Is Trump's Industrial Policy More Continuity Than Disruption?

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Trump’s Industrial Policy is shaping up to be more of an evolution than a revolution, continuing many of the economic strategies set in motion by his predecessor, Joe Biden. While his approach may include different emphases—such as a stronger push for tariffs and fossil fuel expansion—the core objective remains the same: revitalizing American manufacturing, securing supply chains, and ensuring the U.S. remains competitive in key industries like semiconductors, AI, and clean energy.

As businesses and policymakers navigate these shifts, the real question is how effectively Trump can balance incentives and regulatory tools to sustain momentum in industrial growth. Will his administration enhance America’s manufacturing prowess, or will policy missteps slow down progress? The coming years will reveal whether continuity can drive success in an increasingly competitive global landscape.

Trump’s Industrial Policy

A flurry of executive orders and policy pronouncements has marked the return of Donald Trump to the White House. However, when it comes to industrial strategy, there is more continuity than rupture between his administration and that of his predecessor, Joe Biden. Both administrations have recognized the need to rebuild American industrial capabilities to protect national and economic security. This effort is underway in key sectors such as semiconductors, critical minerals, defense, and energy. Below are seven key aspects of this ongoing industrial policy and its implications for the future.

1. Private-Sector Investment in Industrial Policy

A primary measure of the success of any industrial strategy is private-sector investment. Under Biden, significant investments were spurred by legislation such as the CHIPS and Science Act and the Inflation Reduction Act (IRA). Since their passage in August 2022, around $450 billion has been invested in semiconductor manufacturing, and $95 billion has been directed toward clean-energy production. The U.S. government has effectively leveraged $5-7 in private capital for every dollar it has spent through these initiatives.

Trump’s industrial policy appears to rely on a mix of incentives (subsidies) and trade barriers (tariffs) to rebuild U.S. manufacturing. While subsidies are a more targeted and effective approach, the extent to which Trump will use tariffs remains uncertain. Overuse of tariffs could increase costs, especially for intermediate goods, potentially slowing industrial momentum.

2. Energy Policy

Energy policy is perhaps the most significant area of divergence between Biden and Trump. The Biden administration prioritized clean energy, while Trump favors fossil fuel expansion. However, legal and market constraints limit how much Trump can roll back Biden-era clean energy initiatives. Approximately 84% of IRA grants had already been contractually obligated before Trump took office, making them difficult to reverse. Additionally, clean-energy tax credits have gained bipartisan support, particularly in Republican and swing states.

Trump’s industrial policy, which emphasizes domestic manufacturing and deregulation, may shape his energy agenda by favoring traditional industries such as oil, gas, and coal while offering selective support for certain renewables that align with economic and national security priorities. While the Trump administration may emphasize fossil fuels, the demand for clean and competitively priced energy will be driven by market economics and consumer preferences.

Some renewable sources such as hydropower, nuclear, and geothermal are likely to receive support under Trump, while solar and wind might face policy headwinds.

3. AI and the Growing Demand for Energy

Trump’s ambitions for artificial intelligence (AI) require a significant expansion of energy production, including renewables. AI infrastructure, particularly data centers, is energy-intensive, necessitating reliable and cost-effective power sources. This aligns with Trump’s industrial policy, which emphasizes domestic energy production and infrastructure development.

Private-sector initiatives reflect this reality. For instance, Microsoft’s acquisition of the Three Mile Island nuclear power plant underscores the importance of nuclear energy in AI-driven industries. Moreover, in 2023, wind energy accounted for nearly 30% of power generation in Texas, where the proliferation of data centers continues.

Given these trends, even if the Trump administration shifts federal energy policy, the private sector will likely continue investing in clean energy to meet AI-related demand.

4. Addressing the U.S. Shipbuilding Crisis

One of the most pressing industrial challenges for the U.S. is its lack of commercial shipbuilding capacity. The country has struggled to maintain both commercial and naval shipbuilding operations, frequently failing to meet budgets and timelines for naval production.

Rebuilding this sector requires a multi-pronged strategy, including supporting innovative startups and forming partnerships with foreign firms—an approach already seen in semiconductor manufacturing.

Trump’s industrial policy emphasized reshoring critical industries and reducing reliance on foreign manufacturing, a strategy that could play a role in revitalizing U.S. shipbuilding.

However, simply imposing tariffs on Chinese-made ships will not be enough to revitalize the industry. Instead, the U.S. needs a long-term vision that fosters competitiveness through strategic investments and industrial collaboration.

5. Competing in Frontier Industries

For the U.S. to maintain its technological edge, investment in frontier industries such as biomanufacturing and quantum computing is essential. Competing with global powers, particularly China, requires a combination of skilled labor, public and private funding, and a robust manufacturing base.

Trump’s industrial policy emphasized reshoring jobs and strengthening domestic manufacturing, a strategy that continues to influence current approaches to economic competitiveness. Over the past 25 years, global supply chains have been deeply integrated, and attempting to dismantle them overnight would be impractical. Instead, the U.S. must focus on “manufacturing differently,” improving productivity, sustainability, and resilience.

This means incorporating digitalization, automation, and regionalized supply chains while working with allies to align goals and policies. The presence of manufacturing startups and ecosystem partners in the U.S. highlights its innovation strength, and with venture capital shifting toward industrial investments, these startups have greater opportunities to scale domestically.

6. The Role of Digitalization in U.S. Manufacturing

To realize its industrial vision, the U.S. must invest in digital capabilities. Currently, fewer than half of U.S. manufacturing firms utilize specialized software or cloud computing, and the country lags in robotics adoption compared to other advanced economies. Trump’s industrial policy emphasized reshoring manufacturing and strengthening domestic industries, but sustaining competitiveness requires deeper digital integration.

Digital tools such as AI, robotics, and 3D printing can enhance productivity, improve quality, and boost efficiency. Additionally, digital connectivity strengthens supply chain resilience, reducing energy consumption, waste, and emissions through better tracking and resource management. For the U.S. to build a competitive industrial base, addressing this digital gap is imperative.

7. Revitalizing the Manufacturing Workforce

A significant challenge for the U.S. industrial revival is the looming workforce shortage. By 2033, the country could face a shortfall of nearly two million manufacturing workers. The best solution is to upskill existing workers while attracting younger generations to the sector.

Trump’s industrial policy has emphasized reshoring and rebuilding domestic manufacturing, but its success hinges on addressing this workforce gap.

Digitalization and workforce development should go hand in hand. Companies that invest in automation and advanced technologies must also invest in skills training. While manufacturing jobs constitute less than 10% of total U.S. employment, their economic multiplier effect is substantial.

Moreover, these jobs, particularly in high-tech industries, offer competitive wages and benefits, making their quality more important than sheer quantity.

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Bottom Line

Rebuilding America’s industrial base has become a central pillar of U.S. economic policy, with broad bipartisan support. While Trump may adjust certain aspects of Biden’s approach, the overarching industrial strategy remains largely intact. Trump’s industrial policy will face the same challenge as Biden’s: crafting a 21st-century framework that prioritizes private investment, emphasizes incentives over tariffs, and fosters global competitiveness in key sectors.

Ultimately, ensuring U.S. leadership in manufacturing and emerging technologies will require cooperation between government and industry. Given the stakes, this is an agenda that both Republicans and Democrats should be willing to support.

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