Manufacturing Is a War Now

China’s leaders know this very well, of course, which is why they are unleashing a massive and unprecedented amount of industrial policy spending — in the form of cheap bank loans, tax credits, and direct subsidies — to raise production in militarily useful manufacturing industries like autos, batteries, electronics, chemicals, ships, aircraft, dro

... See more

So now I want you to imagine what happens if the U.S. and its allies get in a major war with China — as analysts say is increasingly possible. In the first few weeks, much the two countries’ stores of munitions — including drones and the batteries that power drones — will be used up. After that, as in Ukraine, it will come down to who can produce m

... See more

A military-industrial strategy for the U.S. and its allies to match China will need to involve three elements:

1. Tariffs and other trade barriers against China , in order to prevent sudden floods of Chinese exports from forcibly deindustrializing other countries.




2. Industrial policy , to maintain and extend manufacturing capacity in democratic nations.

... See more

Second, Trump is threatening to put tariffs on U.S. allies like Canada and Mexico. This will deprive American manufacturers of the cheap parts and components they need to build things cheaply, thus making them less competitive against their Chinese rivals. It will also provoke retaliation from allies, limiting the markets available to American manu

... See more

First, he’s threatening broad tariffs on most or all Chinese goods, instead of tariffs targeted at specific, military useful goods. In a post two weeks ago, I explained why broad tariffs are of limited effectiveness:

Broad tariffs cause bigger exchange rate movements , which cancel out more of the effect of the tariffs. Putting tariffs on Chinese-ma

... See more