The US economy is exhibiting signs of slowing growth. Job reports reveal a stagnant labor market since April when President Trump declared it as ‘Liberation Day’. The exciting growth in the AI sector is indeed the silver lining, but the broader economic climate is challenging, with potential contraction in the manufacturing sector, a slowdown in the housing market, and employment growth largely limited to the healthcare sector.
Unless there’s a reversal in current trends, it’s apparent that the persisting effects of the Trump administration’s tax and trade policies, along with their evident aversion to next-gen energy technologies, are steadily diminishing the economy’s complexity. Continuous pursuit of this course of action could lead to the US becoming over-reliant on externally-sourced technology, making it essentially a deindustrialized nation only proficient in trading commodities like cryptocurrency, soybeans, and petroleum-based products.
A glaring evidence of this systemic distortion is the Trump administration’s targeted campaign against the electricity infrastructure, largely fueled by their opposition to solar and wind farms significantly associated with their political rivals. Considering the central role electricity plays in our economy and with large tech companies battling to secure power for their massive data centers, the current administration has initiated a shift in regulation that curtails new power developments.
This hostility against renewable energy commenced with Trump’s domestic policy law, aiming to eliminate tax credits for wind and solar energy, a decisive blow to these burgeoning energy sectors. In recent weeks, various steps to hinder renewable energy projects, such as added scrutiny on federal permits, an implied banning of wind and solar farms on public lands, and regulations that could limit wind farm constructions on private lands, have been initiated.
Alongside these direct assaults on renewable energy, Energy Secretary Chris Wright terminated federal funding for the Gran Belt Express transmission project, a massive power infrastructure initiative intending to carry significant power across the Great Plains. Despite this project having green light, opposition arose from a fraction of Missouri farmers.
Contradictorily, Mr. Wright has at times advocated for more power lines. Nonetheless, by canceling the project, he has not only jeopardized an innovative power source, but also shaken confidence in government commitment, proving detrimental to the trust that business executives place in the Energy Department.
Further, Trump’s erratic tariff policies are steadily undermining our economic complexity. As companies have begun to realize, these fluctuating trade taxes are more detrimental to domestic manufacturers than beneficial, given their unpredictability and far-reaching application covering raw materials, industry equipment, and certain international products.
This unpredictability in trade tariffs destabilizes businesses’ strategic planning for capacity expansion to evade these new taxes. In stark contrast, foreign manufacturers find clearer terms in Trump’s agreements with foreign nations. Faced with the choice between a stable 15% import tariff and navigating through America’s continuously changing slew of taxes on steel, aluminum, and equipment, companies prefer to manufacture abroad.
Erasure of electric vehicle (EV) tax credits is another stark example of this economic decline. EVs in the 21st century hold a position akin to the gasoline cars of the 20th century: an essential industry that synergizes with sectors like steel, mining, and chemicals.
While maintaining limited subsidies for EV manufacturers, the tax law crafted by congressional Republicans stripped away incentives for consumers to purchase or lease electric vehicles. The weakening of the Environmental Protection Agency under Trump implies that there will soon lack a governmental mechanism to encourage Americans to opt for EVs, starving this nascent industry of a steady customer base. Companies have responded predictably: since the start of Trump’s term, over two dozen clean energy or EV initiatives, representing over $27 billion of investments, have been halted, cancelled or discarded.
An execution error regarding EV industry management could have been forgivable a decade ago. However, in today’s highly advanced technological era, it signifies economic senselessness. In the past ten years, China has combined certain technologies—batteries, motors, semiconductors, sensors, and software— into quality manufactured goods like cars and drones, setting unparalleled global standards.
Some believe China might become the first ‘electrostate’ – a country powered predominantly by electricity, not oil. It has also managed to tap into energy production market by transforming it into a form of manufactured good. China can now offer the rest of the world low-cost, low-pollution alternatives to fossil fuels and internal combustion vehicles through its solar panels, batteries, and electric vehicles.
China opted for these technologies not simply for environmental reasons but also to address their national security concerns, particularly their over-dependency on petroleum. During this transformation, Chinese low-cost electronic technologies have moved from complementing traditional oil-based vehicles to effectively replacing them.
As China revolutionizes the global energy market with affordable solar panels, batteries and EVs, the US seems to be an aging industrial colossus, excessively dependent on its oil and gas revenues. This dependency seems to be preventing it from adopting and leveraging the economic sectors that will shape the future.
The US remains proficient at producing food, oil and gas, chemicals, software, and internal-combustion vehicles. However, we lag in producing cost-effective batteries, electronics, solar panels, wind turbines, and EVs. Without a deliberate nationwide effort to improve our skills and competitiveness in these areas, the US risks losing its technological supremacy.
Clearly, the energy transition is just the latest phase of the Industrial Revolution. Earlier, we saw the shift from coal and steam to oil, gas, chemicals and electricity. Our economy witnessed and led the global shift from carbon-based products to silicon in areas like journalism, radio, law and business. Today, transportation sector – cars, trains, flights, and military technology – is being revolutionized by silicon and lithium. However, the Trump administration, probably in an attempt to safeguard oil companies’ interests, is undermining America’s participation in this revolution. We might fare well in short-term but in the long run, our future looks uncertain.
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