In a recent speech, Scott Bessent, President Trump's nominee for Treasury Secretary, said:major restructuring '', emphasizing that economic growth is essential to addressing the federal debt. He proposed cutting the budget deficit to 3% of GDP by 2028, boosting GDP growth through deregulation and increasing oil production by 3 million barrels a day.
When analyzed alongside President Trump's broader economic policies, such as raising tariffs, curbing outsourcing, and reinvigorating manufacturing, these policies suggest that the incoming administration will rely on the same globalization model that drove economic growth in the past. It becomes clear that this is not the case. The old model, which leveraged global supply chains and placed the United States at the top of profit-driven sectors such as innovation and services, brought prosperity and rapid development to parts of the economy.
But it also contributed to the decline of American manufacturing and the erosion of the middle class.
Meanwhile, globalization has established China as the world's manufacturing hub. This change brought significant benefits to China, including a surge in exports and job creation. At its peak, manufacturing employment is 100 million people.
Although China does not enjoy ever-higher profit margins, its industrialization and economic power have taken a quantum leap forward compared to the pre-globalization era. Over the past few decades, China has significantly strengthened its military power based on its superior manufacturing capabilities.
America suddenly finds itself facing new great power competition and an ongoing potential major regional conflict for which it is unprepared.
President Trump's “America First” vision signals a break from globalization and aims to address the damage caused during the globalization era. However, this transition is likely to be hampered by domestic politics, entrenched interests, and economic inertia. Additionally, the economic cycle may not work in President Trump's favor. Despite these obstacles, this transition is critical to America's future.
More narrowly, it may be the most effective way to counter the growing challenge posed by China, the United States' most formidable rival. On a broader scale, this represents an important battle for America's continued prosperity and global leadership.
Among the many effects of globalization, the hollowing out of American manufacturing has led to increased military spending; loss of American military power. Reliance on overseas production complicates quality control, increases costs, and reduces military readiness.
The United States outsources critical manufacturing to allies such as Japan and South Korea, but these countries cannot produce all advanced parts. Critical research and development and core manufacturing, such as aircraft carrier construction, must remain with U.S. defense contractors.
Military power depends on a strong civilian industrial base. Thriving shipyards with commercial contracts provide skilled labor, production capacity, and expertise to enable efficient defense production. However, decades of declining U.S. manufacturing investment led the shipbuilding sector to focus solely on warships.
Globally, China dominates the market with a 47 percent share, followed by South Korea with 29 percent and Japan with 17 percent. Meanwhile, the US lags far behind at just 0.13% and often faces the highest costs. 4 times higher than the standards faced by China and other countries for comparable warships.
The war between Russia and Ukraine highlights the serious consequences of declining American manufacturing capacity. Conventional weapons and basic supplies have proven essential in this war, but NATO's difficulty meeting ammunition needs has highlighted critical manufacturing shortfalls.
Future conflicts, such as those in the Taiwan Strait, are likely to rely on large amounts of conventional weapons rather than cutting-edge technology. China's focus on volume, supported by robust shipbuilding and arms production industries, gives it a significant advantage over the United States in conventional military assets.
The United States needs to rethink its strategy. Erosion of its industrial base leaves it vulnerable, with the risk of ceding supply chains to competitors and falling behind in defense. Although the Trump administration recognizes that fundamental reform is essential, the transition away from globalization will come with short-term economic costs.
Deglobalization will involve some degree of protectionism and localization of supply chains, which could lead to partial or significant decoupling from the Chinese economy. These measures could have economic implications for the United States, and even the prospect of such a decoupling carries the risk of economic downturn.
A recession is particularly unacceptable now, as it could make debt burdens unmanageable and lead to instability. as Bessent took note.“The debt problem can only be solved through economic growth.'' Other policies, such as higher tariffs, could put further economic pressure on the economy in the short term.
For example, higher tariffs on Chinese-made parts would increase costs for manufacturers like Tesla, which use large quantities of Chinese-made parts while other automakers use parts from Canada and Mexico. Probably.
Persistent inflation and vulnerabilities in sectors such as commercial real estate are exacerbating these challenges. Additionally, natural economic cycles may not work in the incoming Trump administration's favor.
Warren Buffett's formula suggests that the U.S. stock market's market capitalization relative to GDP is overvalued by 200%, indicating a possible correction. Buffett's unprecedented $325 billion cash position It reflects a pattern observed in his past businesses and could portend financial turmoil.
Despite these short-term challenges, the reforms President Trump proposes to reindustrialize, revitalize manufacturing, and reduce government costs are essential to long-term stability and prosperity. These reforms require a shift from a highly indebted, borrowing-driven model to one focused on sustainable growth. Geopolitical and economic timing may not favor such changes, but they are essential.
The Trump administration has made clear to the U.S. that while the situation may get worse before it gets better, the costs of inaction will be far greater, including the risk of supply chain transfers, weakened defense capabilities, and economic instability. We have to tell the people.
Simone Gao is an independent journalist and her website is zoomingin.tv.
