Populist politicians sell tariffs to bring jobs home. “Jobs in factories will return to our country,” said President Trump when he announced his mutual tariff “liberation day” in April last April.
And at the last day of work: “President Trump's protectionist trading policy has contributed to the fact that new US investments have promoted more than 8 trillion dollars and created hundreds of thousands of jobs,” published the White House on social media.
The economic logic here seems to be uncomplicated: if the cutting out of trade barriers American jobs in labor -intensive sectors to places where wages were smaller were released and the return of the process returns. Increase these barriers, the restoration of production and the revival of employment in the industrial nuclearlands of America and other rich economies.
However, reality is far more chaotic than this simple story, which apparently drives the current US trade policy under Trump. A new analysis of the San Francisco Fed “Will trade uncertainty boost automation?” It suggests that the tariffs can actually withdraw a production on land, but the real beneficiaries are robots, no carbon -based workers.
The study examines what happens when trade policy becomes more uncertain, for example with sudden tariff hikes or the constant threat of new taxes. Companies that rely heavily on imported inputs, from auto parts to electronics, tend to reduce their dependence on foreign suppliers. However, the new shift is expensive. The US work costs are far higher than in Mexico or China, in the countries that have absorbed a large part of American offhored production in the past three decades.
(While I mentioned the latest Trump tariffs above, they are not the direct point of the essay: “Our data at industry level are available until 2022. Our sample therefore contains the time of the tips in the TPU at the end of 2010, but not the latest locations.”)
Then how can I keep the costs in chess? Automate. The robot density – the number of industrial robots per thousand workers – occurs with increasing trade uncertainty. Productivity improves and derives the blow interrupted supply chains. But there is a problem when it comes to creating jobs.
From the paper:
… industries that are more exposed to [trade policy uncertainty] A stronger reduction in imported intermediate goods and a greater increase in automation was experienced. These industries also experienced an increase in productivity, which partially reflected the increase in automation. However, the estimated relationship between the employment of an industry and its TPU engagement is close to zero, which indicates that TPU's employment effects for companies in exposed industries do not differ significantly from less exposed industries. This is probably due to the fact that automation leads to the elimination of some jobs and the creation of others.
In other words, tariffs and trade wars do not provide the workplace of their political promise of champions. It is almost as if companies are only changing the places to which they change offshoring, Robotland instead of Asia. It is a wonderful teaching in the unintentional consequences of political intervention.
Again from the report:
With regard to the future, the quick improvements in new technologies such as generative artificial intelligence will probably expand the ability of companies to automate and thus facilitate new care if the trade environment becomes uncertain.
A problem for populists in this paradox: tariffs, including uncertainty about their direction, can be able to shorten the supply chains and to nurse production on American soil. However, the cost structure for these companies ensures that factories will be smarter than overcrowded. Politicians may get ligament cuts for shiny new plants, but inside the human stress will disappoint.