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The writer was special assistant to President Biden for economic policy. He is policy fellow at Stanford’s Institute for Economic Policy Research and Columbia’s Center on Global Energy Policy
For all his talk of bringing manufacturing back to America, President Donald Trump has precious little to show for it. The Institute for Supply Management’s purchasing manager index has declined since April’s “liberation day” tariff announcement. And many manufacturers are facing higher prices for the very components and machinery they need to import in order to begin making things in America.
Tariffs alone are a poor tool to promote re-industrialisation. They don’t make domestic manufacturing better; they simply make foreign production more expensive.
The attempt to reindustrialise the US will only succeed if pursued on a targeted basis, in advanced industries where technology is changing rapidly and innovation can be a meaningful competitive advantage. We can’t manufacture everything. Treasury secretary Scott Bessent, for one, knows this, and has argued that his objective is to “bring back high-paying precision manufacturing jobs to the US”.
This will require strategic investment to enhance American manufacturing competitiveness, not just tariffs to hamstring foreign producers. It is why the Biden administration, in which I served, paired tariffs on batteries, electric vehicles and semiconductors with loans from the Department of Energy’s Loan Programs Office (LPO), large-scale grants to chipmakers under the Chips and Science Act and other financial support.
This approach was working. For example, TSMC, the world’s leading semiconductor producer, opened its Arizona fab in 2024 and employs over 3,000 people there. It is hard to square these results, and Trump’s stated manufacturing objectives, with his approach: he has called for the repeal of the Chips and Science Act, while the so-called Department of Government Efficiency is in the process of gutting as much as 60 per cent of the LPO’s staff.
If Trump really wants to supercharge US industry, he needs to do more to give the next generation of American manufacturers the (literal) tools to compete. He should start by ensuring that the sovereign wealth fund he has asked Bessent and commerce secretary Howard Lutnick to draw up includes an asset-backed equipment finance programme.
This would provide low-interest loans to US companies to purchase machinery and other manufacturing equipment. Equipment financed this way would be exempted from tariffs to keep costs low and maximise the programme’s lending capacity. The goal would be to use the public balance sheet to accelerate the acquisition of advanced machinery and the scale-up of manufacturing operations needed to kick-start the industrial renaissance.
The Department of Defense has already piloted a programme like this through its Office of Strategic Capital. But the programme’s constraints have limited its impact. First, with just $984mn to lend, it is too small to make a dent in America’s industrial needs. Second, and more importantly, it excludes early-stage companies building next-generation technologies where we have the best chance of developing new, competitive industries at home.
Trump’s sovereign wealth fund could easily solve the former problem by simply allocating more capital to these investments. The second is trickier because early-stage companies are riskier and more likely to default on their loans. But it is also essential.
This is where making the programme “asset-backed” comes into play. Unlike a loan used to pay employee salaries, a loan used to purchase equipment leaves something behind even if the company goes under: the equipment itself. That equipment can be resold (potentially with a new loan from the programme), reducing the government’s risk and offering another shot at re-industrialisation.
Today, among the hard tech start-ups of Silicon Valley and southern California’s El Segundo, there is a thriving market for second-hand machinery. It’s the result both of the normal process of creative destruction and companies expanding and outgrowing their equipment. The government could take this further by providing the financing and distribution to make more equipment available to more companies.
No one should pretend that reviving American manufacturing won’t be hard. But accomplishing this goal is essential both for US national security and to position it to win in the industries of the future. It will require creative solutions and greater risk-taking than the federal government is used to. Using a sovereign wealth fund to finance the machinery American companies need is exactly the kind of smart risk we should be taking.
