The Protectionist Consensus
The bipartisan shift toward economic protectionism represents one of the most significant policy realignments of the past decade. Both parties now embrace tariffs, industrial subsidies, and supply chain reshoring as central elements of economic policy, though they differ on specifics and emphasis.
This consensus has survived multiple administrations and shows no signs of reverting to the free-trade orthodoxy that dominated US economic policy from the 1990s through the 2010s. The question is not whether the US will pursue protectionist policies, but how far and how fast.
Tariff Architecture
The current tariff regime reflects layers of action accumulated across administrations: Section 301 tariffs on Chinese goods, Section 232 tariffs on steel and aluminum, and various sector-specific measures. These tariffs collectively affect hundreds of billions of dollars in annual trade flows and have reshaped supply chain decisions across industries.
Key tariff dynamics:
- China tariffs remain in place with no indication of significant rollback
- Tariff policy has expanded to include strategic sectors like EVs, semiconductors, and clean energy components
- Allied trading partners face selective tariff pressures designed to encourage supply chain diversification
- The WTO dispute resolution system continues to deteriorate, reducing external constraints on US tariff policy
Industrial Policy Revival
The US has embraced industrial policy with a scope and ambition not seen since the Cold War. The CHIPS Act, Inflation Reduction Act, and various executive actions collectively represent hundreds of billions of dollars in government incentives for domestic manufacturing.
The Iran conflict has reinforced the case for industrial policy by highlighting supply chain vulnerabilities in defense and energy sectors. The political appeal of manufacturing job creation ensures continued bipartisan support for these programs.
Supply Chain Reorganization
Global supply chains are reorganizing in response to both policy incentives and risk management. The concept of friendshoring, concentrating supply chains among allied nations, has moved from concept to execution across multiple sectors.
This reorganization creates both opportunities and costs. New manufacturing capacity in the US and allied nations reduces dependence on adversarial supply sources. However, the process is expensive, time-consuming, and produces less efficient supply chains in the near term.
Trade Agreement Outlook
The prospect of major new trade agreements is limited. Neither party supports traditional free trade agreements, and the political landscape makes ratification of any new agreement extremely difficult. The most likely trade policy developments are narrowly scoped bilateral or plurilateral arrangements focused on specific sectors or objectives.