Released October 22, 2025 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Among the stated goals of the Trump administration's unleashing of tariffs, eliminating the trade deficit and reshoring jobs back to the U.S. were at the top. Neither is likely, or even possible, said Ryan Sweet, chief economist in the U.S. for Oxford Economics.
Sweet's presentation, "Tariffs, Trade, and a Global Economic Outlook," came about at the Ninth Annual Energy Summit in Houston, co-hosted by Baker Botts LLC and the Center for Energy Studies at Rice University's Baker Institute.
As for the first, "eliminating the trade deficit, that's mathematically impossible. And it's mathematically impossible because of you and I." That's because, in short, "unless there's a seismic shift in our spending patterns, we're not going to be able to close a trade deficit, because we're not going to produce enough goods here" to cover what we consume, he said.
Reshoring manufacturing, which is related to the trade deficit, is also a long reach for three reasons, starting with comparative labor costs. "Unit labor costs in the U.S. are still much higher than they are elsewhere."
Second, investment required to update manufacturing structure would be cost prohibitive. Sweet used Pittsburgh as an example. The NFL team there is named the Steelers for a reason, but the days of steel mills and hard hats are gone.
Today, its economy is led by "Healthcare: eds, meds and tech. Pittsburgh's reinvented itself. You can't just... flip the switch, and they're back to producing a lot of steel."
The third issue with reshoring manufacturing is that labor is not only costly, it's scarce. "And the lack of labor force growth is something that is really going to come to bear over the next several years with less immigration. We need more people," he said.
Sweet added that immigration has always been key to U.S. productivity, as immigrants are a large part of the workforce. He is concerned that recent crackdowns may stifle the economy's ability to grow as it needs to, due to workforce shortages.
But reshoring is not a completely lost cause, as Sweet sees positive signs for pharmaceuticals, semiconductors, chips and defense-related industries--the latter a situation of national security--as coming back.
Here to Stay
Whether they accomplish those goals or not, Sweet believes tariffs are here to stay because of their one certainty: They produce tax revenue.
These tariffs "are going to raise a boatload of money--$2.5 trillion, $3 trillion over 10 years. And lawmakers aren't going to roll back these tariffs. It's like giving my children a popsicle. Once you give it to them, you're not getting it back. And that's how lawmakers view money."
Exact numbers could fluctuate, depending on what exemptions are deemed critical or how U.S. rates vary depending on reactions from other countries, but that's all Sweet sees.
Trade Hubs
Referring to tariffs as a "seismic shift" not seen since the 1920s and 1930s, trade routes could be reconfigured to favor regional hubs, which he compared to the days of large shopping malls.
Supply chain disruptions due to tariffs are "causing goods inflation, causing disruptions to corporate profits. So, there's a strong economic incentive to bring manufacturing closer to home," to increase security.
"That's how trade is going to be done going forward," he said. "It's going to not necessarily be reshoring, it's going to be French shoring. So, the U.S. will bring more manufacturing closer to home to minimize these potential supply chain disruptions."
The COVID-19 pandemic startled the world out of its assumption that supply chains would always work smoothly, he noted, and since then the uncertainty has only continued.
But the strain is less here than for most of the world. Referring to "American exceptionalism," he said the U.S. is better off than most, with business starts increasing along with manufacturing. That's mainly due to its ability to attract plenty of new workers--which, as he noted, is now in doubt.
What About AI?
AI is part of pretty much every supply chain and economic discussion, especially surrounding productivity and jobs, and the U.S. is far ahead of most other countries in its adoption. Hopefully, Sweet said, AI will be more disruptive than destructive.
"I think the general consensus is that AI is going to be creative destruction. In the long run, it's going to create more jobs than it destroys. It doesn't mean that it won't destroy jobs. We've identified all the occupations that are most exposed--law clerks, for example, or a lot of your back-office jobs," but it will replace them with different ones, he said.
This article is second in a series on the Rice Baker Institute Energy Summit. Still to come: Supply chain issues with electric grids, oil and gas, and more.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
Sweet's presentation, "Tariffs, Trade, and a Global Economic Outlook," came about at the Ninth Annual Energy Summit in Houston, co-hosted by Baker Botts LLC and the Center for Energy Studies at Rice University's Baker Institute.
As for the first, "eliminating the trade deficit, that's mathematically impossible. And it's mathematically impossible because of you and I." That's because, in short, "unless there's a seismic shift in our spending patterns, we're not going to be able to close a trade deficit, because we're not going to produce enough goods here" to cover what we consume, he said.
Reshoring manufacturing, which is related to the trade deficit, is also a long reach for three reasons, starting with comparative labor costs. "Unit labor costs in the U.S. are still much higher than they are elsewhere."
Second, investment required to update manufacturing structure would be cost prohibitive. Sweet used Pittsburgh as an example. The NFL team there is named the Steelers for a reason, but the days of steel mills and hard hats are gone.
Today, its economy is led by "Healthcare: eds, meds and tech. Pittsburgh's reinvented itself. You can't just... flip the switch, and they're back to producing a lot of steel."
The third issue with reshoring manufacturing is that labor is not only costly, it's scarce. "And the lack of labor force growth is something that is really going to come to bear over the next several years with less immigration. We need more people," he said.
Sweet added that immigration has always been key to U.S. productivity, as immigrants are a large part of the workforce. He is concerned that recent crackdowns may stifle the economy's ability to grow as it needs to, due to workforce shortages.
But reshoring is not a completely lost cause, as Sweet sees positive signs for pharmaceuticals, semiconductors, chips and defense-related industries--the latter a situation of national security--as coming back.
Here to Stay
Whether they accomplish those goals or not, Sweet believes tariffs are here to stay because of their one certainty: They produce tax revenue.
These tariffs "are going to raise a boatload of money--$2.5 trillion, $3 trillion over 10 years. And lawmakers aren't going to roll back these tariffs. It's like giving my children a popsicle. Once you give it to them, you're not getting it back. And that's how lawmakers view money."
Exact numbers could fluctuate, depending on what exemptions are deemed critical or how U.S. rates vary depending on reactions from other countries, but that's all Sweet sees.
Trade Hubs
Referring to tariffs as a "seismic shift" not seen since the 1920s and 1930s, trade routes could be reconfigured to favor regional hubs, which he compared to the days of large shopping malls.
Supply chain disruptions due to tariffs are "causing goods inflation, causing disruptions to corporate profits. So, there's a strong economic incentive to bring manufacturing closer to home," to increase security.
"That's how trade is going to be done going forward," he said. "It's going to not necessarily be reshoring, it's going to be French shoring. So, the U.S. will bring more manufacturing closer to home to minimize these potential supply chain disruptions."
The COVID-19 pandemic startled the world out of its assumption that supply chains would always work smoothly, he noted, and since then the uncertainty has only continued.
But the strain is less here than for most of the world. Referring to "American exceptionalism," he said the U.S. is better off than most, with business starts increasing along with manufacturing. That's mainly due to its ability to attract plenty of new workers--which, as he noted, is now in doubt.
What About AI?
AI is part of pretty much every supply chain and economic discussion, especially surrounding productivity and jobs, and the U.S. is far ahead of most other countries in its adoption. Hopefully, Sweet said, AI will be more disruptive than destructive.
"I think the general consensus is that AI is going to be creative destruction. In the long run, it's going to create more jobs than it destroys. It doesn't mean that it won't destroy jobs. We've identified all the occupations that are most exposed--law clerks, for example, or a lot of your back-office jobs," but it will replace them with different ones, he said.
This article is second in a series on the Rice Baker Institute Energy Summit. Still to come: Supply chain issues with electric grids, oil and gas, and more.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
