Tariffs Do Nothing to Bring Back Non-Manufacturing Jobs

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A New Rural Virginia Commentary

The Rural Angle readers have by now heard all the arguments for what is wrong with Trump’s tariffs, from the $3,800 per year estimated increase in a family’s costs, to the dramatic drop in value of companies and of people’s investments, and to the huge risk of a major recession.

This edition, therefore, will focus instead on a bigger problem of his tariff approach. Tariffs do nothing to bring back millions of good, well-paying non-manufacturing jobs that American companies have sent overseas – jobs that folks living in rural and urban areas alike can aspire to.

Millions of non-manufacturing jobs have been offshored…

For years companies have offshored millions of non-manufacturing jobs to places like India, the Philippines and so on. The obvious example is call centers handling everything from booking an airline flight to canceling a subscription or finding out if your warranty has expired. With advances in AI, you don’t even know that the person helping you has a foreign accent as programs have been developed to smooth that over.

However, in recent years, this strategy has been taken to a whole new level, with many better paying, highly skilled professional jobs being done overseas for and by American companies. They are offshoring jobs like research, product development, engineering, financial analysis budget management, accounting, legal work, and even developing marketing programs. In health services, advances in telehealth have made it possible for your brain scan or mammogram to be read by a qualified radiologist in Australia or India and sent back to your doctor or hospital. Even in entertainment American production houses outsource much of their work. The computer graphics for shows like Game of Thrones were done in Canada by companies housed in converted sweat shop factories.

Non-manufacturing jobs represent more value - but Trump’s strategy ignores them….

So why is Trump focusing on manufacturing? For most companies all these non-manufacturing jobs represent a much larger share of their total expenses than does manufacturing. And when they are done outside the country, all the other benefits of what those workers spend on, like housing, cars, food, services, and taxes are lost to our communities and to the country overall. None of this is rectified by Trump’s tariffs, which address only foreign manufacturing of products and components imported into the USA.

And the reason this is happening is that so many countries have competitive, low-cost or free higher educational systems that churn out qualified individuals who are willing to work at lower rates than their American counterparts. China and India produce many times more engineers and scientists than we do, and countries like Poland and Lithuania generate world-class high-tech graduates in everything from cybersecurity to biotechnology. So there has been a sucking sound of these great jobs leaving this country, like the one we heard when manufacturing jobs left the country a couple of decades ago.

There is a better way!

Tariffs can be a very strategic surgical weapon for critical industries — but using it across all manufacturing segments makes no sense. Do we really want to bring back every type of manufacturing job to America? Should we not rather focus on bringing back jobs that make us winners in the world of the 21st century economy, rather than go backward to 19th century sweat shops.

But there are ways to get at this issue, and bring these great jobs back for Americans:

First, we should make corporate tax rates a function of the extent to which our companies are employing American workers – in manufacturing and non-manufacturing. Why should a company that incurs all its costs in the USA have to pay the same tax rate as a company that offshores all or much of its work? Taxing companies based on how much of their value is created in the US and how much leaves the country would achieve a strong incentive to bring jobs back. Let companies that do all their work here enjoy the kind of tax rates Trump is proposing. BUT for companies that offshore their work – manufacturing and non-manufacturing – have them pay much higher tax rates.

Second, rather than cut back on government educational funding (which will only make higher education the privilege of the elite), why not invest more to make the U.S. the leader in higher education? Yes, we have superb elite schools, but what about all the other less-prestigious universities? Why are they all so expensive? That system fails to tap the best and brightest in rural and urban areas that come from households of modest means. Two of the largest state universities in Virginia have only 9% of their students receiving Pell grants provided by the federal Department of Education, while that number is 15-25% in other states. The current pressure to cut back the Department of Educations will add to that problem. And our state ranks near the bottom for funding of community colleges. So, to return these jobs to America, we need to prioritize affordable quality higher education, just as other countries are already doing.

Third, stay the course in delivering reliable, fiber broadband to all of rural America. In today’s economy there is no magic in going to an office miles away to do good quality work. High-quality broadband can bring good technical and service jobs to the remotest rural corner.  Congress appropriated $42 billion in 2021 to make that happen.  It has been a long roll out, in part because the Biden administration wanted to ensure that contractors would not just skim off the easy installations and skip everyone else.  But now, just as deployment is happening, the Trump administration wants to change it, apparently to divert big contracts and money to Musk’s Starlink.  That could hurt the rural economy and be a betrayal of rural communities.

These are just some of the alternatives to Trump’s blunt force tariffs to bring jobs back to the US – quality jobs, not just sweat shop work.

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