Trump Tariffs Aim to Bring Down Curtain on Era of Globalisation
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WSJ
Apr 03, 2025 08:26 AM IST
The president wants companies to return production to the U.S., but it won’t be easy.
A Taiwan Semiconductor Manufacturing fabrication plant under construction in Phoenix, Ariz., in March.
President Trump’s biggest tariff blitz yet sends a clear message to U.S. and foreign companies alike: The era of globalization is over.
Trump Tariffs Aim to Bring Down Curtain on Era of Globalization PREMIUM
Trump Tariffs Aim to Bring Down Curtain on Era of Globalization
Trump’s “Liberation Day” plan to impose sweeping new duties on trillions of dollars in imports shows that the White House wants goods sold to American consumers to be built in American factories—bringing down the curtain on U.S. support for the turbocharged globalization that powered the world economy for decades.
The new tariffs include a baseline duty of 10% on foreign imports and larger so-called reciprocal tariffs, with China facing total duties of 54%, Vietnam 46% and the European Union 20%.
“Jobs and factories will come roaring back into our country, and you see it happening already,” Trump said in a Rose Garden ceremony Wednesday. To any company or country that complains, he said: “If you want your tariff rate to be zero, then you build your product right here in America.”
Trump’s Made-in-America ambitions mean that a gusher of investment that in recent years showered low-cost manufacturing destinations such as Vietnam, as well as U.S. allies such as South Korea and Japan, is set to dry up. Firms are reconsidering their options for where best to spend their investment dollars.
“The U.S. has been at the center of globalization,” said Andre Sapir, a former EU official who is now economics professor at the Free University of Brussels. “Now the U.S., the center, wants to pull away.”
In the weeks since Trump took office, a flurry of new announcements by companies including iPhone maker Apple, South Korean car maker Hyundai and drug makers Johnson & Johnson and Eli Lilly signal that multinationals are gearing up to expand operations in the U.S. in response to Trump’s tariffs.
Yet untangling the world’s supply chains and relocating to the U.S. in the way Trump wants is a daunting task, given the costs involved. There is also the risk that Trump will lower tariffs if he can use them to wring concessions on trade from other countries, executives say. Economists warn the world could face a growth-sapping investment crunch as companies sit on the sidelines until the trade-war fog clears.
“Shifting things around is going to be quite complicated,” said Derrick Kam, Asia economist at Morgan Stanley. That process will be slow, expensive and challenging, he said.
The president’s hope is that high tariff walls will usher in a golden age of plentiful manufacturing jobs and widespread prosperity as industrial production blossoms across the U.S. He blames predatory trade practices by China, the European Union and other American trade partners for sucking jobs and industries overseas, which he now wants to bring back.
The U.S.’s two largest trading partners, Mexico and Canada, were spared new tariffs Wednesday, with any goods compliant with their free-trade agreement still subject to no duties. But both countries still face 25% duties that Trump imposed on a large share of their exports not covered by the agreement, as well as the ongoing threat that the president could blow up the deal over non-trade issues such as drugs and migration.
On Wednesday, Trump singled out China. It was the biggest beneficiary of the offshoring trend, over decades building out factories that started with toys and clothes and today make high-tech cars, machinery and electronics. Today, it dominates global manufacturing, with a trade surplus last year of $1 trillion.
A new 34% tariff on China announced Wednesday will be additive to previous duties imposed by the Trump administration, like the 20% tariff that Trump imposed over its role in the fentanyl trade. That means the base tariff rate on Chinese imports will be 54% after April 9.
Job aspirants talking with a hiring agent outside the Foxconn factory, where workers assemble iPhones for Apple, in Sriperumbudur, India, last year.
If Trump ends up imposing additional 25% tariffs on China for purchasing Venezuelan oil, then the tariff rate would bump up to 79%.
Driven by growing geopolitical tensions between Washington and Beijing and the trauma of the pandemic, multinationals have added new production bases outside of China to keep their operations running smoothly in the event of disruption from shipping delays, natural disasters, economic sanctions or conflict. Apple, for instance, began making some iPhones in India.
At the same time, Chinese companies have built out their own overseas production facilities, in part to escape brutal competition in their cutthroat domestic market but also to keep serving multinational clients and to sidestep U.S. tariffs on Chinese imports. Mexico and Vietnam have been popular destinations, thanks to low costs and, in Mexico’s case, tariff-free access to the U.S. market.
For the U.S., the result has been a fall in the share of its imports coming from China but widening deficits with Vietnam, Mexico and other countries. The overall U.S. current-account deficit, a broad measure of trade and income from overseas, in 2024 reached $1.1 trillion, underscoring to Trump and his allies the need to revamp global trade.
With his return to the White House, Trump has taken his trade war to adversaries and allies alike, whom he accuses of taking advantage of the global trading system the U.S. nurtured after World War II by pushing exports and restricting imports. Some analysts say such policies do indeed drive U.S. trade deficits, though most mainstream economists cite the U.S.’s persistent budget deficits and low savings rate as the principal drivers of the yawning trade gap.
There are signs Trump’s strategy is having an effect. Around half of German engineering businesses want to boost U.S. investment, both as a result of the tariffs and the size of the market, according to a November survey by the German Mechanical Engineering Industry Association, or VDMA, a lobby group. Most members “look to the U.S. as a growth opportunity,” said Andrew Adair, a VDMA official.
German engineering giant Siemens said last month it would increase by $10 billion its investments in the U.S., its largest market. That includes new manufacturing facilities for electrical products in Fort Worth, Texas, and Pomona, Calif., creating over 900 skilled manufacturing jobs, the company said.
Taiwan Semiconductor Manufacturing said last month that it plans to invest at least $100 billion more in chip-manufacturing plants in the U.S. over the next several years. On Wednesday, Trump said Taiwan would face 32% tariffs, though semiconductors would be exempted.
“We must be able to build the chips and semiconductors that we need right here in American factories with American skill and American labor, and that’s exactly what we’re doing,” Trump said when announcing the deal alongside TSMC Chief Executive C.C. Wei in the White House.
Taiwanese electronics companies Foxconn, Compal and Inventec have said they are seeking new investments in Texas, looking to secure land for AI-server manufacturing that could eventually rival the scale of their existing operations in Mexico.
Mexico became a hub for manufacturing the servers needed by large U.S. tech companies to power artificial intelligence, with around 70% of the U.S. server imports arriving from the country and another 20% coming from Taiwan, according to a report by Taiwan’s Ministry of Economic Affairs.
Yet, despite these pockets of activity, measures of business investment intentions published by the Federal Reserve suggest that across the economy corporate spending plans are being scaled back against the backdrop of tariff uncertainty.
Another problem: U.S. manufacturing is geared towards advanced technology and doesn’t have ready domestic supplies of basic materials and components that can be much more cheaply produced overseas. Already, U.S. manufacturers are struggling with the rising cost of screws, nuts and bolts, highlighting the need for easy access to global supply chains.
“You can’t just put on tariffs and flip a switch and all of a sudden America is an industrial nation again,” said Dan Digre, president and chief executive of Misco Speakers, a St. Paul, Minn.-based manufacturer of audio systems used in amusement parks, medical devices and spacecraft.
Around half of Misco’s production is in the U.S., but the company still depends on overseas factories for vibrating cones, copper voice coils and other essential loudspeaker components, many of them in China.
Digre, who said his business has spent around $14 million paying tariffs since 2018, said he has been scouring Vietnam and other parts of Asia for alternative suppliers. But with these sweeping new tariffs coming down the pike, “it’s very hard to know what to do,” he said. “There’s no place that’s safe.”
Write to Jason Douglas at jason.douglas@wsj.com and Tom Fairless at tom.fairless@wsj.com
Trump Tariffs Aim to Bring Down Curtain on Era of Globalization
Trump Tariffs Aim to Bring Down Curtain on Era of Globalization
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