The primary argument for the implementation of broad-based tariffs is that they will reverse the hollowing out of American manufacturing and reduce the trade deficit, which is causing a "hemorrhaging of America's lifeblood." Contrary to the repeated claim, there has been no hollowing out of American manufacturing. Industrial production in the U.S. is at an all-time high. The U.S. is producing 2.5 times as much real industrial output as it did when we last ran a trade surplus in 1975. We are producing that record output with the smallest percentage of the labor force since America became fully industrialized. The percentage of the civilian nonfarm labor force employed in manufacturing peaked in World War II and has been in secular decline ever since. This has been a great success for productivity and not a failure of trade, as today's full employment attests.
It is telling that the Trump tariffs implemented in mid-2018 and the Biden expansion of those tariffs didn't stop the secular decline in manufacturing employment as a percentage of total employment. The decline in manufacturing employment is being driven by the same secular forces that caused employment in agriculture during the 20th century to fall from 40% to 2% of the labor force: a vast increase in labor productivity and a decline in manufactured products relative to services. This is a worldwide phenomenon occurring in both developed and developing economies.
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