As the 2024 U.S. presidential race heats up, both Donald Trump and Kamala Harris are focusing on an issue critical to the country’s economic future: the revival of American manufacturing. Each candidate promises a renaissance, aiming to boost industrial growth, secure jobs, and solidify the U.S. as a global manufacturing powerhouse. But this is a long-term struggle, as they face not just domestic challenges but also fierce international competition, particularly from China, which already dominates the global manufacturing sector.
The U.S. has seen a surge in new factory construction, driven in part by legislative efforts like the CHIPS and Science Act, the Inflation Reduction Act (IRA), and the Bipartisan Infrastructure Law. These policies are designed to incentivize domestic manufacturing and reduce dependence on foreign suppliers, especially for critical industries like semiconductors and green technology.
The CHIPS and Science Act, for instance, aims to bring semiconductor manufacturing back to the U.S., while the IRA provides significant subsidies for green energy initiatives, encouraging the production of electric vehicles, solar panels, and batteries. The Bipartisan Infrastructure Law adds another layer by investing in infrastructure improvements, which can help support new factories and supply chains. Together, these efforts have set the stage for a manufacturing boom, with the potential to significantly reduce reliance on imports and create thousands of jobs.
China’s Overcapacity Problem: A Looming Threat
While the U.S. works to rejuvenate its manufacturing sector, it faces a significant threat from China. China’s industrial overcapacity, coupled with its aggressive investments in further expanding its manufacturing base, poses a challenge that could stifle the profitability of new American factories. Overcapacity refers to when a country produces far more goods than it can consume domestically or sell at reasonable prices globally, leading to downward pressure on prices.
China denies that it has an overcapacity issue, accusing critics of attempting to hinder its economic rise. However, foreign economists and analysts see the situation differently. China already produces an astounding 35% of the world’s factory output, far exceeding the U.S., which accounts for just 12%. In fact, China’s share is greater than the combined total of the next nine largest manufacturing countries.
Economist Richard Baldwin refers to China as “the world’s sole manufacturing superpower.” With that much production muscle, China can flood global markets with cheap goods, making it difficult for U.S. and other foreign manufacturers to compete on price, especially in industries like steel, electronics, and machinery.
The Stakes for the U.S.
For U.S. manufacturers, the challenge is clear: How can they remain profitable in a global marketplace dominated by China’s industrial capacity and state-backed enterprises? The Chinese government, known for its deep industrial policy, spends significantly more than the U.S. on supporting its manufacturers.
In 2019, China’s industrial policy spending was around 1.7% of its GDP, compared to just 0.4% in the U.S. But that number underestimates China’s true level of support, as it doesn’t account for indirect subsidies like cheap loans, tax breaks, and artificially low prices for energy and raw materials. Some estimates put China’s total industrial-policy spending at nearly 5% of its GDP, a figure that dwarfs U.S. efforts.
Moreover, China’s support for its manufacturing sector isn’t just deep but broad. A report from The Wall Street Journal found that 99% of publicly listed companies in China receive some form of government subsidy. This support allows Chinese companies to undercut international competition and dominate global markets.
For China, the pursuit of manufacturing dominance is about more than just economic growth. It’s also a strategic power play. The Chinese government wants to reduce its reliance on foreign suppliers while increasing other countries’ reliance on Chinese goods, creating leverage in international trade and diplomacy.
This strategy has spurred deep concern in Washington, particularly as global geopolitical tensions rise. The U.S. has witnessed firsthand the dangers of relying on foreign powers for critical supplies. The COVID-19 pandemic exposed vulnerabilities in global supply chains, highlighting America’s dependence on imports for vital medical supplies and other essentials.
In addition, recent global conflicts — from Russia’s invasion of Ukraine to the war between Israel and Hamas — have underscored the importance of a strong industrial base for national defense. Ensuring that the U.S. can produce everything from semiconductors to advanced military equipment domestically is seen as crucial to maintaining national security.
Policy Responses: Trump vs. Harris
Both Donald Trump and Kamala Harris have acknowledged the threat posed by China’s manufacturing dominance, and each has proposed different approaches to reinvigorate U.S. industry.
Trump’s Strategy: True to his “America First” platform, Trump has promised to ramp up tariffs on imports, particularly from China, to protect American manufacturers from cheap foreign goods. He has also threatened U.S. companies like John Deere that are moving manufacturing operations offshore, signaling that his administration would take a hard line against outsourcing. Trump believes higher tariffs will make U.S.-produced goods more competitive and encourage companies to keep their operations within the country.
Harris’ Approach: Kamala Harris, on the other hand, emphasizes using tax credits to incentivize investment in new factories and high-tech industries, like electric vehicles and renewable energy. She proposes building on the success of the Inflation Reduction Act, which has already catalyzed investments in green manufacturing. While Harris supports strategic tariffs, her plan focuses more on innovation and creating the conditions for sustainable growth, rather than punitive measures against companies.
Both Trump and Harris’ plans represent tactics rather than a comprehensive strategy. What the U.S. needs, experts argue, is a long-term plan that goes beyond tariffs and subsidies. Harry Moser, president of the Reshoring Initiative, estimates that China’s excessive investments in manufacturing could create a $450 billion “tsunami” of overcapacity over the next three years. This highlights the urgency of developing a more cohesive approach to compete with China’s industrial might.
To truly address the challenges posed by China’s manufacturing dominance, the U.S. needs a broader conversation about its industrial policy. A bipartisan commission of experts could help by studying key questions, such as:
- How much manufacturing does the U.S. need to reduce its reliance on China and other foreign suppliers?
- Which industries are most critical to national security and economic growth, and deserve government support?
- How much support should the government provide to U.S. manufacturers, and what form should it take? Should the U.S. rely on tariffs, tax credits, or other incentives?
- Should the U.S. work with its allies to reduce reliance on China, or should it pursue an independent strategy?
The foundation for this bipartisan approach already exists. Both political parties agree that overreliance on China is a problem that needs to be addressed. Now, the challenge is to find common ground on solutions. Convening a commission to study the issue and provide recommendations could be the first step toward crafting a more strategic industrial policy.
A coordinated effort is essential. China is already moving upstream, aiming to dominate the high-tech industries of the future, from artificial intelligence to advanced manufacturing. If the U.S. doesn’t act soon, it risks falling further behind. The potential for a second “China Shock” — a surge of cheap Chinese goods flooding global markets — is real, and the consequences for American industry could be severe.
As the 2024 election approaches, the promises of Trump and Harris to lead a manufacturing renaissance come at a critical time. The U.S. is at a crossroads, with the potential for renewed industrial growth or the risk of being further outpaced by China. While both candidates have offered plans, the real challenge lies in developing a comprehensive strategy that addresses not just the symptoms but the root causes of America’s industrial decline. Working together, policymakers can craft a vision for the future that strengthens the U.S. manufacturing base, reduces reliance on China, and secures the country’s economic and national security for generations to come.
