Why Tariffs Won’t Rewire the World Economy

The Trump administration’s sweeping new tariffs, announced on April 2nd, may be pitched as a tool to restore US industrial greatness—but the global economy has moved on. Despite the political appeal of reshoring manufacturing and punishing trade partners, tariffs are a blunt instrument trying to shape a world that no longer exists.

Let’s start with the basics: the structure of global demand and production has changed. In the 1980s and 1990s, global trade was dominated by container ships full of cars, clothing, and household goods. Today, much of the economic value generated by advanced economies is invisible, weightless, and digital. A book bought on an iPhone doesn’t pass through customs. A call between colleagues in New York and Singapore doesn’t register on a trade ledger. The software used to design a prototype in Boston may be sent instantly to a 3D printer in Stuttgart—and no goods are “imported” in the traditional sense.

Tariffs don’t touch any of that. They are analog policy tools in a digital world.

Meanwhile, consumer preferences have shifted—especially in aging economies like the US, Europe, and Japan. Older populations demand more healthcare, more convenience, and more services. They are less interested in accumulating physical goods and more inclined to consume time-saving solutions: app-based services, digital content, personalised experiences. These are not products that are made in factories—they are composed of intellectual property, design, code, and networks.

In this landscape, intangibles rule. The most valuable US exports aren’t cars or machinery—they’re ideas, algorithms, entertainment, and software. The US remains the global leader in high-value services—finance, cloud computing, enterprise software, biotech R&D, education, and media. These exports are often delivered without crossing a border, and they generate high margins without requiring massive industrial footprints. The global demand for American creativity, standards, and know-how has only grown.

Moreover, the rise of modular production and distributed innovation means that physical manufacturing is no longer the backbone of growth. Equipment is smarter, smaller, and more automated. Capital goods are no longer enormous fixed installations; increasingly, they’re digital-first platforms that enable flexible production across geographies. Think of it this way: once upon a time, building a factory was the signal of economic power. Now, setting up a virtual server, licensing a design, or deploying a software tool at scale may create more value with less capital.

And let’s not forget the unstoppable force of technology itself. Artificial intelligence, generative models, and cloud platforms are remaking how we work and what we value. The most critical exports of the next decade may be entirely intangible—trained AI models, encrypted software packages, or intellectual property frameworks embedded in digital workflows. Tariffs don’t—and can’t—capture this value. Trying to redirect the future of the US economy by taxing steel or semiconductors is like trying to shape the course of a river by grabbing a single drop.

Economic data tells the same story. Trade volumes haven’t collapsed, despite escalating protectionism. They’ve simply morphed. Services, digital flows, and intellectual property are where growth is now happening. The world is increasingly stitched together by contracts, cloud infrastructure, and code rather than shipping containers and customs stamps.

So what are tariffs really targeting? Often, they're punishing precisely the parts of the economy where the US is not globally dominant—mid- or low-value-added manufacturing. Meanwhile, the country’s comparative advantage—in intangible capital—is sidelined in public debates, even though it is responsible for much of the US economy’s productivity, profitability, and global influence.

The belief that tariffs can pull the US back to a golden age of industrial self-sufficiency misunderstands the reality of how modern value is created. The American economy is strongest not when it builds everything at home, but when it connects its innovation ecosystem to the rest of the world—exporting know-how, embedding standards, and scaling ideas across borders.

In short, globalisation hasn’t disappeared—it has changed form. The future won’t be defined by how many things we assemble onshore, but by how smartly we engage with the new currency of growth: ideas, networks, and knowledge. Tariffs may buy a short-term political win. But as a long-term economic strategy, they’re fighting the wrong battle—with the wrong tools.