing to harm the company risking the growth in higher paying jobs, not to mention his willingness to impose higher costs on consumers.
Importantly, the U.S. does a great deal of manufacturing in the U.S. already. In 2024, the real value of total U.S. manufacturing output was $2.4 trillion. This is 12% higher than the total produced in 2020. This activity creates well paying jobs for Americans because it focuses on those activities we do well. It does not force companies to produce things that can be produced more efficiently elsewhere.
Regardless of their legal merit, President Trump's global tariffs are economically ill advised, particularly on products that will never be grown in America. Yet, as his doubling of the steel tariffs indicate, the President remains all in. As a result, even if the Supreme Court rules that the Administration has exceeded its authority, the current tariff follies will likely persist.
The problem, of course, is that tariffs either can't, won't, or shouldn't shift production back into the U.S. What they will do is increase costs for consumers and put higher paying jobs at risk.