TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Trump’s industrial policy is more continuity than disruption

There is now a broad consensus on the need to rebuild US industrial capabilities to protect national and economic security.

Elisabeth Reynolds (The Jakarta Post)
Project Syndicate/Boston, United States
Wed, February 5, 2025

Change text size

Gift Premium Articles
to Anyone

Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Trump’s industrial policy is more continuity than disruption United States President Donald Trump speaks to reporters in the Oval Office of the White House on Feb. 3, 2025, in Washington, DC. (AFP/Getty Images/Anna Moneymaker)

F

or all the drama over Donald Trump’s flurry of pronouncements and executive orders since his return to the White House, there is more continuity than rupture when it comes to the industrial strategy of his predecessor, Joe Biden. In fact, there is now a broad consensus on the need to rebuild United States industrial capabilities to protect national and economic security, a process that has already begun in semiconductors, critical minerals, defense and energy.

Private-sector investment, perhaps the most important measure of these policies’ success, has been significant: Around US$450 billion in semiconductors and $95 billion in clean-energy manufacturing since the Biden administration passed the CHIPS and Science Act and the Inflation Reduction Act (IRA) in August 2022. So far, the US government has leveraged $5-7 of private capital for every dollar it has spent through this legislation. Whether carrots (subsidies) or sticks (tariffs) are used to support these investments, they are gaining momentum.

Trump’s early statements about rebuilding US manufacturing point to the use of both tools to stimulate investment. To be sure, subsidies are a better targeted strategy than tariffs, not least because sweeping import duties could dampen momentum by raising costs, particularly for intermediate goods. How heavily Trump will lean on tariffs remains to be seen. What is clear is that industrial policy will be part of his economic agenda, as it was for Biden.

In the case of energy, the issue on which the two administrations are perhaps furthest apart, it is too early to say how Trump’s policies will play out, except that oil and gas production will rise substantially. There are legal challenges to clawing back subsidies (84 percent of the grants under the IRA were contractually obligated before Trump took office), and clean-energy tax credits have proved popular, particularly in Republican and swing states. The Trump administration favors some renewables (hydropower, nuclear and geothermal) over others (solar, wind). But given the US’ inadequate grid capacity and growing demand for energy, the economics of competitively priced clean power and consumer preferences will be the driving forces behind the country’s energy mix.

Trump’s ambitions for artificial intelligence (as illustrated by his support for Stargate, a privately funded AI infrastructure project) will require expanding energy sources, including renewables, to meet data-center and manufacturing demands. Tech companies have already realized this. Consider Microsoft’s purchase last year of the Three Mile Island nuclear power plant, and the fact that in 2023 wind accounted for nearly 30 percent of energy generation in Texas, where data centers are multiplying.

The US’ lack of shipbuilding capacity is another growing concern. Commercial shipbuilding is almost nonexistent in the US, and the country has a terrible track record in meeting budgets and timelines for naval production. Rebuilding these capabilities will require a multipronged strategy that includes backing innovative start-ups and working with foreign companies, as is happening in the semiconductor industry, to create a competitive domestic industry. Tariffs on Chinese ships (which have dominated the sector in recent years) would not achieve this.

Viewpoint

Every Thursday

Whether you're looking to broaden your horizons or stay informed on the latest developments, "Viewpoint" is the perfect source for anyone seeking to engage with the issues that matter most.

By registering, you agree with The Jakarta Post's

Thank You

for signing up our newsletter!

Please check your email for your newsletter subscription.

View More Newsletter

But the Trump administration shouldn’t stop there. To become a global leader in frontier industries such as biomanufacturing and quantum computing, the US needs engineering and science skills and public and private investment in manufacturing. Here, too, the US is competing head-to-head with other countries, especially China.

It took a quarter-century to build the global supply chains on which US manufacturing depends; they cannot and should not be dismantled or rebuilt overnight. The US’ reindustrialization strategy must instead focus on manufacturing differently by improving productivity, sustainability and resilience. That means incorporating redundancy and regionalized supply chains and working with allies and partners to align goals and policies. It also means focusing on manufacturing products that capitalize on the US’ enormous innovation capacity. A fresh crop of manufacturing start-ups and ecosystem partners in the US highlights this strength. And now these start-ups can scale up at home, owing to digitalization, automation and venture capital and other private capital’s new industrial focus.

Realizing this vision requires, first, investment in digital capabilities, which is a core component of any successful industrial strategy. Fewer than half of US manufacturing firms use specialized software or cloud computing, and the country trails far behind others in robotics adoption. Making better use of data, AI and new production systems that include robotics and 3D printing would improve productivity, quality, safety and yields. Digital connectivity also builds resilience in supply chains and helps reduce energy consumption, waste and emissions by tracking and tracing inputs and outputs.

Revitalizing the manufacturing workforce will also be critical. The US could face a shortage of nearly two million manufacturing workers by 2033. The best way to avert a shortfall is to upskill current workers, which would make them more productive and attract a new generation into the sector. This can be achieved alongside digitalization, because companies that adopt new and advanced technologies also invest in skills upgrading.

Of course, manufacturing jobs represent a small share of US employment (under 10 percent, although with a large multiplier effect), and new ones will be created at a slower rate, partly because of AI and automation. But these jobs are tied to technologies and industries that underpin the country’s economic prosperity. Such work can also be high-quality in terms of wages and benefits, which is more important for the US than increasing the quantity of jobs.

Rebuilding the US’ industrial base has become a central pillar of US economic policy. The challenge for Trump, as it was for Biden, is how to devise and implement a twenty-first century industrial strategy that crowds in private investment, emphasizes carrots over sticks and, ultimately, creates a globally competitive manufacturing sector. This is an agenda that Republicans and Democrats alike should get behind.

---

The writer is professor of practice at MIT and a former special assistant to the US President for manufacturing and economic development at the National Economic Council (2021-22).

 

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.

Share options

Quickly share this news with your network—keep everyone informed with just a single click!

Change text size options

Customize your reading experience by adjusting the text size to small, medium, or large—find what’s most comfortable for you.

Gift Premium Articles
to Anyone

Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!

Continue in the app

Get the best experience—faster access, exclusive features, and a seamless way to stay updated.