Customers check out at an ACE hardware store in San Francisco, California, US. Photo: VCG

In the US government's calculation, imposing tariff hikes is seen as a strategy to reduce dependence on China and revitalize American manufacturing. However, in the long run, this misguided approach is unlikely to succeed.

The US has announced excessive tariffs, driven by an "America First" approach, which has led to a restructuring of global supply chains. As the US wants to "reshore, nearshore, and friendshore," it is admitted that some restructuring has occurred in global industrial chain under the influence of US tariffs. For instance, the share of Mexico in US trade has increased, and imports from certain Southeast Asian countries to the US have rapidly grown.

However, the sluggishness of American manufacturing is due to internal factors rather than external ones. Tariffs cannot fundamentally resolve the internal issues hindering the US manufacturing sector, and the value-added (percent of GDP) of US manufacturing has not increased with the rise in tariffs. Moreover, the impact of tariffs cannot be sustained indefinitely, and their marginal effect on production relocation diminishes over time. Worse still, the imposition of additional tariffs can harm the competitiveness of American manufacturing.

First, if the US imposes high tariffs on all countries, it effectively isolated itself. Under such conditions, revitalizing manufacturing is impossible. As tariffs accumulate to a certain level, they will completely block products from other countries from entering the US market. Can the US achieve self-sufficiency through imposing high tariffs? The answer is clearly no.

In today's world, it is extremely difficult for any country to independently produce a full range of products. Even if it could, it would be highly inefficient. Particularly for the US, where the value added by manufacturing accounts for about 10 percent of GDP, the manufacturing system is incomplete. In terms of labor, capital, and infrastructure, the US cannot establish a complete manufacturing supply chain on its own.

Second, tariffs will inevitably raise price levels in the US and increase production costs. In practice, the burden of tariffs varies for different products and companies. If the US cannot find alternative suppliers to replace China, it will have to bear high tariffs. In many cases, both US and Chinese companies share the burden of tariffs. Regardless, tariffs will lead to an increase in the price level in the US, raising labor costs and imposing additional burdens on American companies, thereby impacting US manufacturing.

Third, tariffs will also increase the cost of intermediate goods in the US, which is detrimental to the development of downstream industries. The tariffs imposed by the US apply not only to final products but also to intermediate goods. Although the US tends to focus on upstream production and primarily imports final products, it inevitably imports some intermediate goods as well. Downstream industries in the US face new challenges due to the increased costs of intermediate goods sourced from China. As a result, the production costs in the US will rise significantly.

While tariffs may yield some benefits to the US on the surface, the negative impacts far outweigh them. They undermine the efficient global supply chain cooperation system and harm the long-term interests of the US.

The author is director and research fellow at Department of International Trade, Institute of World Economics and Politics, Chinese Academy of Social Sciences. bizopinion@globaltimes.com.cn