Tariffs dominated headlines last week after a New York court ruled that the Trump administration illegally imposed trade barriers using emergency economic powers. Trump’s officials quickly appealed, meaning the tariffs remain in place for now. Meanwhile, the president threatened the EU with 50% tariffs over stalled trade talks and has now implemented 50% steel and aluminum tariffs as of this week.
One of the main goals of these tariffs, repeated many times by President Trump, is to bring jobs back to the US by building factories here. But don’t be deceived by the president’s rhetoric: America isn’t suffering a job shortage. With unemployment at just 4.2% — barely above the 3.4% low we hit in 2023 — there simply are not many unemployed Americans right now. For context, most economists consider anything below 5% to be full employment. To achieve the President’s goal of on-shoring American production, tariffs will first manufacture an artificial job shortage by increasing industry costs, driving workers out of their current employment.
The brilliant French economist Frédéric Bastiat wrote a piece in 1845 demolishing the tariff-as-job-creator argument by exposing the flawed reasoning of protectionists: “The more you work, the richer you are; the more difficulties you have to overcome, the more you work; therefore, the more difficulties you have to overcome, the richer you are.” Bastiat recognized that artificially creating obstacles to make work harder does not create wealth — it destroys it.
This wealth and jobs destruction is already showing. Small import businesses are doing everything they can to stay afloat, dipping into their savings to cover negative margins, reducing staff hours, or laying off employees entirely. And it’s not only small businesses: Walmart is cutting 1,500 jobs to balance the impact of the tariffs.
Tariffs only create jobs in the same way that tying workers’ right hands behind their backs would create jobs — increasing the demand for workers by handicapping the production value of each individual. As Bastiat wisely observed, “making regulations like this is not to innovate, it is to continue down the same path.”
As a more specific example, consider Trump’s May 23rd threat against Apple: build an iPhone factory in the US or face 25% tariffs. This came months after Apple CEO Tim Cook had already promised in February to build a server facility and hire thousands of workers. But Apple has stayed quiet about the iPhone factory demand, and for a good reason. According to Morgan Stanley, even with a 25% tariff, it would still be cheaper for Apple to just raise prices and keep manufacturing overseas.
Moreover, where would Apple even find workers for an iPhone factory? The company would have to either reassign some of its highly productive software designers to work in the new factory, or poach workers who were previously employed at other manufacturing facilities. In any scenario, Apple would have to pay significantly more than what these people earned in their previous positions as an incentive to switch. Otherwise, no employee would accept to change his or her job for a lower-paying one.
Therefore, “jobs” would indeed be created. However, this outcome would be no different from restricting those talented designers to work only part-time, or — to use Bastiat’s perfect analogy — requiring them to use their computers just with their left hands. Apple would suddenly require twice as many software designers to accomplish the same work. Yet it seems highly doubtful that Apple could maintain its technological competitiveness while producing high-end software under such artificial constraints. Consider how far ahead competitors like Huawei or Xiaomi would be in just a couple of years.
The economic absurdity becomes glaringly obvious when we extend this logic to its natural conclusion. Any country could dramatically increase its “need” for jobs simply by continuing to restrict workers from performing their jobs efficiently. As Bastiat sarcastically noted, “We do not lack the means of increasing national employment. Should the cause become hopeless, we are left with the unlimited resource of amputation.”
