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In his first term as president, Donald Trump talked about boosting U.S. manufacturing but did little to support it. Industrial policy has been a concern for Joe Biden, and the conventional wisdom is that Trump will spend some of his first few months in office dismantling government subsidies for industries like semiconductors and electric cars.
But I would argue that this is just a red herring. In fact, Trump may resort to an industrial policy of his own during his second term, one that focuses specifically on the intersection between security and trade.
This week we'll get our first glimpse of what such a policy might look like, with the introduction of the bipartisan Ships for America Act, which has been co-sponsored by politicians including Sen. Mark Kelly, a Democrat, and Republican Congressman Mike Walz. Trump's new national security advisor. Like many left-wing, pro-labor Democrats, Waltz believes strongly that the United States needs to rebuild the shipping industry as part of its broader efforts to combat Chinese economic and security power.
It's rare for a senior aide who was in Congress to co-sponsor a bill just before he leaves. It points to the fact that many people intending to join the new administration believe the government should support efforts to rebuild America's industrial base. They include Waltz, incoming Secretary of State Marco Rubio, future US Trade Representative Jamison Greer, and economic advisor Peter Navarro.
This represents a break from the era of Ronald Reagan, when support for the US commercial shipbuilding industry was dramatically reduced based on the idea that Cold War defense spending would subsidize shipyards. But the Cold War ended, and the industry collapsed. “When I graduated from the U.S. Merchant Marine Academy in 1986, there were 400 ocean-going ships flying the American flag,” Kelly told me last week. “Today there are 80. China, on the other hand, has 5,500. This is a huge security vulnerability.”
As Waltz put it on a recent occasion with Kelly: “We talk a lot about China being able to stop producing the things it produces now that we no longer do — like medicines or rare earths or….” . . Chips. . . But they can literally stop our entire economy by strangling this (merchant) shipping fleet and, conversely, turning their fleet into warships or into instruments of geopolitical influence. “It is completely unacceptable.”
Waltz has publicly expressed concern about the Chinese threat to Taiwan and its Asian allies such as Japan and the Philippines, as well as the risk of a crisis on the Korean Peninsula. It also connected the dots between the need to build not only a stronger navy, but also a stronger merchant shipbuilding industry (merchant ships transported nearly 90 percent of warfighters' equipment and supplies).
This confirms something China and many other Asian countries know well. In order to quickly and cost-effectively manufacture any product, whether it's chips or ships, you need to scale. In the case of shipbuilding, this requires new subsidies and demand signals from the government to encourage companies to invest in American production. Some of these islands, and others, will be in the new legislation.
The Biden administration, of course, was interested in shipbuilding. Navy Secretary Carlos del Toro laid out a vision for a new kind of maritime statecraft, including industrial strategy and cooperation with allies and the private sector, more than a year ago in a speech at Harvard University. He expanded on this last week at the Naval Institute's Defense Forum. As he put it: “No great naval power has been able to survive for long without also being a merchant navy.”
This vision got a major push forward in November, as Canada, Finland and the United States signed a memorandum of understanding for an “ICE Pact” deal to produce icebreaking vessels together. This partnership aims to address security concerns in the Arctic, as well as enhance American industrial capacity and good-paying jobs. The agreement was supported by Biden's national security adviser, Jake Sullivan, who told me this fall 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 him. But in fact, it was Trump himself who first pushed the idea of strengthening the US icebreaker fleet over the next ten years. For security and commercial reasons, he saw it as a way to counter China and Russia's growing influence in the world North Pole (Mining and shipping opportunities increase as Arctic ice melts.) In his own unique way, Trump can easily say: “What took you so long to implement my industrial policy?”
What's more, industrial policy on shipbuilding has broad labor support, which should boost its chances of easy approval in Congress (both parties want to solidify support among the working class). Michael Wessel, coordinator of the Shipbuilding 301 trade case brought against China earlier this year by a group of US unions, said: Notes: “This kind of industrial strategy connects a lot of dots between Republicans and Democrats.” It includes the desire to rebuild manufacturing and enhance professional skills.
As he put it, “It will be a test of how serious the Trump administration is about industrial strategy.” It will also give clues about which faction of the new administration – MAGA or Wall Street – is steering the ship.
