On April 2, a day he dubbed “Liberation Day,” President Donald Trump proposed tariff increases on US trading partners that, according to his Council of Economic Advisors, would be consistent with driving bilateral trade deficits to zero. In a post on X, US Trade Representative Jamieson Greer heralded President Trump’s trade action, saying it “will usher in a reshoring renaissance and open foreign markets, expanding our manufacturing base and creating new high-paying jobs.”

President Trump conceded that the tariffs he has imposed are likely to be disruptive in the short run. As many have pointed out, they will damage international supply chains and raise the prices paid on finished goods, directly by being passed through to consumers and indirectly by raising the costs of imported inputs.[1] But Trump has claimed that in the long run, by attracting firms to produce more in the US, the tariffs will lead to more balanced US trade and boost US manufacturing production and employment, so “the short-term pain is worth the long-term gain.” Indeed, supporters of Trump’s policies have asserted that the policies will restore the US as a manufacturing superpower and provide many opportunities for US workers who do not have a college degree.[2]

In order to provide a rough measure of the potential for increasing manufacturing employment should the Trump policies be successful, this blog estimates the manufacturing employment content of the US manufacturing trade deficit in 2024. It shows that even if the tariffs and other trade policies of the Trump administration eliminate the US manufacturing trade deficit by switching US purchases from foreign to domestic goods, the share of manufacturing employment in total US employment would increase by just 1.7 percentage points, from 7.9 to 9.7 percent, and the share of workers in production occupations in US manufacturing would increase by just under 0.9 percentage point, from 3.85 to 4.7 percent. These results point to the dangers of exaggerating the gains that policies directed at closing the trade deficit are likely to induce. The US manufacturing trade deficit of $1.2 trillion is a large number, but it is a relatively small share of an economy with a GDP of $29.1 trillion in 2024. Moreover, the changes in employment with balanced trade would be far too small to produce a labor market that significantly increases the opportunities for men without college degrees or the many places that have not shared in US economic growth over the past five decades.

Before proceeding to lay out the calculation, three prefatory comments are in order: First, a word of caution. The trade balance is the quintessential example of what economists term an endogenous variable. In simple language it is not an independent cause but rather an outcome or effect of a host of other variables (e.g., growth at home and abroad, spending patterns, exchange rates, tariffs), and this means that the same sized deficit could be the outcome of a variety of different causes and have very different implications for employment. For example, an export boom in the US caused by growth abroad could eliminate the US deficit and increase employment, but a recession in the US could also shrink the deficit, but it would be associated with declining employment. Thus the estimate provided here is not meant to be understood as unconditional prediction that eliminating the deficit will create a particular number of manufacturing jobs. Rather it is offered to provide a sense of the magnitudes that could be realistically expected from closing the deficit.

Second, it should be emphasized that traded manufactured goods contain more than value added from the manufacturing sector. To obtain the manufacturing job equivalence of the manufacturing deficit, therefore, the (gross) value of the trade balance needs to be adjusted for the raw materials, services, and distribution costs that are included in the headline measure that is commonly reported. To estimate value added from the manufacturing industry, it is necessary to subtract the value of these nonmanufacturing inputs from the gross measure of the trade balance. One technique for deriving this estimate is to use an input-output table, which tracks the purchases and sales among industries as well as their sales to final demand. Fortunately, in a major exercise, estimates of trade in value added have been made in the Trade in Value Added (TiVA) project undertaken by the Organization for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO), which integrates input-output tables for 76 economies.

And third, as can be seen from table 1, which reports the occupational composition of manufacturing employment, the stereotype of a manufacturing worker as a blue-collar production worker fits only roughly half of the overall occupational composition of manufacturing employment (shaded row in table 1). Many of the workers in manufacturing have occupations such as managers, accountants, engineers, drivers, and salespeople who are found throughout the economy—although manufacturing does account for 71 percent of all US production workers.[3]

Table 2 reports the value of the US gross and net manufacturing trade balances using the latest TiVA data compiled through 2020. It shows that from 2015 to 2019 the ratio between the headline gross trade deficit in US manufacturing and the net trade deficit in manufacturing value added remained remarkably constant, with manufacturing value added averaging 51.75 percent of the gross measure of the trade deficit.[4] Thus just over half of the value of the manufacturing trade balance reflects production in manufacturing industries.

As shown in table 3, using the average ratio of .5175 from the 2015-19 ratios of the net to gross manufacturing trade balance suggests that the deficit of $1.211 trillion reported by the US International Trade Commission (USITC) for 2024 included manufacturing value added of (.5175 * 1.211) = $626.7 billion. In 2024 total US value added in manufacturing was $2.913 trillion. Thus, the manufacturing value added in the trade deficit equaled 21.5 percent of US production. Had Americans maintained the same level of spending but met their demand with additional domestic production rather than through imports, manufacturing production would have been 21.5 percent larger.

According to the St. Louis Fed’s Federal Reserve Economic Data (FRED), in 2024, manufacturing employment averaged 12.818 million workers, representing 7.9 percent of total US employment of 161.4 million workers. Using the average output per worker in US manufacturing indicates that 21.5 percent of 12.818 million equals 2.76 million jobs. Adding this number of jobs to manufacturing would have increased manufacturing employment to 15.6 million workers, which would have been equal to 9.7 percent of overall US employment—i.e., an increase in the manufacturing share of total US employment by 1.71 percentage points. As indicated by the occupational share data in table 1, adding the production worker content of the trade deficit in manufacturing increases the manufacturing production worker share in total US employment from 3.85 percent (48.7 percent * 7.9 percent) to 4.7 percent (48.7 percent * 9.7 percent)—i.e., an increase of just under 0.9 percentage point, or an additional about 1.3 million manufacturing production workers.

To be sure, as noted above, there are many different combinations of increased US exports and/or reductions in imports of manufactured goods that could result in a balanced trade deficit, so the numbers here need to be taken with a grain of salt. Nonetheless, the estimate strongly suggests that even a strategy that led to a US economy with balanced trade would not have a noticeable impact on the overall patterns of US employment. As a result, putting the US economy through the massive disruption entailed by the Liberation Day tariffs in the name of creating a relatively small number of manufacturing jobs is truly a fool’s errand.

It is natural to ask why manufacturing employment has such political salience despite this overwhelming evidence of its relatively small potential for creating jobs. One explanation is that attributing America’s declining manufacturing employment and its trade deficit to unfair foreign practices is a convenient scapegoat and provides a pretext for protectionism. But this flawed view ignores the overwhelming evidence that the US has had a declining manufacturing employment share long since the 1950s—well before it was significantly exposed to foreign trade. Moreover, manufacturing employment shares have declined in all developed and many emerging-market economies regardless of whether they have run trade surpluses or deficits.[5]