Editor's Note: The views expressed in this column are solely those of the author.
For the first time since I have been writing about American manufacturing, a high-ranking member of the administration has admitted that free trade, cheap imports and dependence on foreign suppliers were a mistake. As Treasury Secretary Scott Bessent said recently, ”We treated efficiency as a substitute for resilience.”
Bessent’s speech, “While America Slept,” was not about tariffs. It was about the fact that for four decades, our trade policy has relied on efficiency and the lowest cost without creating an industrial policy and plan to compete and sustain the country’s economic future. We have slowly learned that dependence on other countries is a serious vulnerability, and are at a point where we can no longer make what we need to defend ourselves. Bessent asks whether America is willing to rebuild what we have lost.
America’s multinational corporations’ pursuit of low costs and shareholder value has played into the hands of our foreign competitors and made us dependent on foreign countries for everything from semiconductors and rare earth to medicine and auto parts. If we can't do more to get control over what we make, then the future looks pretty grim. Here are some examples.
Semiconductor Industry
Most U.S. chipmakers made a critical decision years ago to go fabless, meaning they design and market in the U.S. and farm out production to foreign countries. The U.S. invented semiconductor technology and was once a major chip manufacturing center. But top U.S. chip designers outsourced fabrication of leading-edge processors, mostly to Taiwan, South Korea, and, more recently, China. The fabless model slashed operating costs and generated short-term profits.
The fabless model led to heavy dependence on overseas factories run by non-U.S. companies for a technology critical to many U.S. industries, U.S. corporations, and their customers, including the U.S. government. Dependence on imported chips created both national and economic security issues.
The industries most dependent on foreign-manufactured semiconductor chips are consumer electronics, automotive manufacturing, artificial intelligence and data centers, telecommunications, aerospace and defense.
Semiconductor chip shortages stopped or slowed down American automotive production lines. Modern cars use thousands of tiny computer chips for items like automatic braking, airbags and touchscreens.
When the COVID-19 pandemic hit, automakers canceled chip orders. In 2021 alone, the chip shortage resulted in the loss of about 9.5 million light-duty vehicles globally. American factories—including Ford and General Motors—built cars without chips. They parked thousands of unfinished vehicles in massive storage lots, waiting for chips to arrive. American corporations went for short-term profits but created massive long-term problems for their own domestic production lines.
The answer was to bail out the industry with the $54 billion subsidy called the Chips Act. The important point is that the semiconductor industry got itself into this problem by outsourcing production and making itself and the country dependent on foreign foundries that are also competitors.
National Security & Weapon Systems
A report titled “Remaking American Security: Supply Chain Vulnerabilities & National Security Risks Across the U.S. Defense Industrial Base,” by Brigadier General John Adams, found that ”U.S. national security and the health of the nation’s defense industrial base are in jeopardy because of an over-reliance on foreign suppliers for critical defense materials. Imported products include memory chips, sensors, printed circuit boards, magnets, rare earth, guidance motors, actuators and passive components like resistors and capacitors. These components are used in smart bombs, fighter jets, laser targeting, radar, sonar transducers, jamming devices and other military systems, to name a few.
Foreign sourcing puts America’s military readiness in the hands of potentially unreliable or hostile supplier nations and undermines the ability to develop capabilities needed to win on future battlefields. In chasing the lowest cost, we have made our defense industries vulnerable. Minerals like rare earth, antimony and gallium are imported from China, are critical to our defense industrial base and are used in jet engines, missile guidance systems, advanced computing, radar systems, advanced optics and communication equipment.
The U.S. Geological Survey shows that the U.S. is 100% dependent on foreign countries for 10 critical minerals and 50% to 95% dependent on 18 other minerals. It also shows that we are dependent on China for 10 of these critical minerals.
We have set ourselves up for extortion. Foreign producers now engage in price manipulation, arbitrary export restrictions and extortion as a tool for leverage over the U.S.
China has banned exports to the U.S. of gallium, germanium, antimony and rare earth magnets. These materials are essential for automakers, aerospace, semiconductors and military contractors. The Chinese government enacted this export suspension to retaliate against the U.S. Beijing specifically targeted supplies in response to tariff hikes and semiconductor controls imposed by the U.S.
Shipbuilding
During World War II, the U.S. shipyard labor force of 750,000 people built 9,000 ships in six years. According to the Maritime Administration (MARAD) and the Bureau of Labor Statistics, the U.S. shipbuilding and repairing industry had 178,000 workers in 1980. Employment declined to 105,517 in 2023.
Today the industry builds fewer than 10 vessels for oceangoing commerce in a typical year. In comparison, China builds more than a thousand such ships each year. In the 1950s, the U.S. Merchant Marine transported a third of all global trade. Today, the entire U.S.-registered fleet of oceangoing commercial ships numbers fewer than 200 vessels, out of a global total of 44,000 or .004%. From a national security perspective, the U.S. Merchant Marine today may not be able to support military sealift requirements in a war.
The U.S. Navy is also not keeping up with China in military shipbuilding. After 2001, the U.S. Navy fleet size decreased from 316 to 278 ships. China now has the largest fleet of warships in the world—approximately 350 ships.
The Navy has launched a major expansion plan to build up a 450-ship fleet by the early 2030s. The most recent budget requests historic funding, including $65.8 billion for 34 manned ships and five unmanned platforms in a single fiscal year.
Bipartisan leaders in the House and Senate have introduced the Ships for America Act. This act would establish a 25% investment tax credit for shipyard investments, as well as investment in maritime workforce development, to expand the U.S. flagged international fleet of 250 ships in 10 years and grow local economies. As of June 2026, Congress has not approved the Ships for America Act. U.S. shipyards can only produce a fraction of the ships that Chinese shipyards can in a given year. We are still dependent on foreign suppliers
EVs
Over the past decade, China has surged to become the world’s largest producer of motor vehicles, rapidly expanding its presence across Europe, Asia, Africa and Latin America. Backed by extensive state support, Chinese automakers export heavily subsidized electric, hybrid and internal combustion engine vehicles at prices far below their true fair market value, distorting competition and undermining incumbent manufacturers.
China has a state-supported goal of dominating the world electric and hybrid auto markets. They want to export to the U .S. or perhaps invest in manufacturing plants in the U.S. Jim Farley, the CEO of Ford, says, “We should not let them into our country.” He warns that “the fight against Chinese EVs isn't fair, and letting them into America could mean the final blow for U.S. auto manufacturers.”
Farley is right about the China threat. We simply can't compete with China when they use huge government subsidies, global overcapacity, transshipping to get around tariffs, product dumping and below-market pricing. We should wake up to the fact that our number one competitor is not going to play by the rules and is committed to any strategy to get domestic market share.
Until recently, there was broad bipartisan alignment in the U.S., and across North America, that Chinese auto imports posed a grave threat to national, economic and data security. That consensus is now breaking down.
President Donald Trump terminated the federal tax credits for electric vehicles on September 30, 2025. He signed the legislation, often referred to as the "One Big Beautiful Bill Act,” on July 4, 2025, which ended both the $7,500 new EV and $4,000 used EV tax credits. The credit was originally supposed to last through 2032 under the Inflation Reduction Act.
Rather than developing a strategy to counter China’s industrial expansion, President Trump has signaled a willingness to open the US market itself—inviting Chinese automakers to build electric vehicles in the U.S. “Let them come in,” he said in January, despite years of rallying against China’s unfair trade practices and promising to protect American industry.
Allowing China to export their EVs, or establish manufacturing plants in the U.S., will make us even more dependent on them. It is a game we can't win, and we pursue it at our peril.
Conclusion
Bessent said, “Somewhere along the way, we lost sight of a foundational principle that previous generations understood instinctively: economic security is national security, for a nation that cannot manufacture, mine, ship, refine its needs gradually cedes its strength —and sovereignty—to others. That is a dangerous dependency for any country. It is an unacceptable one for the United States.”
China’s accession to the WTO and the granting of Permanent Normal Trade Relations were sold to the American people as steps that would make trade fairer and the world safer. Instead, we left our workers to compete against state-led subsidies, excess capacity and practices that distort trade and undermine reciprocity. It is called “regression toward the mean.” And it was perhaps the most critical factor in the decline of the middle class. It pitted American workers against low-wage workers around the world, and over time reduced American wages closer to the mean of foreign wages, which led to wage stagnation.
Treasury Secretary Bessent says that, “The truth is that for too long, America had been asleep. We mistook comfort for strength. We treated efficiency as a substitute for resilience, and consumption as a measure of prosperity.”
But this loss of independence didn't happen overnight. We had plenty of warning, beginning with NAFTA, where we lost 850,000 jobs, and hundreds of small cities and towns in the heartland died. Military planners like Brigadier General Adams knew that national security was in jeopardy because of a reliance on foreign suppliers for critical defense products. Hospitals, clinics and the government also knew about drug shortages, which averaged more than 300 per month.
All the while, economists continued to preach the advantages of the post-industrial service economy and cheap imports. In the end, we became very dependent and lost control of the vital products we need. We have lost our independence and ceded control of vital products to foreign competitors who want to take our markets.
Manufacturing in foreign countries and giving our technologies to our competitors was never a government strategy; it was the absence of a strategy. All government administrations back to Reagan supported free trade and never developed a plan to protect our vital technologies, our industries or the American people.
China’s goal is to replace the U.S. as the number one economy in the world, and its industrial plan lists the technologies it wants and the industries it intends to dominate. Why can’t we develop a plan that lists the technologies and industries we need to reshore?
Bessent publicly admitted these mistakes when he said: “For our part, we made a series of mistakes—some bipartisan, others ideological, and many defended long after their costs became impossible to ignore.” He goes on to say, “Somewhere along the way, we lost sight of a foundational principle that previous generations understood instinctively: economic security is national security. That is a dangerous dependency for any country. It is an unacceptable one for the United States.
“The warning lights were glaring all around us. But our political class preferred the comfort of old formulas. Cheaper was always better. Offshoring was inevitable. Industrial policy was unfashionable. And strategic dependence was acceptable so long as the cost remained invisible.”
Scott Bessent can talk the talk, but will he and the Trump administration walk the walk?
We know what we must do. But can we do it? Coming up next month: Economic Security is National Security: Part 2.
Michael Collins is the author of a new book, "The Globalization Trap," available on Amazon. He can be reached at [email protected] or on mpcmgt.net.
