Six months into tariffs, businesses have no idea how to price anything

I’d like to lay out an argument about why tariffs are good.

The only businesses that are derailing with tariffs issues are those that import goods to sell. The argument against tariffs is that they make goods more expensive.

Of course, this argument is true. But that’s not the end of the story.

Because prices are higher for imported goods, demand for domestically produced goods increases. This increase in demand leads to increased demand for labor, which can increase wages. Additionally, the money multiplier effect is higher when money is kept domestically vs paid to offshore parties.

Finally, I think it’s ridiculous to expect that this nation can maintain its wealth without producing anything. We act as if the producers of food are fungible cogs that businesses can swap out. But I think we’ll find that management is the fungible part. Anyone can sell a quality good. Knowing how to make it is what’s important. I’m surprised that mindset doesn’t resonate more with software engineers.

How do businesses hire local labor for non-existent manufacturing facilities? Why would anyone spend the massive amounts of money over years required to make new factories when people expect that eventually sanity and rule of law will return to the White House?

A cogent, long range tariff and industrial policy might accomplish something like this over a period of years. Does that describe the last 6 months?

This would make sense if there were a single labor market. There isn’t, so this simply increases prices (even for domestic goods, as raw materials are frequently imported).

There is no meaningful path to restoring much of the US’s lost manufacturing capacity. The rent is too damn high, and the cost of goods is rising quickly as well. Labor is expensive and becoming moreso daily. Manufacturing in the US can never compete with SE asia even with 50% tariffs due to the gigantic disparity in the cost of labor.

It’s not going to increase wages, it may even result in even more offshoring due to the increases in cost for raw materials.

Sure, a cogent policy would be ideal. But you can’t let perfect be the enemy of the good. America was getting their lunch eaten well before Trump. At least the tariff policy is an attempt at rectifying the situation.

Both raw materials and finished goods are tariffed.

So if the idea is to be more self sustaining: we cannot.

Also, read this: https://www.molsonhart.com/blog/america-underestimates-the-d...

Mercantilism is evil.

Incentives work better than tariffs. Tariffs are less effective due to their uncertainty (why would I build a factory if the next admin removes the tariffs?)

Perhaps if tariffs were implemented in a somewhat sane way, your argument might have more merit. Today, we are also tariffing the raw materials needed for domestic production, including many that have zero or insufficient local production. so it actually makes it harder and more expensive to meet demand domestically.

Plus, with the fickle and chaotic application of trumps tariffs, you’d be insane to invest in domestic production.

Low labor costs are not why goods are produced in China. That viewpoint is outdated. Goods are produced in China because they have the most capacity and expertise. Don’t believe me. Believe Tim Cook: https://m.youtube.com/watch?v=2wacXUrONUY

The fact that X is more effective than Y is not an argument against Y if X and Y are not mutually exclusive.

Except for one little thing: countries have comparative advantage in the production of different goods and services. Boeing is great at turning aluminum and steel (low in the value chain) into jetliners (at the top of the value chain).

Because of this, Boeing gets to make thousands of jetliners and sell them all across the world and America gets to be one of very few places that can do this.

I think you'll find that steel and aluminum are a lot more fungible than jetliner factories. Why are we kneecapping what we're good at for the sake of things that China will ALWAYS be better than us at?

> Finally, I think it’s ridiculous to expect that this nation can maintain its wealth without producing anything.

The total value of US exports has only ever gone up (see above).

I do get the argument for moving manufacturing expertise back onshore, I really do. But tariffs are not gonna lower the minimum wage and if manufacturing is gonna come back to the US, it'll come back in a highly automated form with a boatload of government support.

Sure, I get your point. It all comes down to the pros and cons of each on the rest of the economic system. The goal isn’t to get industry onshore at the expense of the economy. If you have a better tool, use that instead

Is the argument here what we should forgo important things because they’re difficult? As far as I can tell, the difficulty will only increase as time goes on.

> you can’t let perfect be the enemy of the good

You can let bad be the enemy of both good and perfect.

Investment in manufacturing structures is down in ‘25 [1]. Manufacturing activity in the northeast is down, with “the new orders index dip[ping] into negative territory” [2].

Tariffs can reduce trade imbalances and incentivize domestic production. We’re not doing that. Our tariffs are too volatile. They tax manufacturing inputs. Tweets grasping for the straws of a Nobel prize cede prized export markets like India to China [3]. Cancelled licenses for nearly-complete projects add risk [4].

The policies of a degrowth leftist who wanted to reduce our industrial output and pivot to manufacturing would be virtually identical.

[1] https://fred.stlouisfed.org/series/C307RX1Q020SBEA

[2] https://www.philadelphiafed.org/surveys-and-data/regional-ec...

[3] https://www.nytimes.com/2025/08/30/us/politics/trump-modi-in...

[4] https://www.reuters.com/legal/litigation/us-orders-orsted-ha...

"Demand for domestic goods" includes a lot of exports. And when the foreign policy is explicitly "the US vs everyone else", it's obviously the US businesses that will have nowhere else to go as the retaliatory tariffs hit the businesses/industries that were previously strong.

Oh, that too. China is the best place to manufacture most precision goods today, period, independent of labor costs.

But even if you could wave a magic wand and put the USA on equal footing in terms of skills and experience and capability, it would still cost several times more to make the same goods in the USA due to the labor costs (and labor-adjacent overhead costs like workplace safety).

Both would need to be solved, and I think that solving either one alone is already basically impossible on any short- or medium-term timescale. A tiny bandaid like tariffs isn’t going to move the needle.

It is neither in our best interests to continue this, because I can't give you the level of detail this can. It would be a pale imitation of the reasons in front of you.

Basically, there is no way we "win" this economically through tariffs. Nor can we power through it by trying to throw labor at the problem, because the labor cost is cheaper everywhere else.

How does this argument apply to a good like coffee? We drink a lot of coffee, and it makes us more productive, but we produce very little of it. Maybe we could increase coffee production in Hawaii, but since we can use the land and the labor for more high-value purposes, it would cost a lot more than importing it from Brazil or Colombia. So when we slap a 50% tariff on Brazil, the average American ends up consuming less of something that they enjoy and find valuable, or paying more to consume the same amount. Maybe some land owners and agricultural workers in Hawaii benefit. Doesn't seem like a worthwhile trade-off.

I think there are some categories of goods where protectionism makes sense for national security reasons, but for most goods, I don't really see the value of propping up less productive domestic production and causing increased prices for consumers. Do we need to make underwear in America? Or toys?

And of course tariffs are not one-sided, so retaliatory tariffs hurt the domestic industries where our exports are competitive, which tend to be high-value.

Lunch eaten by whom? Who was eating the world's richest country's lunch? The only lunch eating going on is the American rich eating the poors', something that's only accelerated under Trump. The tariffs are a tax that is most disproportionate on the poor. And they are in no way, shape or form actually intelligently designed to help them. It's just stupid madness.

How about direct orders from retailers in foreign countries of products that aren’t made domestically (and are so specialized and small market in the US that there’s no world where they manufacture here)? I’ve already been burned on specialty products just suspending shipping here due to tariff uncertainty in addition to the various postal services suspending to the US, like JP Post.

The problem with incentives is that they need to be ongoing. It doesn’t matter how cheap it is to build a factory in the US if foreign competition can still bring comparable products to market for cheaper. Because then you won’t sell anything, so your ROI is zero.

Boeing is going to be the first company to feel the pain of Trump’s tariffs.

The govt of India has already put one small order on hold and the word in aviation circles is to switch to Airbus as far as possible.

Military purchases now also won’t happen.

Peter Navarro in one of his rants inadvertently leaked this out on TV: his specific issue was a demand for mandatory tech transfer and manufacturing in India.

From your first link, investment in manufacturing is lower than in 2024 (by like 3%), but both 2024 and 2025 (Trump’s presidency) are the highest datapoints in that dataset.

Also, your second link generally paints a mixed picture, not an outright negative one:

> On balance, the firms indicated an increase in employment, and the price indexes rose further above their long-run averages. The survey’s broad indicators for future activity suggest that firms continue to expect growth over the next six months.

I think it’s misguided to interpret current data as evidence either for or against the current policies. This is something that’s going to take a decade plus to play out. Trying to use data to call winners 6 months in isn’t really possible.

This is one of the most surface-level understandings of national economics that I have seen. Sure, all of that would be great, if not for two things a) these tariffs are not targeted and b) your country could produce everything that it is tariffing. What is the plan for cocoa beans? bananas? aluminum and steel?

These thinly veiled pro-trump people are much too common the internet and I'm getting tired of it.

>China will ALWAYS be better than us

Comparative advantage is not innate. China was a rural country and didn't have a comparative advantage in manufacturing, they developed it and are now a powerhouse.

Nothing worth doing is easy. I don't know why Americans think that if its not easy, it's not worth doing. Americans 80 years ago would hate us for what we have become today.

the real problem is that sudden tariff changes are one of the worst tools imaginable. building large scale factories requires spending billions that will only pay off over decades. if the tariff changes every month that's one of the worst things you can do to build confidence in long term bets.

no. the argument is that show deliberate policy is how you fix long term systematic problems. flash grenades thrown by toddlers just make everything worse.

He’s giving that speech in China. It’s impossible to know if he’s glazing or not. Either way, I would want to hear him commit to building those factories in the US if education was not a factor. I suspect real estate costs, unions, OSHA, and US wages are bigger factors than he’s letting on. Still, I’m not going to fault the man for complimenting China while speaking to a Chinese audience.

In some sense of the word “manufacturing” china has several thousand years of experience in silk production. It also has - and had for much of it’s history - a stable government overseeing a high order society. The situation makes a lot more sense if we stop thinking about “the rise” of china and more “return to the historical norm”. There are a lot of other countries with cheap labour and governments desiring to industrialise that have achieved nothing like china did.

It's actually pretty amazing that the current regime has managed to get people to believe that the current world order, where the US has been sitting on top for decades and managed to extract the largest piece of the growing world trade cake, somehow means that the US is being taken advantage of.

There's more than one commenter in this post that talks about "other countries walking all over the US", or claiming that capitalist free trade allowing American consumers to purchase ridiculous amounts of stuff is somehow a scam?

It's as infuriating as it is mindboggling how people can fall for it. It's completely baseless.

Apple had a lot of supply chain issues when trying to manufacture in the US. E.g. they failed to procure enough screws: https://www.nytimes.com/2019/01/28/technology/iphones-apple-...

Do you think you just have to flip a switch somewhere in buttfuck nowhere Wisconsin and all of a sudden you get a full fledged factory and the trained workers needed to compete with China on low quality/high volume products?

Even with triple digit tarrifs Chinese goods would still be cheaper.

The American worker has had their lunch eaten by the American capitalist class in conjunction with countries providing cheaper labor. By allowing unfettered labor arbitrage (i.e. tariff-free trade) the US has allowed their working class to be completely gutted. Combined with with unfettered illegal immigration (another Democratic Party position), the assault on the American worker is immense.

American companies will move manufacturing offshore long before they’ll open factories in the U.S. The economics of using domestic labor for cheap goods don’t add up.

Their whole platform is grievance. It’s the only thing he’s good at.

No, I don’t think there is a switch. It will be a long and difficult process. But your argument seems to be that, just because it’s difficult, we should just give up. I don’t believe in that argument. Building things is always hard.

I agree with you. Reading the comments here, it’s clear that many people lack the “fighting spirit” for competition and improvement.

Honestly, I’m surprised by this, especially here on HN. This is/was a place where builders congregate. Building new things is never easy. Sometimes all you have is a belief that you can do it. It’s sad to see that go.

The US makes both aluminum and steel FYI. I don’t think banana tariffs are going to make a huge difference either way.

Your argument ignores that Trump is using tariffs for non-economic reasons. You are arguing a weird straw man that isn't reality.

Trump has used tariffs as leverage against India for buying Russian oil, as leverage against Brazil for domestic politics he dislikes, against Mexico to pressure actions against drug cartels, and against Canada and others for recognizing a Palestinian state.

There is no sound economic logic to these schemes. The rates change as Trump likes or dislikes the praise he hears; deals are announced without signed agreements or details; rates, justified by "returning manufacturing" are changed faster than you could dig a foundation for a new factory, let alone actually make anything; industries are targeted for political reasons (like climate change denialism) and not economic reasons; deals are reached to exchange dollars for US-based manufacturing (like the china chip buying kickbacks).

The only logical consistent aspect of the tariff scheme is as unrestrained (and likely illegal) power play for Trump to get what Trump wants.

China had a comparative advantage in labor costs that they have turned into an advantage in manufacturing.

Plenty of Americans want factory jobs to exist - almost no Americans want to work them. Sure, nothing worth doing is easy, but not everything hard is a good use of time and resources.

They also grow coffee in Puerto Rico. Nevertheless, these few small islands have much less area available for coffee growing than Brazil. And coffee is grown in many other countries than Brazil, all of which are under Trump's trade assault. There is no way to substitute US-grown coffee for foreign-grown coffee.

I’m sure plenty of Americans would love to work a factory job if it meant they could provide a comfortable life for their family. Unfortunately, due to decades of anti-labor practices, that isn’t possible anymore. But that doesn’t mean we shouldn’t attempt to rectify the situation.

They sure do, but not enough to be self sustaining, and tariffs aren't going to magically produce more aluminum and steel. https://www.congress.gov/crs-product/R47294. Canadian aluminum is critical to the US supply.

Bananas may not matter (to you), but coffee certainly will.

Its not “due to decades of abti-labor practices" but “due to a century of economic progress driving higher expectations”.

Now, its true that there have, within that, been a few decades of regression in tax and other policy effecting a worsening of the distributional situation, such that labor gets a smaller share of the returns that are returned. But even with that, basically every segment of society is better off in absolute terms than when manufacturing was more dominant: working against comparative advantage and regressing on the US’s industrial mix would only reduce aggrgeate output and do nothing to improve distribution. And that's the point, because its a policy proposed by those who don't want to deal with distribution, and in fact want to take further steps to worsen it, because they expect the benefit their narrow group will receive from that will outweigh, for them, the impact of shrinking the total output.

The worsening of the distribution of wealth is exactly the problem. Productivity is increasing faster than wages. That means labor is losing out on economic gains. Your argument is that labor should just accept this because “at least they’re better off than before.”

Imagine you invest $1000 in the stock market and the market is growing at 10%. But when you open your brokerage account, you see only 5% growth, and it turns out someone has been pocketing the difference. When you confront this person, they say: don’t be angry, you’re still better off than you were before. You would be right to be angry and you would be right to demand policies that force this person to give you your fair share.

> The worsening of the distribution of wealth is exactly the problem.

That's literally what I said, and why the solution is to undo the things that produced that instead of undoing the things that fueled the aggregated growth while doubling down on the sources of inequality.

Then I agree. But, one of the sources of inequality is labor arbitrage by the capitalist class. Tariffs decrease the utility of that arbitrage.

Unfettered illegal immigration is not a Democratic Party position.

Both Obama & Biden deported more illegal immigrants than Trump.

Due Process is a Democratic Party position that Republicans don't value.

Actually, considering the lack of real penalties for employers of illegal aliens, I'd say that the acceptance by both parties of white-collar crime is the real problem.

Properly prosecute rich criminals & illegal immigration will dry up real fast.

I agree more could be done in prosecuting employers. But supporting illegal immigrants absolutely was a part of the democrat platform. Sanctuary cities are not about supporting “due process.”

Also, the number of deportations does not tell the whole story. The number of illegal crossings under Biden was astronomical compared to both Obama and Trump.

You're sure, but virtually no Americans want to work in factories when there are plenty of jobs with either less physical demands or higher pay.

This is a well-known problem with factory jobs: https://fortune.com/2025/04/15/americans-want-factory-jobs-r...

It's not possible because you simply cannot afford to pay manual factory workers a competitive wage AND sell the goods from the factory for competitive prices.

Factory work coming back to America would have to look like car factories do right now: highly automated, highly skilled work that takes full advantage of cheap inputs and advanced technology. It will not be helped by raising the price of inputs, deporting engineers, and defunding research.

Tariffs decrease that utility by decreasing the utility of all imports, even the ones that were supporting domestic employment.

It's not 1910 anymore. The US is integrated into the global economy and many if not most jobs export to a global audience. Do you want to hurt the labor arbitrage that allows us to support advanced manufacturing?

Will? They did a long time ago!

> Sanctuary cities are not about supporting “due process.”

I thought it was about keeping local law enforcement out of immigration matters. Because otherwise undocumented people would be afraid to report crimes or be witnesses, and that's worse for local crime. Which is what city governments care about.

If you're interested in a detailed discussion of what a "cogent, long range tariff and industrial policy" might actually look like, you could do worse than my new book on this subject. The website is at IndustrialPolicy.US.

Yeah, I should have prefaced with "given a choice". I'm aware of the current manufacturing situation in the U.S.

> investment in manufacturing is lower than in 2024 (by like 3%), but both 2024 and 2025 (Trump’s presidency) are the highest datapoints in that dataset

Sure, it’s down in ‘25 and has stalled a multi-year trend. The most-recent data show that trend spreading.

> something that’s going to take a decade plus to play out

Won’t get there. One, the policy is changing on a week-to-week basis. And two, there is no bipartisan buy-in to this policy.

The tariffs could have worked were they sensibly implemented. They weren’t. As structured, they are politically and economically infeasible for their aims. (Great if you’re an intermediary, though.)