Since the onset of the pandemic, the U.S. has done a lot to build up its own industries.

American companies were burned by shutdowns and shortages at their global manufacturing plants. Many are rebuilding production back on U.S. soil.

And alongside these re-shoring efforts, the U.S.—and the rest of the world—is facing extreme levels of government hand-holding in decades.

Countries have started ramping up “industrial policy” interventions. In other words, governments are pushing subsidies, local tax breaks, and tariffs on imports to help support local industry.

Global industrial policy interventions ballooned from 228 in 2017 to more than 1,500 last year. That’s almost 560% higher.

And some investors are getting worried…

Particularly in the U.S., there’s a longstanding skepticism around government intervention in industry. Many people are wary of “big government” policies.

Until the pandemic, government intervention had been in a decades-long rut.

While it boomed in the decades after World War II, Western nations—particularly the U.S. and U.K.—started worrying that governments had become too bloated and controlling.

Ronald Reagan and former Prime Minister Margaret Thatcher set out to flip the narrative.

Instead of taxing businesses, only to turn around and help support them with subsidies, they lowered taxes and focused more on lowering inflation.

These initiatives are often considered major drivers of the pro-business shift in the U.K. and the U.S. Global policy interventions were pretty much zero through 2010.

COVID-19 completely changed how the U.S. government thinks about intervention. Our leaders are back to the hands-on approach that was popular before Reagan took office.

The Biden administration has put a clear emphasis on industrial policy, boosting domestic chip production through the CHIPS and Science Act and investing in infrastructure and clean energy with the Build Back Better initiative.

This is an instance where industrial policy pushes the country in the right direction. It should foster innovation and corporate success, not get in the way. The U.S. will grow its most important sectors, like manufacturing, chips, and AI.

According to the International Monetary Fund (“IMF”), in 2023, around 35% of global interventions were motivated by this sort of strategic competitiveness.

If Kamala Harris takes office, she’ll likely continue with this policymaking approach.

On the other hand, former President and current Republican presidential hopeful Donald Trump has his own track record of intervention.

He raised tariffs to protect domestic industries and jobs. He also tends to pick industry winners and losers and support the chosen ones.

For instance, Trump has made it clear he’ll support U.S. oil and gas. And while he’s not planning to subsidize U.S. solar, he’d increase tariffs on Chinese solar goods to help the U.S. in a different way.

We’re looking at a lot more hands-on intervention, despite what either candidate might claim… and even if you’re a lifelong government skeptic, that doesn’t spell automatic disaster for the U.S. economy.

Industrial policy can be a problem when it interferes with the inner workings of a business. It’ll be a bad sign if the government starts bailing out struggling companies rather than investing in high-growth industries.

That’s not what we’ve seen so far from either policy platform. Policies that focus on critical sectors like chips, infrastructure development, and emerging technologies like AI could lead to significant economic growth.

There will be plenty of booming industries to invest in… no matter who takes office.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

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