America’s Return to Industrial Policy

President Joe Biden, despite disagreeing with former President Donald Trump on most issues, kept his predecessor’s tariffs. Indeed, he doubled down on them, most recently with the prohibitive 100% tariff on Chinese electric cars. Previously, with the CHIPS Act, the Bipartisan Infrastructure Act, and the (misnamed) Inflation Reduction Act (IRA), President Biden imposed the largest domestic, civilian industrial policy initiatives since the Great Depression. Clearly, industrial policy—the deliberate and coordinated governmental support of industries—is coming back, even if it is not clear yet where it will end up. 

In our opinion, the return of industrial policy is a very good thing. Industrial policy is what grew the American economy from a backwater colony to a global economic superpower, and, if coordinated properly, it is what will allow us to compete successfully with global competitors in China, Korea, and elsewhere. We need new initiatives like the CHIPS Act to support innovation and retention of advantageous industries such as computer chips, semiconductors, and nanotech. We also need trade and tariff policies to protect these fledgling industries from imports and to pressure foreign governments to reduce the obstacles they place on American exports. In these fractious, politically embittered times, industrial policy is emerging as a unique issue that not only bridges the partisan gap but also has the potential to help heal the country from political extremism by reducing some of the economic discontent that causes it.

Make no mistake: Despite what some people say, the decline of America’s industries, especially manufacturing, is very real. From 1998 to 2010, 6 million manufacturing jobs disappeared. Many–3.5 million between 1991 and 2019 alone–are estimated to have been lost due to imports. (That is where tariffs come in.)

In 2023, the United States’ trade deficit in goods exceeded $1 trillion, about 4% of GDP. The United States runs an annual $200 billion-plus deficit in Advanced Technology Products, the very industries in which we were the innovators. In 2022, the share of manufactured goods sold in the United States that is made here sank to a record low of 66%.