For thirty years China chased market share by driving prices down, squeezing competitors until factories closed and capacity shifted overseas. That strategy built global dominance in key goods while leaving other nations dependent on single-source supply lines. The result is a trade-off between cheap products and strategic vulnerability.
The Chinese state didn’t simply sit back and let competition play out; it backed exporters, absorbed losses and directed resources toward chosen industries. Those actions mimic industrial policy but are framed as market-driven success. The confusion between state-directed advantage and free-market triumph matters for how we respond.
When critical components are concentrated abroad, a shock — pandemic, political tension or a shipping disruption — becomes a national emergency. Chips, batteries and rare earths are not just consumer inputs; they are leverage in geopolitics. That leverage can be used diplomatically or weaponized economically.
A Republican view accepts markets as powerful allocators, but it also recognizes that markets alone cannot guarantee national security. Markets reward cost, not resilience. Where costs are distorted by foreign subsidies, the naive acceptance of “market forces” leaves us exposed.
Policy tools matter: tariffs, targeted incentives and defense-aware procurement can rebuild capacity without turning to command economics. Smart incentives nudge private firms to invest in onshore lines and allied factories. Those incentives should be time-limited, transparent and tied to clear national security goals.
Procurement is a lever often ignored by free-market purists; government buying power can create demand for resilient supply chains. When the Pentagon and federal agencies specify domestic content for critical items, private investment follows. This isn’t permanent protectionism; it’s a strategic use of purchasing power to correct market blind spots.
Allies matter. Diversifying suppliers across trusted partners reduces the risk of a single point of failure and strengthens geopolitical ties. Coordinated industrial policy with friendly countries can preserve competition while preventing dependence on a strategic rival.
Stockpiles and surge capacity are practical, low-drama measures. Holding reserves of essential materials and maintaining facilities that can scale production in emergencies buys time without distorting everyday market prices. It’s insurance, not an obstacle to commerce.
Regulatory clarity helps too. Rules that reward resilience — like certification for secure supply chains or expedited permitting for critical factories — encourage the right investments. Predictable rules are as important to investors as subsidies or tariffs.
Rebuilding a domestic industrial base requires private initiative backed by public purpose. Entrepreneurs will respond to predictable markets that value reliability as much as price. Government’s role is to realign incentives, remove bureaucratic barriers and protect core capabilities.
We should be candid: cheap imports were a win for consumers but a strategic gamble for a nation. Rebalancing will cost money and political capital because resilience is not free. It’s an investment in independence.
Facing a decade shaped by supply shocks and strategic competition, the right approach marries market dynamism with deliberate policy. That combination protects liberty and keeps us competitive without surrendering security.
