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In his first term as president, Donald Trump talked about bolstering US manufacturing but did little to support it. Industrial policy has been Joe Biden’s thing, and conventional wisdom is that Trump will spend some of his first few months in office dismantling government support for industries such as semiconductors and electric vehicles.
But I would argue that’s a red herring. Trump may, in fact, bring his own kind of industrial policy to a second term, one focused particularly on the intersection of security and commerce.
This week, we’ll get the first glimpse of what such a policy might look like, with the introduction of the bipartisan Ships for America Act, co-sponsored by politicians including the senator Mark Kelly, a Democrat, and Republican congressman Mike Waltz, Trump’s incoming national security adviser. Like many pro-labour leftwing Democrats, Waltz believes passionately that the US needs to rebuild its shipping industry as part of its broader efforts to combat Chinese economic and security power.
It’s a rare thing for an incoming senior aide who has been in Congress to co-sponsor a bill right before leaving. It speaks to the fact that many people set to join the new administration think government should support efforts to rebuild America’s industrial base. These include Waltz, incoming secretary of state Marco Rubio, future US trade representative Jamieson Greer and economic adviser Peter Navarro.
That’s a break with Ronald Reagan’s era, when subsidies for the US commercial shipbuilding industry were massively scaled back on the notion that cold war defence spending would support shipyards. But the cold war ended, and the industry collapsed. “When I graduated from the US Merchant Marine Academy in 1986, there were 400 US-flagged oceangoing ships,” Kelly told me last week. “Today there are 80. China, on the other hand, has 5,500. This is a huge vulnerability.”
As Waltz put it at a recent event with Kelly: “We talk a lot about China’s ability to turn off things that they now produce and we no longer do — like pharmaceuticals or rare earth minerals or . . . chips . . . but they literally could turn off our entire economy by essentially choking off that [commercial] shipping fleet and, conversely, turn theirs into warships or into levers of geopolitical influence. It’s just completely unacceptable.”
Waltz has publicly worried about the Chinese threat to Taiwan and to Asian allies such as Japan and the Philippines, as well as the risk of a Korean peninsula crisis. He has also connected the dots between the need to build not just a stronger navy but a stronger commercial shipbuilding industry (commercial vessels transport roughly 90 per cent of war fighters’ equipment and supplies).
That underscores something that China and many other Asian nations know well. In order to make any product quickly and cost-effectively, whether it be chips or ships, you need scale. And in the case of shipbuilding, that requires new subsidies and demand signals from government to encourage companies to invest in US production. Some of these carrots, and some sticks, will be in the new legislation.
The Biden administration was, of course, all over the topic of shipbuilding. The secretary of the navy, Carlos Del Toro, laid out a vision for a new kind of maritime statecraft, involving industrial strategy and co-operation with allies and the private sector, over a year ago in a speech at Harvard. He expanded upon it last week at the Navy Institute’s Defense Forum. As he put it: “No great naval power has long endured without also being a commercial maritime power.”
The vision got a significant push forward in November as Canada, Finland and the US signed a memorandum of understanding for the “ICE Pact” deal to produce icebreaker ships together. This partnership is designed to address Arctic security concerns, as well as to bolster US industrial capacity and good-paying jobs. The deal was backed by Biden’s national security adviser, Jake Sullivan, who told me this autumn that ships were the new chips in terms of industrial strategy.
One might think that Biden’s support for such an effort would automatically make Trump want to bury it. But in fact, it was Trump himself who first pushed the idea of bolstering America’s icebreaker fleet over the next 10 years. On both security and commercial grounds, he saw it as a way to counter China and Russia’s expanding influence in the Arctic (mining and shipping opportunities are increasing as Arctic ice melts). In his inimitable fashion, Trump could easily say: “What took you all so long to implement my industrial policy?”
What’s more, an industrial policy around shipbuilding has broad labour support, which would bolster its chances of an easy passage in Congress (both parties want to solidify support among working people). Michael Wessel, co-ordinator for the shipbuilding 301 trade case brought against China earlier this year by a group of American unions, notes: “This kind of industrial strategy connects a lot of dots between Republicans and Democrats.” It includes the desire to rebuild manufacturing and bolster vocational skills.
“It will be”, as he puts it, “a test of whether the Trump administration is serious about industrial strategy.” It will also give clues as to which faction of the new administration — Maga or Wall Street — is steering the ship.
rana.foroohar@ft.com
