During his election campaign, Trump repeatedly pledged to create manufacturing jobs by imposing tariffs of 10% on all imports and up to 60% on Chinese goods. He also pledged to punish U.S. companies that produce goods overseas, deport millions of undocumented immigrants and make it harder for migrants to enter the country and compete with U.S. workers.

At first glance, Donald Trump’s vision of a “manufacturing renaissance” may seem appealing. Given the election result, it clearly resonated with voters. Financial markets also reacted positively: after the election was called, the dollar appreciated against most major currencies and the S&P 500 recorded its largest weekly gain in a year.

But the reality is not as rosy as it seems. The rise in stock markets is primarily driven by expectations of significant tax cuts and deregulation. Plans to raise taxes on the very wealthy and big corporations, the centerpiece of Vice President Kamala Harris’ campaign, will be scrapped, at least for now.

When it comes to Trump’s plans to restrict the movement of goods and people, experts remain much less optimistic. A recent Peterson Institute article by Kimberly Clausing and Mary Lovely examines the potential consequences of Trump’s proposed trade barriers, warning that his import tariffs will drive up prices, with the burden falling disproportionately on households at low and middle income.

To be sure, some may argue that Trump’s tariffs will not lead to sustained inflation, just a one-time rise in prices. According to this view, the long-term benefits of this policy would outweigh the short-term costs.

But there is reason to believe that rather than generating lasting economic gains, the trade policies favored by Trump would cause serious damage. Indeed, while consumers would undoubtedly shoulder much of the burden, they are only part of the problem.

A tariff wall around the United States would increase costs for domestic producers, a result that would shock no one except Trump.

The fundamental flaw in Trump’s tariff plan is that domestic producers rely heavily on imported inputs. Take steel for example: the United States, the world’s largest steel importer, sources its steel from 80 countries, including Brazil, Canada, Mexico and China.

A sharp increase in steel tariffs would raise the cost of U.S.-made goods, erode the country’s economic competitiveness, and ultimately undermine Trump’s stated goal of bringing back manufacturing jobs. .

Trump’s plan to limit the use of foreign labor would only make the problem worse. India, for example, has been one of the largest suppliers of labor to the United States since India’s 1991 economic reforms.

Over the past three decades, outsourcing has been a boon to India and the United States as the digital revolution has allowed American companies to take advantage of lower labor costs in India.

Restrictions on outsourcing in the name of protecting American workers will not only harm the Indian economy but also increase production costs in the United States. In addition to reduced competitiveness, Trump’s proposed restrictions could have far-reaching geopolitical consequences, potentially undermining three decades of U.S. diplomatic efforts to forge closer security ties with India.

Additionally, restricting access to cheap foreign labor would allow other countries, notably China, to displace U.S. companies in the product market. As the United States becomes increasingly isolated, China is working to expand its presence in Africa, Asia and Latin America.

Its growing presence in these regions could open new production and supply routes, boosting Chinese productivity and strengthening its geopolitical influence.

While the outsourcing debate in the United States is often framed as a simple conflict between American and foreign workers, what is often overlooked is that outsourcing drives up company profits.

The solution does not lie in restricting access to lower-cost foreign labor, but in using taxation to redistribute part of the earnings from the rich to the poor, thus ensuring a more equitable sharing of benefits. of world trade.

In most democracies, the main concern after an election is that the winners do not keep their campaign promises. The 2024 U.S. presidential election is one of the rare instances where there is palpable fear – in the United States and around the world – that the winner will actually prevail. ©2024/Project Union

The author is a professor of economics at Cornell University and a former chief economic advisor to the Indian government.