The Trump administration will continue to view the protection of domestic manufacturing as central to its tariff policy
On April 14, the Trump administration announced Section 230 (national security) investigations into the imports of semiconductors and pharmaceuticals into the United States. Such investigations typically precede long-lasting tariffs, as seen with steel and aluminium. They also indicate that these two industries are on President Donald Trump’s priority list for restoring domestic manufacturing. Their use as a stick to encourage domestic manufacturing will remain a central feature of Trump’s tariffs.
What’s next
Subsidiary Impacts
- Many of the ‘half-empty factories operating at low capacities’ lamented by the White House are unsuitable for modern manufacturing.
- Lifting US manufacturing labour from mid-skilled to high-skilled will require a national revamping of vocational and technical education.
- Trump’s love of deal-making will conflict with his policy of protecting domestic industry behind tariff walls.
Analysis
The announcement of the Section 230 investigations followed Commerce Secretary Howard Lutnick’s statements the previous day defending the unexpected exemption from the president’s ‘reciprocal’ tariff regime, announced on April 10, for many electronic imports made in China.
The heavy lobbying by the US tech industry for this exemption underlined a continuing dependence on Chinese supply chains, as had the shortages of medicines and personal protective equipment (PPE) during the COVID-19 pandemic.
Lutnick said the United States needed to produce its own medicines, semiconductors and electronics, reiterating the Trump administration’s policy that high tariffs are necessary to encourage companies to establish domestic manufacturing facilities and jobs.
Trump’s multiple policy objectives for tariffs have made it challenging to determine his priority list of manufacturing sectors. Nonetheless, under a broad rubric of strategic decoupling from China, which remains the paramount industrial national security imperative, there is a list comprising industries that support one or more of the administration’s national security, geopolitical and domestic political policy objectives.
Military-industrial complex
First among equals are industries that can strengthen the US defence industrial base. This includes the space and aerospace engineering industries, including the production of nuclear and hypersonic weapons, as well as conventional arms, armaments and military equipment (see US: Congress will push hypersonic missile development – October 22, 2024).
Current defence needs involve traditional manufacturing sectors as well as new ones
The 21st-century defence-industrial complex has an inevitable high-tech overlap with the advanced electronics, avionics and artificial intelligence (AI) industries but also with more traditional sectors such as shipping and shipbuilding. Here the administration sees an urgent national security priority in matching China’s rapid expansion of its ability to project maritime power through the People’s Liberation Army Navy’s fast-growing fleet.
US shipyards cannot keep up with demand from their primary customer, the US Navy, whose 30-year plan calls for constructing between 290 and 340 new ships by 2053.
Critical civilian manufacturing
Beyond defence-related industries, the Trump administration considers it necessary to establish US supply chains in the critical sectors of pharmaceuticals, medical devices, PPE and food. These are all sectors in which the United States has import dependencies to a greater or lesser degree.
Imposing tariffs to protect these industries, as with shipping, falls under the administration’s heading of geopolitical imperatives.
The high-tech nature of most modern manufacturing means that the Trump administration will seek to protect emerging and foundational technologies. These range from advanced semiconductors to AI, quantum computing, battery storage, biotechnology and cybersecurity technologies.
The administration also wants to cut foreign dependency on raw materials, particularly rare earth minerals, steel and aluminium. Rare earths, used in electronics, electric vehicles and military equipment, are challenging to produce and underline the weakness of relying on tariffs to provide market incentives to develop domestic capacity.
China controls 90% of global supply. The United States has extensive rare earth deposits, and seeks more through international agreements, but they can be uneconomic to extract, with China able to control global prices. More critically, the United States lacks the refining infrastructure and expertise to process them at scale (see INT: Chinese dominance will influence dysprosium use – March 26, 2025).
US-based extraction and processing of rare earths remains uneconomic at present
Steel and aluminium are already protected. The United States has imposed countervailing and anti-dumping tariffs on imports of both metals for some years (see UNITED STATES: Tariffs and politics will stay entwined – April 25, 2024). Yet, in 2024, 47% of US aluminium consumption was from imports, and 13% of steel use was from imported steel.
Both metals are also critical for domestic production in several industries the Trump administration will protect for electoral reasons, such as the auto industry, which carries symbolic weight with politicians and voters beyond its significance for the economy.
Orchestrating a renaissance
The Trump administration will need a range of coordinated policy initiatives beyond tariffs to bring about a US manufacturing renaissance.
Tax policy
The tax cut package needed to fulfil Trump’s election pledge of making his 2017 Tax Cuts and Jobs Act permanent will likely include several incentives for businesses to operate and expand manufacturing in the United States, including:
- lower and preferential corporate tax rates for companies producing goods domestically;
- full expensing of domestic capital investments to encourage upgrades to existing facilities and the adoption of new manufacturing technologies; and
- reinstatement of the more favourable interest deductibility rules for companies that were in place before the Biden administration tightened them.
Also possible are changes to the rules governing the taxation of US multinationals to discourage production in, and profit shifting to, lower-tax countries — as, for example, US drugmakers and tech companies do in Ireland.
Regulatory relief
The administration will also continue its regulatory rollback, which would help the expansion of domestic manufacturing by scrapping environmental regulations that delay the construction of factories or limit their operation through environmental and labour compliance requirements.
Labour mismatches
In an era of automation and AI, new and reopened US factories will require more robots but fewer workers. Those employed will need more specialised skills in advanced tooling and precision engineering and, beyond fabrication, in production control and robotics as well as supply chain management. Unskilled entry-level manufacturing jobs are a thing of the past.
The United States is significantly lacking in skilled labour needed for manufacturing functions. According to the February Job Openings and Labor Turnover Survey, there were 482,000 unfilled manufacturing job openings, suggesting existing manufacturing labour shortages along with geographical and skills mismatches that large-scale manufacturing expansion will exacerbate.
People can be trained for the new roles, but it will take time. The United States has a poor record in vocational training and retraining manufacturing workers whose skills have become technologically obsolete (see UNITED STATES: Community colleges see enrollment fall – July 16, 2021).
Outlook
These structural labour shortages and the changing nature of manufacturing are why the Trump administration’s promise of well-paid manufacturing jobs on a large scale may not materialise sufficiently to reverse the long-term decline in manufacturing’s share of US employment. In 1970, more than one in four US non-farm workers held jobs in the manufacturing sector. Today, it is fewer than one in twelve.
Peter Navarro, senior counselor to the president for trade and manufacturing, seen in the Oval Office of the White House, April 17, 2025 (Brendan Smialowski/AFP/Getty Images)
Authored by:
Dr Giles Alston
Deputy Director & Senior Analyst,
North America
