Under both the Trump and Biden administrations, industrial policy has re-emerged as a tool for strengthening domestic manufacturing industries to maintain global economic competitiveness and national security. But neither the Biden nor the Trump administration’s industrial policy approaches were—or are now—without controversy, as both administration’s policies ran or run counter to the previous decades-long economic policy consensus against an active national industrial policy.
For example, Brian Deese, Director of the National Economic Council in the Biden administration, characterized the Biden policies as a “modern American industrial strategy” using public investment in physical infrastructure, research and development, and clean energy to help shape markets (Deese 2022). In contrast, Adam S. Posen, President of the Peterson Institute for International Economics, was a critic of part of the Biden industrial policy (although supportive of the administration’s public investment goals), characterizing it as zero-sum, protectionist, fiscally costly, and likely to undermine U.S. economic growth and international economic alliances (Posen 2023). Likewise, in the second Trump administration Kevin Hassett, Director of President Trump’s National Economic Council, has suggested that non-voting equity stakes in companies could be considered more broadly by the administration where the U.S. government provides major support, framing the equity stakes as a taxpayer benefit rather than a traditional subsidy (Fortinsky 2025). A contrarian approach is taken by Michael R. Strain, Director of Economic Policy Studies at the American Enterprise Institute, who warns that federal government equity stakes and direct firm interventions risk politicizing business decisions, distorting capital markets, and expanding political cronyism (Strain 2025).
In a more general sense, these contrasting views on U.S. industrial policy are nuanced among commentators across a political-economic spectrum. Mark Fasteau, vice chairman of the Coalition for a Prosperous America, and Ian Fletcher, previously a senior economist at the Coalition for a Prosperous America (2024), support an explicit pro-industrial policy, one which emphasizes rebuilding of productive capacity, supporting advanced industries, and emphasizing manufacturing as pivotal to national prosperity and security. In their view, the market alone will not support strategically important industries, so public policy must actively shape investment and production. Dani Rodrik (2008; 2004), economist and Ford Foundation Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University, is broadly sympathetic to industrial policy, cautiously framing it as a process of discovering and correcting institutional market failure, with firms and governments collaborating to identify constraints on productivity, innovation, and structural transformation. While accepting that industrial policy can fail, he argues that one can learn from such failures, and governments can design institutions that encourage learning, transparency, and discipline. Oren Cass (2018), an American public policy commentator affiliated with think tank American Compass, offers a conservative and nationalist defense of industrial policy emphasizing the social value of work, family stability, national cohesion, and the decline of domestic manufacturing communities. He advocates a broader reorientation away from market fundamentalism and laissez-faire economics and is concerned with domestic manufacturing and the trade deficit.
Adam Posen (2021) argues that the policy toward embracing subsidies, “Buy American” rules, and manufacturing nationalism reflects a return to economic nostalgia rather than sound economic policy. Posen sees this industrial policy as potentially reducing efficiency, alienating allies, raising consumer costs, and weakening the international economic order that has benefited the U.S. Inu Manek, senior fellow at the Council on Foreign Relations, approaches industrial policy from a trade-policy and rules-based order perspective, and that U.S. industrial policy becomes problematic when tied to discriminatory local-content rules, tariffs, or measures that weaken the global trading system. Moreover, she posits that industrial policy often fails regardless of the financial investment spent implementing it, but because many of these policies lack a cost and benefit plan and measurable objectives to ensure success (Butscher 2024). When evaluated together, these economic commentators reveal that the U.S. debate on industrial policy turns on deeper disagreements. For industrial policy advocates, it is a necessary correction to deindustrialization, market failure, and geopolitical security vulnerability; while for critics, it risks becoming protectionist, inefficient, fiscally costly, and damaging to the international trading system.
For many individuals in both the Republican and Democrat parties, the problem of American economic competitiveness centers on the problem of inadequate supply, in contrast to the demand side (Uehara 2025). This “supply side” approach is found in what is termed the “abundance agenda”, which aims to synthesize wealth redistribution combined with tax cuts and deregulation (that encourages innovation) with strategic public investments in infrastructure and R&D, resulting in increased supply and ensuring broad access to critical goods and services (Uehara 2025).
In the previous Biden administration, there was bipartisan support in the U.S. Congress to enact two of three major pieces of legislation impacting U.S. industrial policy. The first two are the so-called “green industrial policy” provisions included in the “Infrastructure Investment and Jobs Act” (2021) and the “Inflation Reduction Act” (2022). In the former, the U.S. Department of Transportation received $7.5 billion to develop a national electric vehicle (EV) charging network, while in the latter legislation, the Act contains a revamped $7500 tax credit for the consumer purchase of a new EV. However, immediately after taking office, the Trump administration immediately “froze” funding to review both Acts (St John 2025). This administration action was damaging, as it created policy confusion, legal uncertainty, administrative delays, financing risk, and likely economic losses. Specifically, it created a disruption of the investment environment for certain manufacturing sectors, for example EV charging, automotive electrification, batteries, solar, wind, grid equipment, hydrogen, and clean energy. Generally, the “freeze” was damaging because it undermined the credibility and predictability of federal “green” industrial policy affecting manufacturing sectors targeted in these two laws. The third, the “CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act” (2022) (“CHIPS Act”) authorized approximately $280 billion in new funding to increase domestic R&D and manufacturing of semiconductors in the U.S. The CHIPS Act also included $39 billion in subsidies for domestic semiconductor manufacturing, along with 25% investment tax credits for costs of manufacturing equipment, and $13 billion for semiconductor R&D and workforce training. As to applying Lincicome and Zhu’s (2021) four essential features of industrial policy, all three legislative acts were focused on domestic manufacturing (the fourth essential feature) and included subsidies utilizing grant monies or tax credits applied to specific industries, i.e., tech or the automotive industry (the first and second essential features).
The Trump administration “America First Trade Policy” has invoked two laws to impose tariffs: “The International Emergency Economic Power Act” (IEEPA 50 U.S.C. §§1701 et seq.) and Section 232 of the Trade Expansion Act of 1962 (Section 232, 19 U.S.C, §1862) (Hammond and Burkhart 2026). The IEEPA authorizes the President to “regulate” certain economic transactions, including imports, in response to declared emergencies concerning certain “unusual and extraordinary” threats to national security, foreign policy, or the economy (Hammond and Burkhart, 2026).
On February 20, 2026, the U.S. Supreme Court issued its decision in Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections, Inc., two appeals concerning tariffs President Trump had imposed under IEEPA (Zirpoli 2026). In an opinion authored by Chief Justice Roberts, the Court held that IEEPA does not give the President authority to impose tariffs (Zirpoli 2026). The Court upheld a lower court decision that invalidated two sets of IEEPA tariffs: one set of tariffs on imports from Canada, Mexico, and the People’s Republic of China (PRC) based on declared emergencies concerning illicit drugs, and another set of tariffs on most other U.S. imports based on a declared emergency concerning the U.S. trade deficit (Zirpoli 2026). However, Section 232 tariffs of the Trade Expansion Act of 1962 remain in effect, and the administration immediately announced the imposition of a 10 percent tariff under Section 122 (effective for five months), later increasing the rate to 15 percent, with the administration looking to utilize other legislative trade protection options to maintain its tariff policies (Froman 2026). As to Lincicome and Zhu’s (2021) four essential features of industrial policy, under Section 232 President Trump imposed tariffs on U.S. imports of steel, aluminum, automobiles, and automobile parts in 2025, all of which are targeted and directed industry-specific “support” (e.g., tariffs) (the second essential feature) and focused on protecting domestic manufacturing (the fourth essential feature).
What have the economic impacts of the Trump tariffs been in 2025? According to an analysis undertaken by the New York Fed (and whose findings align with most mainstream economists), nearly 90% of the tariffs’ economic burden impacted U.S. firms and consumers (Amit, et al. 2026; Cerullilo, 2026). Yet, while many economists predicted that these tariffs on imports were likely to drive up inflation, these price hikes have largely failed to materialize (Cerullio 2026). However, according to Chris Stanley, executive director of Morgan Stanley’s research unit on U.S.-based industrial businesses, the Trump administration tariff policies have led more manufacturers to invest in their U.S. operations (Desrochers and Sutton 2026). Nevertheless, these tariff policies have not largely resulted in increased jobs and factories for traditional industries, as manufacturers are trying to maximize output from their existing facilities (Desrochers and Sutton 2026).
When applying industrial strategy, representing public policy for implementing industrial policies either vertically or horizontally, Hemphill (2024) identifies five key components addressing both vertical industrial strategy and horizontal industrial strategy. First, adopting a governance approach, i.e., embracing a primary orientation on public (government) ordering (vertical) versus a primary focus on private (market) ordering (horizontal). Second, identifying the level(s) of R&D investment, i.e., basic research, applied research, and experimental (development) research (vertical) versus basic research (horizontal). Third, identifying public incentives, e.g., tax incentives, grant funding opportunities, government procurement policies, etc., with industry or sector (vertical) versus cross industry/sector (horizontal). Fourth, identifying public disincentives, e.g., instituting public regulatory policies negatively impacting specific sectors or industries (vertical) versus cross industry/sector (horizontal). Fifth, identifying the scope, e.g., narrow (vertical) or broad (horizontal), of industry/sectoral collaboration and participation with government and/or academia.
Vertical industrial strategy signifies an enhancement of an existing national industrial policy, while horizontal industrial strategy signifies a weaker variant of national industrial policy. In the cases of public–private partnerships evaluated in the first and second years of the second Trump administration, these all comfortably reside in the typology of vertical industrial strategy, clearly exhibiting the elements of centralized government planning, public incentives (industry or sector), and industry sectoral participation (narrow). When “market failure” occurs—where specific societal problems occur that cannot be resolved using decentralized markets—the use of “nonmarket” interventions should be employed for these specific problems, and not the use of “centralized government planning.” How broadly the term “specific” is defined by government decision-makers—say for national economic competitiveness and/or national security reasons—remains the policy challenge.
For example, Open Secrets (2026) provides data/metrics on how such enhanced Federal public incentives effecting specific industries or sectors lobbying expenditures focused on the U.S. Congress and Federal agencies: for calendar year 2024, Open Secrets (2026) calculates there were 13,028 lobbyists and $4.45 billion in lobbying expenditures, while for calendar year 2025, there were 13,699 lobbyists and $5.08 billion in lobbying expenditures. This increase in lobbying expenditure was up 14.15% for 2025 over 2024, while the increase in the number of lobbyists is up 5.15% for 2025 over 2024. Such rent-seeking behavior, i.e., to acquire firm, industry, or sector government competitive advantages (“incentives”) that distort market competition, represents significant increases in lobbying resources that likely correspond to enhancements to existing U.S. industrial policy during the first year of the second Trump administration.
This so-called “stop–go” industrial policy, one where there are partial or full reversals or policy redesigns after elections, creates a strategic environment in which U.S. manufacturers cannot treat public policy as simply background political noise. The Biden administration and the Trump administration have both embraced industrial policy—a bipartisan “sea change” from previous decades in which it was not formally embraced—favoring domestic manufacturing, but with different economic and sectoral priorities. In the Biden-era, the emphasis was on climate-linked manufacturing, EVs, batteries, clean power, semiconductors, infrastructure, labor standards, domestic content, and supply chain resilience. In the second Trump-era, the emphasis is on tariffs, import substitution, fossil-energy support (including “clean” natural gas and nuclear), defense and strategic industries, tighter China decoupling, less support for climate-linked rules and subsidies, and more transactional use of financial incentives.
For business planning purposes, domestic manufacturers need corporate-level strategies that are operational under policy volatility and not policy certainty. The most resilient—and adaptable—manufacturing firms in this new economic policy environment of “stop–go” industrial policy will be those avoiding overdependence on one form of subsidy; where and when possible, diversify markets and technologies; deeply map supply chains; use a phased, “real options” approach to capital investment; monitor federal and state policy closely; and position the firm in sectors with bipartisan strategic value—such as semiconductors, defense, critical rare minerals, energy grid infrastructure, and advanced manufacturing. In short, industrial policy is now an important part of the competitive landscape. Manufacturing firms which treat industrial policy as a strategic variable will improve their business planning, invest more wisely, and be less likely to be caught “flat-footed” when it comes to federal policy changes.
Ultimately, whether this second Trump administration enhanced industrial policy successfully strengthens U.S. manufacturing domestically will depend on important economic performance metrics, including the increase in Americans employed in the manufacturing sector; the increase in foreign direct investment in domestic manufacturing facilities; and improvements in manufacturing productivity and output, to name a few important performance criteria.
