Trump Has No Monopoly On Trying To Restore Vanished Factory Jobs

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Australia's Future Made In Australia plan is a prime example of this.

Trade disruptions

Even before the Trump tariffs, the US and other countries were alarmed by China's control over key manufacturing sectors and its associated ability to disrupt trade and commerce.

Australia experienced this first-hand when China imposed significant tariffs on wine and barley in response to Australia's call for a Covid inquiry.

China's willingness to use its economic position was demonstrated on Friday when it announced not just retaliatory tariffs, but export restrictions on seven categories of rare earth minerals. These are critical to strategic US sectors affecting companies like Apple and defense contractor Lockheed Martin.

Government support on the rise

This shift to increased economic resilience through self-reliance has led to a big surge in government intervention through industrial policies.

The objective of industrial policy is to target certain sectors in order to change the structure of economic activity within a country. It uses government policy to promote investment in sectors deemed under-served by markets.

While all countries have used some level of industrial policy, historically it was mainly confined to developing economies. It has been used sparingly since the 1970s. Between 2009 and 2017, the total number of industrial policies used by countries was less than 200.

Between 2017 and 2023 the use of industrial policy increased nine-fold . In 2023, there were roughly 2,500 industrial policy interventions put in place with two-thirds introduced by advanced economies. Almost 48% were concentrated in three: China, the EU and the US.

Intervening in markets

Generally, industrial policy has been out of favor with mainstream economists. It is very hard to get right as it relies on an in-depth knowledge of industries as well as an ability to predict the future.

Providing funding for one sector means less funding available for others. This could undermine new technologies or other as-yet unseen opportunities. It involves shifting resources from existing, efficient uses to less efficient uses.

It rarely works. A prime example: the many countries that have spent billions of dollars trying to recreate their own domestic Silicon Valleys with no success .

However, Trump is trying to do just that, on an economy-wide scale, mainly through tariffs. The tariffs announced also imply the US will go it alone. The approach takes fragmentation to a new level, where bilateral negotiations are the name of the game.

Shifting global alliances

Meanwhile the response from other nations such as Canada, Southeast Asian economies and even Europe is to diversify and form new alliances without the US.