Will Trump’s America First Policies Put America Last?

Trump wants to bring production back to America, and that’s a noble effort and, for many companies, a smarter thing to do than they realize as escalating logistics costs and global uncertainty make near-shoring and, even better, home-shoring much less risky (and, in the long run, often more cost effective) than off-shoring, especially when there’s no good reason to off-shore.

But Trump’s recent almost across-the-board tariffs are going to cost some American manufacturers anywhere between millions of dollars to hundreds of millions of dollars as, simply put, due to a lack of availability of certain resources, Americans have to import. The net effect of so many lower-cost global options over the years is that American companies went off-shore for just about everything they figured they could get cheaper, and as a result not only has there been little to no growth in raw-material extraction and production at home, but some industries have actually lost capacity. And that capacity can’t be turned on and ramped up over night.

As a result, Americans need to import aluminum, steel, and other metals, at least for the short term. And while most of that importation should come from near-source locations (like Canada and Mexico, especially if the US wants to maintain NAFTA, which, for the most part, is better for it than Canada and Mexico [combined]) to decrease risk and increase border security (after all, it has two borders — Canada and Mexico; working with Canada and Mexico on security issues makes the entire North American continent safer), Americans have such high demand in some categories even Canada and Mexico can’t meet it all.

For now, American manufacturers have no choice to but import their raw materials from other (non-exempted) countries. It’s unfortunate, but it’s the reality. And if any of these companies have access to good global strategic sourcing optimization and supply chain planning tools, they’re going to start modelling and realize that it’s cheaper in the mid-term, and maybe even the short term, to manufacturer whatever is intended for the global market outside the US. Rev that factory back up in Mexico and serve the world from there. Only manufacture at home what is needed at home.

And what happens if companies shift their operations to other jurisdictions? America loses jobs, tax revenue, and it’s share of the global GDP. That’s, hopefully, not what Trump, or anyone inside North America, wants.

And while there should be tariffs on goods imported from jurisdictions a country can’t compete with and, in particular, a country that allows its corporations to pay it’s employees $2 a day for a job an American would have to be paid at least $58 a day for (as there’s no way America could compete with imports otherwise), those tariffs should be designed not to hurt the manufacturers who depend on raw materials they can’t get at home, or at least be used to fund local raw material extractors / producers to give those companies at home a local option. For instance, all tariffs collected should go into a fund to help local raw material extractors and producers expand or increase production, and until that happens, companies that need to rely on imports in the interim should at least get tax credits until such a time as they have a local option. Or they are just going to find ways to take as much of their business as they can elsewhere.

And that won’t make America great again, or even competitive. While I actually agree with the premise that, especially when it comes to manufacturing and agriculture and staple industries, America needs to be great again, unfortunately, just slapping import tariffs without a broader plan to achieve that goal is not only not going to help, but it’s going to hurt.