By Mari Hansen 
The half-finished factory is one type of building that has resurfaced in political fashion. You can still see the cranes from the highway, the dust hanging in the dry air, and the chain-link fences enclosing nothing but desert when you drive past one of Arizona’s new semiconductor plants.
During shift changes, employees in hard hats congregate in groups, chatting on phones and sipping from steel flasks. A structure like this would have seemed almost nostalgic five years ago. It feels like a physical version of policy now.
| Field | Details |
|---|---|
| Topic | The return of industrial policy and its trade consequences |
| Era of focus | 2015 – 2026 |
| Key policies | Made in China 2025, CHIPS and Science Act, Inflation Reduction Act |
| Core players | United States, China, European Union, emerging Global South economies |
| Trade tensions | U.S.–China tariff escalation since March 2018 |
| Governing body | World Trade Organization (WTO), 1995–present |
| Recent academic work | Ju et al. (2023) on MIC 2025 and trade war welfare effects |
| Pending forum | MC14 ministerial dialogues on industrial policy reform |
| Primary instruments | Subsidies, tariffs, local content rules, export restrictions |
| Outlook | Uncertain — depends on cooperation between major economies |
The way governments view their economies has changed. The old belief that everything would be resolved by markets and that prosperity would result from comparative advantage if you simply moved aside has faded. A more nervous instinct takes its place. Create items at home. Pay for the things you can’t afford to lose. Tax the imports that displace domestic businesses. In some respects, it’s a return to an earlier conception of the role of a state.
China was the first to anticipate this. When Beijing unveiled Made in China 2025 in 2015, the plan was viewed overseas as a sort of curiosity, a long list of industries the government sought to control. When the U.S. did respond, it was more forceful than anticipated. After the Section 301 report was released in March 2018, waves of tariffs followed, turning what had started out as a trade dispute into something more complicated. Looking back, it seems like no one truly anticipated it would last this long.
More recently, the US has stopped acting as though it didn’t support industrial policy. With the exception of their diplomatic name, the CHIPS and Science Act and the Inflation Reduction Act are subsidy programs. Hundreds of billions of dollars, depending on where, what, and occasionally who you hire. Investors appear to think this is long-lasting. It’s more difficult to predict whether voters will after ten years.
Economists are now keeping up with political developments. Ju and colleagues recently attempted to quantify all of this by modeling the interactions between tariffs and subsidies when industries benefit from economies of scale. Their conclusion—that trade policy cannot lead to the best result on its own—sounds clear when expressed but unsettling when internalized. Industrial policy is also necessary. Additionally, unless both nations cooperate, which they are not doing at the moment, doing it simultaneously makes almost everyone worse off.
In the midst of all of this, the WTO is positioned awkwardly. The liberal optimism of the 1990s, when its rulebook was written, already seems like a different century. Technically, subsidies related to exports or local content are still prohibited. However, it is precisely those kinds of supports that drive the green transition, the race for chips, and the rush to develop batteries. The discrepancy between what the regulations state and what practically all major economies are actually doing is difficult to ignore.
Whether industrial policy has returned is not the true question at hand. Of course it is. The question is whether new regulations can be created quickly enough to prevent competition from turning ugly. The cranes continue to rise for the time being.