During the campaign, Trump repeatedly pledged to create manufacturing jobs by imposing a 10 percent tariff on all imports and up to 60 percent on Chinese goods. He also promised to punish American companies that manufacture goods abroad, deport millions of undocumented immigrants and make it harder for migrants to enter the country and compete with American workers.

At first glance, Donald Trump’s vision of a “manufacturing revival” may seem appealing. Given the outcome of the election, it clearly resonated with voters. And financial markets reacted positively: after the election was called, the dollar rose against most major currencies and the S&P 500 posted its biggest weekly gain in a year.

But the reality is not as rosy as it might seem. Stock markets rallied primarily on expectations of significant tax cuts and deregulation. Plans to raise taxes on the super-wealthy and big corporations, a centerpiece of Vice President Kamala Harris’ campaign, will be shelved, at least for now.

When it comes to Trump’s plans to restrict the flow of goods and people, experts remain far less optimistic. A recent Peterson Institute paper by Kimberly Clausing and Mary Lovely examines the potential consequences of Trump’s proposed trade barriers, warning that his import tariffs will lead to higher prices, with the burden falling disproportionately on low- and middle-income households .

To be sure, some might argue that Trump’s tariffs won’t lead to sustained inflation, just a one-time increase in prices. According to this view, the long-term benefits of the policy would outweigh the short-term costs.

But there is reason to believe that instead of providing lasting economic gains, the trade policies favored by Trump would cause serious damage. This is because while consumers would undoubtedly bear much of the burden, they are only part of the story.

A tariff wall around the US would raise costs for domestic manufacturers, an outcome that would hardly come as a shock to anyone but Trump.

The fundamental flaw in Trump’s tariff plan is that domestic manufacturers rely heavily on imported inputs. Consider steel: The US, the world’s largest importer of steel, sources its supply from 80 countries, including Brazil, Canada, Mexico and China.

A sharp increase in steel tariffs would thus raise the cost of American-made products, erode the country’s economic competitiveness and ultimately undermine Trump’s stated goal of bringing back manufacturing jobs.

Trump’s plan to limit the use of foreign labor would exacerbate the problem. India, for example, has been one of the largest suppliers of labor to the US since India’s 1991 economic reforms.

Over the past three decades, outsourcing has been a boon for both India and the US, as the digital revolution has allowed US companies to take advantage of India’s lower labor costs.

Restrictions on outsourcing in the name of protecting American workers will not only hurt India’s economy, but also increase manufacturing costs in the US. In addition to reduced competitiveness, Trump’s proposed restrictions could have far-reaching geopolitical consequences, potentially undermining three decades of US diplomatic efforts to forge closer security ties with India.

In addition, restricting access to cheap foreign labor would allow other countries, especially China, to outbid American firms in the product market. As the US becomes more isolated, China is busy expanding its foothold in Africa, Asia and Latin America.

Its growing presence in these regions could open new avenues for production and supply, boosting Chinese productivity and increasing geopolitical influence.

While the outsourcing debate in the US is often framed as simply a conflict between American and foreign workers, what is often overlooked is that outsourcing increases corporate profits.

The solution is not to restrict access to lower-cost overseas labor, but to use taxation to redistribute some of the gains from the rich to the poor, ensuring that the benefits of global trade are shared more equitably.

In most democracies, the main concern after an election is that the winners will fail to keep their campaign promises. The 2024 US presidential election is one of those rare instances where there is palpable fear – in America and around the world – that the winner will actually go on. ©2024/Project Syndicate

The author is Professor of Economics at Cornell University and former Chief Economic Adviser to the Government of India.