President Donald Trump’s trade strategies have often been characterized as erratic or even shortsighted by critics. However, dismissing them outright might mean overlooking significant underlying trends—trends that can present valuable opportunities for savvy investors.
A Shift from Globalization to Protectionism
For decades, mainstream economic thought promoted the advantages of globalization, emphasizing free trade and offshore manufacturing to minimize costs. Today, this model is steadily shifting toward policies resembling 18th or 19th-century mercantilism, emphasizing protectionism and domestic manufacturing.
At first glance, this shift may feel counterintuitive, yet there’s a clear strategy behind it. Key figures in Trump’s administration, notably Vice President JD Vance, advocate a pronounced “make it here” philosophy. Investors hoping to navigate this new landscape should familiarize themselves with influential voices shaping these ideas—such as Curtis Yarvin.
According to BofA Securities analyst Andrew Obin, investors would do well to “brush up on Curtis Yarvin.”
Yarvin, whose views resonate strongly with Vance and other administration figures, suggests democracy has inherent weaknesses. Instead, Yarvin proposes that America would benefit from adopting a more centralized, CEO-style leadership model akin to a monarchy. Yarvin critically challenges the modern economic wisdom of prioritizing cheap consumer goods, arguing it has come at the cost of domestic employment and job quality.
Impact of Globalization on U.S. Manufacturing Jobs
The U.S. economy experienced dramatic shifts after China joined the World Trade Organization (WTO) in 2001. At that time, around 17 million Americans were employed in manufacturing. Today, fewer than 13 million workers remain in the sector.
China’s manufacturing sector, meanwhile, has experienced substantial growth. Initially holding about 10% of global manufacturing capacity upon joining the WTO, China’s share has since surged to nearly 30%. The U.S. manufacturing share correspondingly shrank from 25% to approximately 15%.
Despite these job losses in manufacturing, overall U.S. employment has grown significantly—from around 135 million jobs at the turn of the century to approximately 165 million today, according to data from the U.S. Bureau of Labor Statistics. However, the types and quality of these jobs are a topic of ongoing debate.
Reassessing the Risks of Global Supply Chains
Beyond employment concerns, the COVID-19 pandemic clearly demonstrated the vulnerabilities inherent in globalized supply chains, prompting businesses and political leaders to reconsider their manufacturing and sourcing strategies.
“The whole globalization thing became overdone,” notes Wilbur Ross, Trump’s former Commerce Secretary. Ross further remarks pragmatically that “CEOs of major companies tend to have a little bit of lemming-like behavior.”
Historically, corporate leaders prioritized minimizing labor costs globally, often neglecting supply chain resilience. Today, reducing supply-chain vulnerabilities has become a critical priority for executives.
Even before Trump’s return to the White House in November, industry terminology began to change. Terms like “nearshoring” (manufacturing closer to home) and “dual sourcing” (securing multiple supply lines for critical components) became standard vocabulary, according to Arjun Divecha, director and head of emerging markets equity at investment firm GMO.
Yet Divecha cautions investors against expecting a full return to past manufacturing glory days: “Low-end manufacturing…forget about it. The stuff that’s going to come back is intellectual property, high capital spending.”
Investment Opportunities in a Shifting Landscape
As the U.S. pivots toward localized, high-value manufacturing, several sectors stand to benefit significantly. Investors may find promising opportunities in businesses involved with:
- Infrastructure and Plant Construction: Companies engaged in building new factories or refurbishing existing facilities.
- Energy and Power Generation: Firms supplying energy and power solutions to manufacturing plants.
- Automation and Robotics: Businesses specializing in automation technologies that enhance manufacturing productivity.
On the downside, higher tariffs and protectionist policies present challenges to firms reliant on inexpensive foreign labor. For instance, Nike’s stock (NKE) has declined roughly 13% since the November 5 election due to concerns over increased trade barriers. Additionally, the auto industry faces significant uncertainty amid proposals for potential 25% tariffs on vehicles and components imported from Canada and Mexico.
Despite potential industry setbacks, it’s unlikely the Trump administration will reverse its stance on reshoring manufacturing. The broader move toward deglobalization appears irreversible, marking a significant shift for investors to acknowledge and adapt to strategically.
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