This Is the One Indicator President-Elect Trump Should Be Looking at When Thinking About Using Tariffs to Create Jobs

This week, President-elect Trump said he would impose a 25 percent tariff on all goods coming from Mexico and Canada, effectively disregarding the North American free trade agreement (USMCA) that he made a priority to renegotiate in his first term. The USMCA has a review clause where the three countries are to confirm in July of 2026 whether they want to continue or not with the agreement. The announcement, I would say, is a pretty good hint of what the outcome of that review process will be. Tariffs on Chinese goods, as expected, were also announced.

In Trumponomics, the use of tariffs is meant to be a job creation strategy. According to his view of the world (explained in this Bloomberg interview), sufficiently large tariffs will incentivize firms to relocate their plants inside the US to sell domestically (avoiding the tariffs), resulting in more jobs at home, and in turn, more economic growth (arguably).

There are, of course, many other things happening when tariffs enter the stage, before job growth can even occur (since those things take time): price increases (even if imports are now coming from other destinations) affecting consumer power, and trade retaliations affecting producers and exporters’ competitiveness.

(Note, however, that the use of tariffs announced by the President-elect are explicitly meant to be a pressuring mechanism for China and Mexico on both migration to and drug use in the United States).

Overall, however, there is one key indicator that should matter when it comes to job growth and economic growth in the context of exports: How competitive are American goods and services on the world stage? The answer to that question is: There is plenty of room for improvement.

Take the figure below, which graphs the exports of goods and services as a share of global exports for the US, the European Union trade block, and China, since 1985 until today, with values being normalized to 100 in year 2000. Chinese exports as a share of total trade have nearly quadrupled (!) since 2000 (up to 11 percent in 2023 from 3 percent in 2000), while US exports are now 40 percent less than what they were in 2000 (from 14 percent in 2000 to 9 percent in 2023). Europe has been able to keep its global share of exports, at around 30 percent of global trade. 

Figure 1: Evolution of global export share of US, European Union and China (1985-2023)

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Americans have made a clear choice that the country should use tariffs as a tool in its economic toolbox when they elected Donald Trump for a second term. So, who I am to judge?

But my unsolicited piece of advice for the President-elect is: Even if (BIG if) more tariffs do end up miraculously bringing new jobs to America that will serve the local market so that US consumers can buy more made-in-America products, and US producers can use more made-in-America intermediate goods, long-term prosperity will not follow without reversing the drop in competitiveness the US has suffered and shown above. If you care about growth, Mr. President-elect, America’s market share in global trade should be one of the main indicators you should be looking at. And let us agree on that: It does not look good at all.