by Marc Jackson, Teckrez President and CEO
In recent years, tariffs have been a significant topic of discussion in economic and political discourse. Most media coverage focuses on consumer goods such as automobiles, whiskey, and avocados. However, the U.S. economy is far more complex than these everyday products, and tariffs have far-reaching implications beyond the consumer market.
The manufacturing sector in the United States relies on a vast array of raw materials, parts, and components essential for fabricating and assembling finished goods. These include products such as clothing, automobiles, electronics, and footwear. For instance, consider a pair of running shoes. Their production requires various materials, including pigments, dyes, compounded rubber, extruded synthetic fibers, and adhesives—each formulated from numerous chemical ingredients.
Similarly, even a simple cereal box is the result of an intricate supply chain. The box itself, rather than the cereal inside, is made from softwood pulp blended with chemicals to ensure it is thin yet sturdy while incorporating recycled fiber content. Once the board is produced, it undergoes printing, cutting, folding, and gluing before being sealed with adhesive after packaging. These processes demonstrate the complexity of manufacturing, where multiple components must come together to create a final product.
American companies produce many of these essential materials. Consider the adhesive industry, which formulates products from a variety of ingredients, such as polymers, waxes, stabilizers, and tackifiers. Tariffs significantly increase the cost of these inputs for U.S. manufacturers.
For example, tackifiers—used in adhesives—are manufactured in multiple regions, including the United States, Europe, South Korea, Brazil, and China. While increasing tariffs on Chinese tackifiers may seem like a targeted measure, the broader impact is more complex. First, domestic production capacity is insufficient to meet the needs of U.S. adhesive companies, making imports a necessity. Second, when tariffs are imposed on Chinese imports, suppliers from other countries, such as South Korea, may seize the opportunity to raise their prices, aligning them with the higher tariff-adjusted costs.
As a result, U.S. manufacturers pay significantly more—often 20–30% higher—for essential raw materials. This increase in input costs forces adhesive companies to raise their prices, making it more expensive for food manufacturers to package products like cereal. The same pattern occurs across numerous industries, leading to widespread cost inflation throughout the manufacturing sector.
Consequently, U.S. manufacturing becomes less competitive rather than more, counteracting the intended goal of tariffs, which is to bolster domestic production. The historical precedent of the Smoot-Hawley Tariff Act of 1930, which contributed to the Great Depression by stifling international trade, serves as a cautionary example. Despite these lessons, broad tariff policies continue to be implemented with unintended economic consequences.
For instance, the Trump administration imposed tariffs exceeding 25% on Chinese goods in 2018—tariffs that remain in place today. Rather than boosting domestic production, these tariffs incentivized many U.S.-based blending factories to relocate to Mexico, where industrial raw materials could be imported tariff-free. As a result, adhesives and other industrial goods were manufactured in Mexico and then exported to the United States, circumventing the original intent of the tariffs.
Broad, indiscriminate tariffs are not the solution for strengthening U.S. manufacturing. History has shown that protectionist trade policies often lead to economic inefficiencies, reduced competitiveness, and unintended shifts in global supply chains. A more nuanced and strategic approach is necessary to support domestic industry without imposing unnecessary burdens on manufacturers and consumers alike.