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Weekend Reads
(First Breakfast)
Beijing’s decision to cut the United States off from Chinese exports of various critical minerals reinforces the imperative of American reindustrialization.
Nadia Schadlow argues that reindustrialization is not all about additional government spending. It is about incentivizing new supply and demand opportunities and unleashing American capital and ingenuity.
The second Trump administration could redefine America’s industrial future by focusing six lines of action. These are the underlying conditions required to make the progress that Donald Trump is driving toward: focus on strategic sectors, reform regulations, make energy abundant and reliable, develop the US industrial workforce, mobilize capital, and reexamine trade policies.
Read the full article in Palantir CTO and Hudson Trustee Shyam Sankar’s Substack First Breakfast.
Key Insights
1. Prioritize critical sectors and reduce regulation.
Policymakers need to make strategic, sector-specific choices. Solar panels, for example, are not a strategic necessity. The United States should focus on the “manufacturing trifecta” for critical components: chips, batteries, and rare earth magnets. These are the necessary building blocks for virtually all electronic systems, from consumer electronics to advanced military weapons systems. Without electronics, missiles will not be intercepted, soldiers will struggle to communicate, and precision weapons will be less precise. To further grow these industries, Trump should undertake a regulatory reset. Reports indicate that 40 percent of major manufacturing projects linked to the CHIPS Act and the Inflation Reduction Act have been delayed due to permitting and compliance with environmental standards. The new administration should seek national security waivers to clear these obstacles.
2. Address energy and workforce shortages.
It will be impossible to reindustrialize America without abundant energy. Trump’s focus on energy diversification and deregulation can jump-start the energy renewal required to enable reindustrialization. His team will likely take advantage of what all sources have to offer, including natural gas, petroleum, renewables, nuclear fission, and eventually fusion. And he will likely be more realistic than the Biden administration and halt many of its rules. The Trump administration also has an opportunity to address the industrial workforce challenge. Large-scale, general federal retraining programs underperform, while sectoral-based training, linked to specific potential employers, works. The Trump administration should make this type of training a priority.
3. Mobilize capital and level the playing field on trade to rebuild American industry.
In the defense industrial base specifically, procurement problems are legendary and longstanding. The Trump team should not start from scratch. We know what needs to be fixed. Assisted by technology, the incoming Trump team can produce a better system by actually implementing the best ideas. On the commercial side, trade policies will be an essential component of rebuilding American domestic manufacturing. Globalization in the presence of mercantilist nations has been a disaster for the US industrial base and those who worked within it. Tariffs should be used to create a protected market for US manufacturers (though this should be a competitive market involving multiple US firms) and used against states like China that engage in systematic abusive trade practices.
Go Deeper
The Replicator Initiative—which seeks to rapidly field and scale existing technologies to address high-priority operational problems—should take advantage of America’s comparative strengths: technological innovation, adaptability, and market-driven advancement. Bryan Clark sat down with Defense Innovation Unit Deputy Director Aditi Kumar to discuss the program’s future.
Instead of stockpiling small numbers of ultra-high-performance weapons, the Pentagon should design missiles that can be mass produced on demand and adapt to enemy countermeasures, explain Dan Patt and Bryan Clark.
Re: Building Defense is a limited series that highlights Hudson’s policy recommendations for revitalizing the US defense industrial base for great power competition. Read this week’s edition to learn how the US can leverage America’s economic and military advantages to maintain deterrence against China.
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