Donald Trump's approach to trade and tariffs mirrors a strategy once used by President William McKinley. During McKinley's time, the goal was to turn the United States into an industrial powerhouse by imposing steep tariffs on imported goods—especially steel and other key materials. Trump's trade policies reflect a similar desire to revive American manufacturing and reduce reliance on foreign production. However, while the comparison is interesting, the economic realities of McKinley's era and today's world are vastly different.
McKinley's Industrial America: A Different Time
At the turn of the 20th century, the United States was in the midst of rapid industrialization. Roughly two-thirds of the American workforce was employed in agriculture or low-skill industrial jobs. Labor costs were incredibly low—American workers earned about 25 cents an hour (approximately 13 pence in British currency at the time). This was a fraction of what workers in the United Kingdom made, where hourly wages were around 54 pence.
These low wages, combined with a lack of higher education opportunities (only 8% of Americans attended college), created an environment where heavy industries like steel and aluminum thrived. At the time, U.S. steel was 24% cheaper to produce than steel from Germany or Britain. The absence of a federal income tax also meant that tariffs were a crucial revenue source for the government.
This economic model worked because the U.S. had a fully integrated supply chain and a massive labor pool willing to work industrial jobs for low pay. In many ways, America from 1880 to 1930 resembled what China is today—a manufacturing juggernaut with low costs and an enormous workforce.
Why Trump's Era Is Different
Fast forward to today, and the U.S. economy looks nothing like it did during McKinley's presidency. Only about 9% of American workers are employed in manufacturing—just 14% of the workforce share during McKinley's time. The majority of working Americans—71 out of 100—pursue higher education and seek white-collar careers.
Labor costs have also skyrocketed. The average manufacturing wage in the U.S. is $17.22 per hour. In contrast, Chinese factory workers earn approximately 36 yuan ($4.93) per hour, while Indian workers make around ₹230 ($2.22) an hour. This significant wage gap makes it difficult for American manufacturers to compete on price.
Additionally, U.S. steel is no longer the bargain it once was. Before tariffs are even considered, American steel costs 55% more per ton than Japanese steel and 72% more than Chinese steel. Moreover, the modern U.S. government relies heavily on federal income taxes, which now account for 47% of total revenue. This makes tariffs a far less essential source of funding compared to McKinley's time.
The Real-World Impact of Tariffs
The practical effects of Trump's tariffs are felt most acutely by American consumers. According to Jim Farley, CEO of Ford, tariffs on steel and aluminum could increase the price of an average car by $1,800. If these materials were entirely sourced from the U.S., he estimates the price could jump by as much as $8,000.
For context, in India, that would be equivalent to paying an extra ₹2.2 lakh for the same vehicle—a cost that could cover more than two years' worth of groceries for the average family. These increased costs ripple through the economy, making everyday goods more expensive and putting a financial strain on households.
The Labor Shortage Dilemma
One major challenge to reviving American manufacturing is the sheer lack of workers. In China, approximately 38.3% of the workforce—equivalent to 363 million people—are employed in manufacturing and industry. Even if you focus only on the domestic market, that still leaves around 220 million workers.
In comparison, the U.S. has just 25.6 million people working in these sectors—less than 10% of the workforce. With so few people available to staff factories, it's difficult to see how the U.S. could scale up production to the levels needed to meet domestic demand while competing globally.
A Political Lever, Not an Economic Solution?
Given these realities, some speculate that Trump's trade policies are less about achieving a genuine manufacturing renaissance and more about using tariffs as a political tool. By targeting weaker nations with economic pressure, he may be seeking to extract favorable trade deals while simultaneously convincing his political base that he is delivering on his "Make America Great Again" promise.
The concern is that this approach could extend beyond economic policy. Some critics fear that Trump could use his trade agenda to justify eliminating presidential term limits, arguing that he needs more time to "finish the job"—a move that would pose serious risks to American democracy.
The Bottom Line
While the comparison between Trump and McKinley may seem valid on the surface, the underlying economic conditions couldn't be more different. In McKinley's time, the U.S. had a large pool of low-wage workers, no federal income tax, and a cost advantage in key industries like steel. Today, the U.S. faces higher wages, a labor shortage in manufacturing, and a tax system reliant on income rather than tariffs.
Ultimately, attempting to recreate a bygone industrial era may be more about political messaging than sound economic policy. For everyday Americans, the consequences of these tariffs translate to higher prices and a more expensive cost of living—without a clear path to restoring the manufacturing dominance of the past.
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