A critical examination of U.S. trade policy suggests that the implementation of tariffs has not achieved its primary stated goal of repatriating manufacturing jobs to the United States. In a recent discussion hosted by The Verge, Evan Smith, co-founder and CEO of Altana, argues that the strategic use of trade barriers to force production back to domestic soil has failed to materialize into a significant employment recovery for the American industrial sector.
The discussion centers on the systemic complexities of global supply chains and the reality that tariffs often shift production between foreign nations rather than returning it to the U.S. According to Smith, the belief that taxing imports would automatically trigger a domestic manufacturing renaissance ignored the structural dependencies and cost efficiencies that define modern global trade.
The Impact of Trade Barriers
The core of the argument presented by Smith is that tariffs act as a blunt instrument in a highly nuanced global economy. While tariffs are designed to make foreign goods more expensive—thereby making domestic products more competitive—the actual result is frequently a restructuring of where goods are made outside the U.S., rather than a move inside its borders.
Smith, whose company Altana specializes in mapping multi-tier supply chains, notes that when tariffs are placed on a specific country, such as China, corporations rarely move their entire production line back to the United States. Instead, they often migrate production to other low-cost jurisdictions, such as Vietnam, Malaysia, or Mexico, to avoid the duties while maintaining low overhead. This “trade diversion” allows companies to bypass the intended penalty of the tariff without investing in the expensive infrastructure and labor costs associated with U.S.-based manufacturing.
Furthermore, the discussion highlights how tariffs can inadvertently harm domestic manufacturers. Many U.S. factories rely on imported raw materials or intermediate components to create finished goods. When tariffs increase the cost of these inputs, the cost of production rises for the American manufacturer, potentially making their final product less competitive on the global market and offsetting any perceived advantage gained from tariffs on finished foreign imports.
Why This Matters
The failure of tariffs to bring back manufacturing jobs is a significant finding because it challenges a dominant political and economic narrative used to justify protectionist policies. For years, the promise of “bringing jobs home” has been a central pillar of trade rhetoric, framing tariffs as a tool for national economic renewal and a weapon against the outsourcing of the middle class.
If the evidence suggests that these policies merely shift the geography of foreign production, it implies that the economic pain caused by higher consumer prices and disrupted supply chains is not being traded for a tangible gain in domestic employment. This creates a tension between political signaling and economic reality, suggesting that the tools being used to combat the decline of U.S. manufacturing are misaligned with the actual drivers of industrial flight.
Moreover, the reliance on tariffs as a primary economic tool can lead to volatility in shipping logistics and increased costs for the end consumer. When trade policies shift abruptly, the resulting chaos in the supply chain can lead to shortages and inflation, which disproportionately affect lower-income populations.
Background and Context
The current debate over tariffs is rooted in a decades-long trend of globalization, where U.S. companies moved production to Asia and Latin America to capitalize on lower labor costs and less stringent regulatory environments. The Trump administration aggressively pursued a tariff-heavy strategy to reverse this trend, targeting China in particular to address trade imbalances and intellectual property theft.
By early 2025, the initial effects of these policies had become clearer. While some specific sectors saw a marginal increase in domestic activity, the broader trend of manufacturing employment remained stagnant or continued to decline in traditional industrial hubs.
The role of technology in this landscape has also evolved. Altana’s platform represents a new era of “supply chain visibility,” where AI is used to map the hidden layers of global trade. Historically, companies only knew their immediate suppliers (Tier 1). Now, through AI-driven data aggregation, governments and corporations can see Tier 2 and Tier 3 suppliers—the companies that provide the raw materials to the suppliers. This visibility reveals that even when a product is “assembled” in a non-tariffed country, the core components may still originate from the country the tariffs were intended to penalize, rendering the trade barrier ineffective.
Analysis: The Gap Between Policy and Outcome
The assertion that tariffs failed to bring back jobs highlights a fundamental disconnect between political intent and economic execution. From a policy perspective, tariffs are a visible, decisive action that signals a government’s commitment to domestic industry. However, from an operational perspective, the decision to build a factory is rarely based on a single tax variable. It is based on the availability of skilled labor, energy costs, infrastructure, and the proximity to raw materials.
The “diversion effect” described by Smith suggests that as long as the cost of domestic production remains significantly higher than the cost of producing in a third-party country plus the tariff, companies will choose the latter. Therefore, tariffs alone cannot “create” jobs; they can only make foreign jobs more expensive. Without concurrent investments in workforce training, infrastructure, and energy subsidies, the incentive to return to the U.S. remains insufficient.
Additionally, the use of AI in supply chain management, as discussed by Smith, suggests that corporations are becoming more adept at navigating and circumventing trade barriers. As visibility increases, so does the ability of global firms to optimize their networks to avoid the financial impact of tariffs, further diminishing the effectiveness of protectionist measures.
What to Watch Next
As trade dynamics continue to shift, several key areas will determine the future of U.S. manufacturing:
1. The Role of AI in Trade Enforcement: If governments begin using platforms like Altana to enforce “rules of origin” more strictly, it may become harder for companies to simply shift production to a third country. This could potentially force a more genuine evaluation of domestic production.
2. Trade Relations with Canada and Mexico: With the USMCA framework in place, the movement of goods across North American borders will be a critical indicator of whether “near-shoring” (moving production closer to home) is a viable substitute for “re-shoring” (moving production back to the U.S.).
3. Industrial Policy vs. Trade Policy: There is a growing shift toward industrial policy—such as direct subsidies and tax credits (e.g., the CHIPS Act)—rather than purely punitive tariffs. The effectiveness of these “carrots” compared to the “stick” of tariffs will be a primary point of economic study in the coming years.
Conclusion
The evidence presented by Evan Smith suggests that the era of using tariffs as a primary mechanism for job creation has reached a point of diminishing returns. While tariffs may serve as a tool for diplomatic leverage or national security in specific sectors, their application as a broad economic strategy to restore the U.S. manufacturing base has largely failed. The complexity of the modern global supply chain, coupled with the agility of multinational corporations, means that domestic employment cannot be mandated through taxes alone; it requires a comprehensive structural overhaul of the domestic industrial ecosystem.
Sources
– The Verge podcast episode: https://www.theverge.com/podcast/971306/tariffs-liberation-day-ai-trade-shipping-jobs-canada
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Story synopsis gathered from: The Verge — source
