Evaluating Trump’s Trade Policy on Trump’s Criteria

We are a third of the way through President Donald Trump’s second term. I thought it might be useful to assess how one of the administration’s major policies—its trade policy—is performing vis-à-vis its stated goals.  

CFR’s Washington office has the distinct privilege of being a stone’s throw from the Office of the U.S. Trade Representative, although we resist throwing stones. So, earlier this week, I invited our neighbor, U.S. Trade Representative Jamieson Greer, to walk next door for a conversation about the state of U.S. trade policy on the heels of the Trump-Xi bilateral in Beijing.  

Earlier this year, Ambassador Greer wrote in the Financial Times that “2025 will be remembered as the year of the tariff, regardless of one’s economic ideology.” True. But tariffs are a means, not an end in and of themselves. As Greer spelled out, the administration will measure the success of its trade policy along three lines: reducing the trade deficit, increasing manufacturing’s share of the economy, and raising wages for U.S. workers.

So, how’s it going?

The data paint a mixed picture, although to be fair it’s early days for some metrics. The overall trade deficit in goods is down modestly, even when normalizing for the surge of imports at the beginning of the administration as companies sought to stock up on products in anticipation of tariffs. How much of that decrease should be attributed to trade policy versus broader macroeconomic trends can be debated, but tariffs likely played a role.

Manufacturing as a share of the economy hasn’t rebounded—at least thus far, falling from 9.8 percent of GDP in 2024 to 9.4 percent of GDP in 2025, although there have been anecdotal announcements of companies’ intent to build additional manufacturing capacity in the United States. This metric will take time to properly assess given the time cycles of corporate decision-making, including about moving or onshoring supply chains, and the time it takes to build factories and stand up production.

That’s not to say this administration (and, dare I say, virtually all past administrations) don’t place special value on manufacturing jobs. Greer does, and he argued that real earnings for manufacturing line and nonsupervisory workers are up by “more than $1,000” in President Trump’s second term. Data reveal that those wages have risen—up roughly 5.4 percent in nominal terms since during Trump’s second term, though they have increased only 1.2 percent in real terms, taking into account the stubbornly high inflation (to which tariffs have contributed). Those slim real gains are now being eroded further by the energy price shocks coming from Iran.

When asked why the administration gives short shrift to the services sector, Greer argued that manufacturing jobs, on average, pay more than service jobs. This is an area of rich debate, and we had a bit of one on stage.

I took issue with this assertion, citing the Federal Reserve Board’s 2024 paper on the manufacturing wage premium, which found that the long-time “manufacturing wage premium”—the extra pay a factory worker earns over a comparable worker elsewhere—has not just narrowed but disappeared. Contrary to some critiques, that data isn’t a raw average which lumps Wall Street executives and corporate lawyers into “services.” Rather, earnings figures were controlled for factors such as education, age, and tenure. Trying to compare apples to apples, as of April of this year, the average private service-providing nonsupervisory worker was paid $31.93 per hour, while the equivalent production/nonsupervisory worker in manufacturing was paid $30.10 per hour. That said, it’s true that manufacturing still leads on weekly pay, by close to 20 percent, as production workers work longer hours—an average of around forty hours a week to the service sector’s thirty-three hours. Maybe that’s part of what people are thinking when they say manufacturing jobs are better than service jobs—more hours.

In response to our give and take, the Coalition for a Prosperous America (CPA) published a piece entitled, “Mike Froman Is Wrong Again.” I take the CPA—and that title—seriously. They argue less about the hourly wage rate and focus instead on the wider benefits of manufacturing jobs for those that hold them, their communities, and the broader economy. The CPA argued, for example, that, when you take software, finance, and professional services out of the equation, typical services jobs, such as those in hospitality and food service—do less to anchor a community or support a family. There may be merit to this argument. Manufacturing jobs are often longer tenured, offer richer benefits, and are one of the avenues available to workers without a four-year college education. Some of the benefits might be more qualitative than quantitative.

That said, my own view is that we should be careful not to undervalue the U.S. service sector which employs 80 percent of American workers, generates a roughly $330 billion trade surplus, and is the home to the leading companies of the global digital economy. Moreover, there is a persistent pool of 450,000 manufacturing jobs that have yet to be filled, and business leaders cite the difficulty filling those jobs as one of the biggest obstacles to reindustrializing the U.S. economy. Survey data suggests that a significant portion of young Americans currently don’t want to work in manufacturing, nor do their parents want them to. If we are going to see a U.S. economy that is substantially larger in manufacturing, this is an issue that will have to be addressed.

Investment in manufacturing would be aided by greater certainty on the tariff front. The uncertainty about tariffs after Liberation Day and the Supreme Court’s decision on the International Emergency Economic Powers Act (IEEPA) tariffs—through the negotiation of a raft of bilateral agreements, and in anticipation of decisions on a series of Section 301 investigations—makes it difficult for companies to make the necessary capital investments for reshoring. That would involve a multiyear, multibillion-dollar wager that hinges in large part on long-term input costs and market access.

Ambassador Greer noted, “Everyone should know if you want to have absolute certainty in avoiding tariffs, you should source as much from the United States as possible.” Yet he also acknowledged, “There’s another type of uncertainty, which is what is the tariff rate going to be today? That is not a situation we want to be in, right? We want to be in a situation where these are the tariff rates, here’s the structure that’s set up.” Once the Section 232 and Section 301 actions are finalized, Greer hopes they will establish stable rates across a broad range of partners and products upon which businesses will be able to rely.

Interestingly, Greer articulated what many of us have been quietly wondering: When on July 23, the 10 percent Section 122 tariffs—which Trump imposed when the Supreme Court invalidated his use of IEEPA and which themselves have been ruled illegal by the Court of International Trade—expire, will the administration simply reimpose them days later? Since they have never been invoked before, there is no precedent. From what Greer intimated, that thought had crossed their minds.

There were a lot of other nuggets to be gleaned from our conversation, but I will conclude with just three:

—    Fundamental principles of the post-war trading system like Most-Favored-Nation (MFN) treatment are now considered by Greer as “artifacts” and part of what got us to where we are today (and not in a good sense). Greer made clear that we need to treat different countries differently and, therefore, didn’t think “MFN is really going to be the touchstone going forward.”

—    The administration is going to focus on negotiating pragmatic arrangements with China—through a Board of Trade—about lowering tariffs on a reciprocal bucket of non-strategic goods, and will no longer emphasize trying to get them to modify their economic strategy, despite the risks associated with their imbalances, which has proven difficult to achieve in the past.

—    Canada was the only country other than China that dared to retaliate against Trump’s imposition of tariffs. And the administration is pissed. That might well be reflected in how they treat Canada during the looming United States-Mexico-Canada Agreement (USMCA) review.

To conclude on a note of optimism: Globalists are not dead. Indeed, they’re winning. Last weekend, one of my colleagues spent an afternoon in Kentucky at Churchill Downs. She took a liking to a horse named Globalist. (Not making this up.) Thirty-two to one odds. He placed, and her ticket cashed. I trust the proceeds were spent on some Made-in-America bourbon, not Canadian maple syrup.

Let me know what you think about Trump’s trade policy and what this column should cover next by replying to [email protected].