President Donald Trump’s “Liberation Day” tariffs are the biggest shock to the global financial and economic order since the end of the Bretton Woods system in the 1970s, and possibly since the end of the Second World War. If they remain in place — an open question, since Trump sometimes indicates the tariffs are more bargaining chips than longterm policies — they will reshape the international system, as well as America’s domestic economy.

This reshaping will be painful in the short run for essentially everybody: prices for nearly everything will rise as corporations pass on tariff costs; businesses of all kinds will hesitate to make investments in such a radically uncertain political-economic environment; other nations, especially developing nations, will struggle to compete after the loss of their primary competitive advantage: low costs.

The medium- to long-term benefits are, at this moment, speculative. The dream is to reindustrialize the American heartland, to provide millions of manufacturing jobs with family-sustaining wages and to make the United States as self-reliant as possible. These are worthy goals, and tariffs — though typically targeted to particular industries and not slapdash across the board — are an essential tool in achieving it.

But there are major hurdles to achieving this dream that tariffs cannot address: the nature of the U.S. corporate-financial system, and of the nation’s workforce. REINDUSTRIALIZED HEARTLAND Import taxes serve a variety of purposes, but here we will focus on the protection — and, ideally, strengthening — of domestic manufacturing. By making it more expensive to import goods, tariffs make manufacturing in the United States more attractive for both foreign and domestic companies.

The question of the decline of American manufacturing, and whether it has been exaggerated, is complicated. As a matter of real GDP — which is inflation-adjusted — manufacturing has remained about 10% to 14% of the U.S. economy for 80 years, without a significant drop-off.

But as a matter of employment, the decline has been catastrophic: from over 30% of all jobs in the 1940s to under 10% today. Combined with the relatively flat share of GDP, this appears to prove that manufacturing job losses are entirely due to automation, which tariffs can’t fix.

Not so fast. During the same period, the overall amount of goods manufactured, for burgeoning consumer economies here and around the world, has also skyrocketed. And the U.S. has been left behind. While manufacturing only accounts for about 10% of U.S. GDP today, it accounts for 27% of China’s, 20% of Japan’s and 19% of Germany’s. In other words, America produces a lot less than other countries relative to the size of our economy.

This, plus the devastation of American communities that depended on manufacturing, makes the case for attempting to reindustrialize the economy. But will it work?

SHAREHOLDERS VS.

STAKEHOLDERS In two major ways, the American economy is not set up for a resurgence of domestic manufacturing: the finance and workforce systems.

In an interview this week, celebrated South Korean economic Ha-Joon Chang — a critic of the contemporary global finance system and defender of protectionism for developing economies — explained that the “extra resources” generated by tariffs will be “drained” by the “parasitic” American financial system. “In the last 25 years, the top American corporations have given away something like 90%95% of their profits to shareholders through dividends and, more importantly, stock buybacks,” rather than reinvesting in their businesses.

To be clear, Chang is not considered an orthodox neoliberal economist and is certainly not a proponent of free trade. He believes government intervention, including in the form of tariffs, is essential to equitable growth. But he argues that other conditions in the U.S. system will make it impossible for tariffs to work on their own.

This is fundamentally related to a relatively recent doctrine in American law and policy: “shareholder primacy,” which holds that it’s a corporate board’s exclusive fiduciary duty to maximize shareholder value — that is, to boost the price of stock and the goodies distributed to shareholders. Implicitly, this means that corporations do not have binding obligations to pursue the good of their workers or the public as a whole.

Both Vice President JD Vance and Vermont Sen. Bernie Sanders have criticized this standard.

It means — especially in times of uncertainty, when making long-term investments appears risky — that public companies that benefit from tariffs won’t necessarily be incentivized to invest in American workers and communities. They’ll likely be incentivized, and even required, to deliver the benefits back to the owners. It will be difficult to reindustrialize America without breaking the hold “shareholder primacy” has over corporate governance.

FINDING AND TRAINING WORKERS It will also be difficult to reindustrialize America without workers trained and willing to perform manufacturing duties.

As we have previously discussed, the international consulting firm Deloitte estimates that there are 1 million unfilled manufacturing jobs in the U.S. right now. That’s largely because the systems the nation traditionally used to develop its blue-collar workforce, from high school vo-tech to apprenticeships to trade schools, have atrophied at least as badly as manufacturing itself.

Right here in Western Pennsylvania two years ago, Re:Build Manufacturing announced a major project in New Kensington that’s slated to provide up to 300 jobs. But with the closure, just in the past year, of two technical schools in the region, the company isn’t sure where it’s going to find workers with the specialized training needed to man the facility.

If Pennsylvania struggles to develop a few hundred manufacturing workers, how is America going to develop a few million?

Any attempt to reindustrialize will require a rethinking of, and massive investments in, the kind of education needed for such an economy. That’s a project that will take decades, if not generations.

America, and in particular left-behind communities, would benefit from a more robust manufacturing economy. Tariffs — again, targeted rather than scattershot — are one important tool. But the U.S. economy will also require difficult and intensive reforms in other areas to make reindustrialization truly possible.

— Pittsburgh Post-Gazette via TNS