Ferry: How Tariffs are benefiting US Manufacturing

By Jeff Ferry, CPA Chief Economist –

Last year, the US raised the share of domestic demand for manufactured goods met by US production for the first time in six years.

The CPA Reshoring Index shows a positive score of 59 basis points (bp) for 2019. It’s only the fourth positive figure since the data begins, in 2002. Equally important, the data for the first two quarters of this year shows that we took another 120 basis points away from importers by the end of Q2, despite the disruption caused by the pandemic. The domestic market for manufactured goods, worth $7 trillion last year, is the most important market for US manufacturers.

Neither a Biden nor a Trump administration should reject tariffs as part of a whole-of-government strategy to continue reshoring industrial supply chains that provide the incomes needed to reduce inequality, the goods we need and the innovation for future prosperity.

Tariffs are a big part of the driver of this success for US manufacturers. Beginning in January 2018, the Trump administration levied tariffs on a series of industrial sectors, followed by tariffs on over half of US imports from China. The tariffs ranged from 10 percent to 25 percent on most of the affected imports. That margin gave domestic producers a cushion of protection against cheap, subsidized foreign imports. The China tariffs were relatively small in relation to the size of our economy but were concentrated in durable goods. The CPA Reshoring Index shows that the biggest reshoring impact occurred in durable goods, even as net offshoring continued in the tariff-free nondurable goods.

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