Trump's second-term manufacturing policy: Strengthening or transformation of US industrial policy?

American Positioning in the Global Manufacturing Landscape

In 2023, US manufacturing contributed $2.4 trillion to GDP, accounting for 10.2% of the total (in 2017 dollars), ranking second globally, behind only China. However, this share has steadily declined from 13.1% in the first quarter of 2005 to 9.4% in the first quarter of 2025, a drop of 27.2% over two decades. Despite its enormous absolute scale, the relative position of US manufacturing is weakening. Meanwhile, manufacturing foreign direct investment reached a record $2.416 trillion in 2024, indicating that global capital still holds expectations for US manufacturing capabilities. Every dollar invested in manufacturing generates $2.69 in overall economic output, and it accounts for 55% of all US patents and 54% of R&D spending—these data make it a core engine of US innovation and employment.

The Trump Administration's Manufacturing Policy Framework

Trump's second term, with the slogan "Make America the world's manufacturing superpower again," constructed a policy mix that goes beyond tariffs. The White House claimed that by March 2026, it had attracted $10.5 trillion in investment commitments (the president often stated $18 trillion in public appearances), with the vast majority flowing into manufacturing. The core policy tools are not single subsidies but form four types of public-private partnerships:

1. Golden Shares: The federal government acquires special voting shares in companies, retaining veto power over key decisions. 2. Equity Holdings: The government directly holds shares in private enterprises, participating in corporate governance. 3. Revenue Sharing: The government and enterprises share revenue and jointly bear risks on specific projects. 4. Drug Pricing Agreements: Reaching price reduction agreements with pharmaceutical companies to lower medical costs while ensuring supply chains.

These mechanisms focus on three priority areas: products required for national security and economic security, products with high value due to differentiation, and key supply chain links supporting the first two categories. This is in stark contrast to traditional "universal" industrial policy—the National Institute of Standards and Technology (NIST) clearly states that resource dispersion should be avoided and efforts should be concentrated on a few key industries.

Industrial Policy Enhancement: Vertical and Horizontal Analysis

The industrial policy classification model proposed by Lincicome and Zhu (2021) divides government intervention into "horizontal" types (such as tax incentives, basic R&D) and "vertical" types (specific industry support, selective subsidies). The public-private partnership mechanism of Trump's second term exhibits significant vertical characteristics: golden shares and equity holdings directly intervene in corporate control, while revenue sharing and drug pricing precisely target technology-intensive and pharmaceutical fields.Based on data from the first quarter of 2025, mapping policy instruments along the vertical-horizontal dimension shows that most cooperative projects fall into the vertical category: the government is consciously selecting strategic industries such as semiconductors, rare earth mining, advanced materials, and biopharmaceuticals. This indicates that the United States is shifting from a "laissez-faire market" to "selective intervention," effectively enhancing the depth and targeting of existing industrial policies. However, this enhancement is not a broad rollout but a narrow focus anchored in national security and supply chain resilience.

Supply Chain Restructuring and Industrial Relocation Drivers

The logic behind the policy is an inevitable response to the accumulation of industrial chain risks. Since 2021, chip shortages, rare earth dependence, and pharmaceutical supply chain vulnerabilities have prompted Washington to reexamine its manufacturing base. The design intent of the public-private cooperation mechanism is to:

• Lock in key minerals and materials: Use golden shares to ensure domestic supply security for rare earths and lithium mines, avoiding dependence on geopolitical rivals.
• Promote advanced manufacturing reshoring: Equity participation in semiconductor plants lowers the threshold for corporate investment and financing, accelerating the establishment of advanced processes by TSMC, Samsung, and others in Arizona and Texas.
• Reshape the pharmaceutical supply chain: Drug pricing agreements force companies to shift production domestically, reducing reliance on Indian and Chinese active pharmaceutical ingredients.

These measures are generating new regional industrial competition. The Midwest "Rust Belt" and the Southern "Sun Belt" have become investment hotspots, but there is a huge labor gap—2.8 million manufacturing workers will be needed by 2033. Automation and AI manufacturing have become inevitable choices to fill the gap, but investment thresholds and skill mismatches remain bottlenecks.

Implications for the Restructuring of the Global Industrial System

The policy framework of Trump's second term is not an isolated case. The EU has launched its "Critical Raw Materials Act," Japan has strengthened its "Economic Security Promotion Act," and China is accelerating deployments of "New Industrialization" and "New Quality Productive Forces." Global manufacturing is shifting from efficiency-first to security-and-resilience-first. The key to the U.S. model lies in: leveraging limited government capital to mobilize private investment, deeply embedding corporate decision-making through equity rather than subsidies.

However, risks coexist: golden shares may distort market competition, government equity holdings face exit mechanism challenges, and revenue sharing could lead to excessive corporate dependence on public projects. The share of U.S. manufacturing in GDP remains persistently low (still 9.4% in the fourth quarter of 2025), and the long-term effects of the policy remain to be verified. If labor, energy costs (green transition pressures after the Inflation Reduction Act), and infrastructure shortcomings cannot be addressed, mere capital incentives may struggle to reverse the structural decline.

Long-Term Trend Judgment

Over the next decade, U.S. manufacturing policy will exhibit three characteristics:

1. Normalization of selective intervention: Key industries linked to national security will continue to receive government backing. 2. Institutionalization of public-private cooperation: Golden shares and equity structures may become standard terms in federal contracts. 3. Competitive regionalization: North America, Europe, and East Asia each build closed-loop supply chains, accelerating the fragmentation of global manufacturing networks.For China, although US policies are not directly targeted, the risk of technological decoupling in areas such as rare earths, semiconductors, and pharmaceuticals is rising. The rise of manufacturing in the Global South (Vietnam, India, Mexico) is absorbing transferred production capacity, forming a multi-center pattern.

Conclusion

The manufacturing policy framework of Trump's second term has enhanced the penetration of existing US industrial policies in key areas through vertical public-private partnership mechanisms. This change is not a return to comprehensive industrial planning but a problem-oriented, industry-focused "light-touch intervention." Its effectiveness depends on implementation details and the evolution of the global environment, but it has already had a profound impact on supply chain relocation, regional competition, and the global industrial order.

---

*This article is reorganized based on the analytical framework and data from the Springer academic paper "The Trump administration manufacturing economy: an enhanced U.S. industrial policy?" and combined with a global manufacturing research perspective. All data in this article are from the authoritative sources cited in the original paper.*