The United States stands at a pivotal juncture. As I discussed on Financial Sense Newshour this past weekend, we are witnessing an economic reset aimed at reindustrializing our nation and reclaiming our manufacturing heritage. Recent announcements of reciprocal tariffs have sparked concerns about trade wars, inflation, and potential recessionary pressures. However, I believe these measures reflect a broader strategy—one that transcends short-term disruptions and addresses critical issues of national security and economic sovereignty. This transformation involves an initial phase of challenges followed by substantial long-term benefits. Below, I outline my perspective on this shift, from the strategic imperatives driving it to the opportunities and potential pitfalls that could result.

To listen to this full podcast discussion, see Tariffs: First the Pain, Then the Gain

The Imperative for an Economic Reset

At its core, this reset seeks to address a fundamental weakness: the erosion of America’s industrial capacity. I’ve long maintained that if we were forced to fight a conflict on the scale of World War II today, our diminished industrial base would render us incapable of meeting the challenge. Modern warfare, as evidenced in Ukraine and Israel, underscores this vulnerability. Inexpensive technologies like drones are proving more effective than traditional, high-cost systems, yet our production capabilities lag. For instance, we’ve supplied over 1 million 155-millimeter artillery rounds to Ukraine, but with an annual output of just 240,000, replenishing that stockpile would take over five years. Similarly, replacing the 1,600 Stinger missiles sent abroad would require nearly two decades at current production rates. This gap in manufacturing capacity is a glaring liability we must confront.

The stakes extend beyond military preparedness. Our reliance on foreign supply chains, exposed starkly during the COVID-19 pandemic, has left us vulnerable to disruptions in everything from pharmaceuticals to household goods. This is not a new phenomenon—it’s the result of decades of offshoring that began in the 1970s amid high inflation and strong labor unions, only to accelerate with globalization and trade agreements like NAFTA. Once accounting for 25-30% of global manufacturing, the U.S. now contributes just 11%. The current administration’s tariff policies aim to reverse this trend, restoring our industrial and technological foundations. Failure to do so risks relegating America to a secondary role in a world increasingly dominated by others.

China’s Dominance and Strategic Dependencies

A significant factor in this reset is China’s commanding position in global manufacturing and critical resources. They dominate 50% of the world’s shipbuilding and produce $4.7 trillion in goods annually—29% of the global total, surpassing the combined output of the U.S., Japan, Germany, and India. Their control over rare earth minerals is even more pronounced, with 80% of global production, 70% of extraction, and 87% of processing under their purview. Materials like gallium, germanium, and graphite—vital for technology and defense—are similarly concentrated in their hands.

See related: David Woo: Tariff Calculation Aimed at Bankrupting China

This dependency poses a strategic risk. Our military relies on Chinese-sourced components, from semiconductors to magnets, while our production timelines for legacy weapons systems stretch years beyond what’s sustainable. The pandemic further highlighted this fragility, with shortages delaying construction projects and industrial output. I’ve noted how homes that once took 12 months to build stretched to 18 due to unavailable supplies. The goal now is clear: we must reduce this reliance and rebuild domestic capacity to safeguard our economic and security interests.

Tariffs as a Strategic Lever

Tariffs represent the challenging first phase of this reset, but they are a necessary tool to rebalance global trade. Many view these measures as provocative, yet other nations have long imposed significant duties on American goods. By contrast, the U.S. has historically maintained a more open stance. Our economy, with exports comprising just 11% of GDP, is less exposed than Europe’s 23%, Canada’s 34%, or China’s 20%. This relative self-sufficiency provides leverage in negotiations.

As I emphasized on the podcast, I see tariffs as a means to an end. They pressure trading partners to adopt reciprocal terms, potentially leading to a global reduction in barriers by mid-2025. Countries that are heavily reliant on exports cannot sustain prolonged restrictions against the world’s largest market. Reindustrialization requires a level playing field—our goods cannot compete if others impose tariffs while we do not. This shift disrupts decades of complacency, but it’s a critical step toward revitalizing domestic production.

The Rewards of Reindustrialization

Beyond the initial difficulties lies the promise of a revitalized industrial base. Investments totaling $4 trillion from corporations and nations are already flowing into the U.S., with projects like Taiwan Semiconductor’s $165 billion factory initiative, Apple’s $500 billion diversification effort, and Meta’s $10 billion AI data center in Louisiana. In Phoenix, where I once resided, three major facilities from Taiwan Semiconductor, Intel, and Apple are slated to begin operations next year, creating thousands of high-paying positions—6,000 direct jobs from Taiwan Semiconductor alone, alongside 10,000 indirect roles.

These are not low-wage jobs but six-figure careers, bolstered by advancements in automation and robotics. The factories of tomorrow will differ markedly from those of past decades, leveraging technology to enhance efficiency. The broader economic impact could multiply these gains, supporting industries from mining and energy to retail and logistics. Historically, offshoring eroded wages as service jobs replaced manufacturing; this resurgence promises a return to robust, family-supporting employment.

Investment Strategies for a New Era

This transformation carries significant implications for investors. For decades, consumption drove growth, favoring consumer product companies. That dynamic is shifting toward production-oriented sectors. Industrial firms, technology leaders, and utilities stand to benefit, as do commodities and energy providers essential to factory operations. Infrastructure investments will also play a key role, given the need to modernize roads, bridges, and power grids.

My approach remains rooted in dividend-paying stocks, though the focus is evolving. Rather than consumer staples, I’m targeting sectors aligned with this industrial pivot—utilities with strong growth potential, energy firms with rising payouts, and industrial players poised for expansion. Recently, we acquired a two-year bond yielding 5.75%, a prudent move amid market volatility. As I noted last weekend, we’re positioning for the long term, identifying opportunities in this correction to build a portfolio that capitalizes on America’s Reindustrialization.

Potential Pitfalls: What Could Go Wrong

While the prospects of reindustrialization are promising for US workers, several risks could undermine its success. One concern is that trading partners might resist lowering their tariffs, opting instead to escalate into a prolonged trade war. We have seen this with China’s immediate response of retaliatory tariffs on US goods. Canada and Mexico—key US trading partners who rely heavily on exports—could decide to dig in, prioritizing short-term protectionism over negotiation. If global trade contracts as a result, we could face a 70s-like stagflationary environment, slowing the momentum of reindustrialization.

Rebuilding America’s industrial capacity is a monumental task, and could easily be complicated by delays in execution. While $4 trillion in investments have been announced, their success depends on overcoming supply chain bottlenecks, labor shortages, and regulatory hurdles. The U.S. has outsourced much of its industrial capacity to China, leaving us dependent on foreign-manufactured capital equipment to construct the factories we need. Advanced facilities, such as those planned in Phoenix, also require a skilled workforce and cutting-edge technology. Any shortfall in these areas could significantly stall progress.

Political and economic pressures further complicate the effort. The President likely has a year to show results before the mid-term congressional elections in 2026. Failure to deliver could cost his party control of Congress, potentially ending these initiatives if impeachment proceedings follow. Meanwhile, government spending has ballooned, with the federal government now accounting for 23% of GDP, up from 18–19% in the last decade. The national debt is nearing $37 trillion and may end up closer to $40 trillion by the end of the year. Also, interest payments currently consume 20% of tax revenue—an unsustainable fiscal path that risks triggering a financial crisis and political instability.

Waste, fraud, and corruption within the government also threaten to undermine progress. The Congressional Budget Office estimates the U.S. loses $233 billion to $521 billion annually to improper spending, adding up to $2.8 trillion since 2003. These inefficiencies, coupled with powerful vested interests, make reform incredibly difficult and jeopardize the country’s financial health.

Reindustrializing America will not happen overnight. Decades of outsourcing and industrial decline cannot be reversed quickly, and even the President acknowledges it will take time. While I want to give his policies the benefit of the doubt, I remain cautious. Should these efforts fail to deliver, I am prepared to adjust my investment strategy accordingly.

Conclusion: A Path to Renewed Strength

In summary, we are navigating a period of transition—challenges today for prosperity tomorrow. This economic reset addresses decades of industrial decline, driven by both security imperatives and the need to reclaim manufacturing leadership. While tariffs may test global relationships, our trading partners’ greater exposure suggests a resolution that favors broader trade liberalization. The rewards—a robust industrial base, high-quality jobs, and technological advancement—are within reach. As an economist and investor, I see this as a defining moment. We’re laying the groundwork for a stronger, more self-reliant America, and I’m committed to steering through this shift with clarity and resolve.

For related podcast, see Tariffs: First the Pain, Then the Gain. If you’re not already a subscriber to our weekday FS Insider podcast, click here to subscribe.

For a link to our full podcast archive, see Financial Sense Newshour (All) and don't forget to subscribe on Apple Podcasts, Spotify, or YouTube Podcasts!

To learn more about Financial Sense® Wealth Management, give us a call at (888) 486-3939 or click here to contact us.

Content is for informational purposes only and does not constitute financial, investment, legal, or other advice.

There are risks involved in investing, including the potential for loss of principal.

Forward-looking statements are based on assumptions that may not materialize and are subject to risks and uncertainties.

Any mention of specific securities or investment strategies is not an endorsement or recommendation.

Advisory services offered through Financial Sense® Advisors, Inc., a registered investment adviser. Securities offered through Financial Sense® Securities, Inc., Member FINRA/SIPC. DBA Financial Sense® Wealth Management. Investing involves risk, including the loss of principle. Past performance is not indicative of future results.