For the better part of the last 18 months, policymakers in Washington have finally begun addressing one of the central truths of economic growth: America cannot outcompete the world if it remains impossibly expensive to build, manufacture, invest, and expand here at home.
That realization helped drive a long-overdue push toward regulatory modernization and permitting reform. Federal policymakers have streamlined approvals, accelerated infrastructure timelines, and rolled back compliance burdens that quietly strangled investment for years. By some estimates, these reforms have reduced projected regulatory costs by more than $200 billion.
Those are not abstract savings. They represent capital businesses can redirect toward expansion, modernization, hiring, research, and domestic production. After years of policy working against American competitiveness, Washington finally began improving the bedrock conditions of the economy.
Which is precisely why it is so important to ask whether current trade policy is now undermining those gains. Tariffs can erase reform’s hard-won gains.
At a time when Americans are already grappling with rising gasoline prices, elevated borrowing costs, and lingering inflation, tariffs are quietly operating as an additional tax on production, investment, and consumption. Put simply: tariffs are a hidden tax on making things. Nowhere is this more apparent than in the recently elevated Section 232 tariffs on steel and aluminum.
Supporters present these tariffs as essential tools for reshoring manufacturing. That argument may sound compelling politically, but the real-world economics are more complicated.
A prosperous America requires a vibrant manufacturing sector — robust domestic production, resilient supply chains, and globally competitive goods produced at scale. But that goal is not achieved by making industrial inputs more expensive.
Modern manufacturing does not operate within isolated national silos. American industry increasingly functions within integrated North American supply chains spanning the United States, Canada, and Mexico. Automotive, aerospace, heavy equipment, fabricated metals, energy infrastructure, and advanced industrial systems all rely on cross-border sourcing networks that evolved because they improved efficiency, lowered costs, and enhanced competitiveness.
That is why a low- or no-tariff North American trading zone remains essential to long-term industrial success.
The numbers tell the story. A U.S. International Trade Commission study found that downstream manufacturing industries lost an average of $3.4 billion in production value every year from 2018 to 2021 as a direct result of Section 232 tariffs. The hardest-hit sectors were precisely the ones policymakers claim to champion: construction and automotive manufacturing, which together account for nearly three-quarters of all U.S. steel consumption.
Tariffs on steel and aluminum do not only affect foreign producers. They affect every American manufacturer that uses these metals. They increase construction costs, raise equipment prices, and inflate the cost of expanding factories. They drive up the cost of vehicles, appliances, machinery, pipelines, and countless consumer products.
Most importantly, they divert investment capital away from growth. Every dollar spent paying tariffs is a dollar that cannot be invested in reshoring, automation, facility expansion, workforce development, or modernization. Tariff dollars don’t build factories.
That raises an uncomfortable but necessary question: are tariffs actually hurting reshoring?
Manufacturers do not make location decisions based on patriotic messaging alone. They decide based on cost structures, predictability, logistics, energy prices, labor availability, permitting timelines, and long-term competitiveness. Over the past 18 months, policymakers worked hard to improve those conditions. But tariffs risk offsetting those gains by artificially increasing the cost of operating in the United States.
There is also a broader macroeconomic danger. Tariffs can create a vicious cycle: higher material costs raise the price of finished goods, higher prices reduce demand, reduced demand weakens production volumes, and lower volumes discourage investment. Eventually, domestic manufacturers themselves become less globally competitive because their cost structures exceed those of foreign competitors.
That outcome does not strengthen American manufacturing. It weakens it.
Despite years of these tariffs, policymakers should honestly examine whether the results justify the costs. Has American steel production increased enough to offset the downstream damage? Have supply chains become materially more resilient? Or have manufacturers simply absorbed higher costs while struggling with uncertainty?
These are not anti-manufacturing questions. They are pro-competitiveness questions.
There is also a broader conceptual problem politicians avoid acknowledging. Tariffs are frequently asked to accomplish three goals at once: raise revenue, force changes in foreign trade behavior, and reshore manufacturing. In practice, they cannot maximize all three. If tariffs successfully reduce imports and reshore production, revenue declines. If they generate large revenue, imports must continue. If they successfully pressure foreign governments into changing behavior, the tariffs themselves may eventually be removed.
That does not mean tariffs can never serve a strategic purpose. It does mean policymakers should stop pretending they are cost-free.
America does not become stronger by making itself artificially expensive. It becomes stronger by becoming more competitive. The last 18 months showed that reducing regulatory burdens, streamlining permitting, and lowering barriers to investment can improve the country's economic foundation. The next step should be applying that same discipline to trade policy.
If the goal is a prosperous industrial economy, the answer is not isolation. It is building a competitive North American manufacturing ecosystem capable of producing high-quality goods more efficiently, more affordably, and more successfully than anyone else in the world.
Andrew Langer is President of the Institute for Liberty.
