Beyond Tariff Walls: Three Types of Incentives We Can Deploy Now to Help Revitalize American Manufacturing
Tariffs are a bit like building a wall around your garden - they can protect what's growing inside from the rabbits and coyotes. But walls alone won't help your plants thrive. You still need to plant the seeds and water the garden. For U.S. industry, that means strong domestic manufacturing and production incentives are imperative to reindustrializing America.
Rebuilding America's industrial base requires an approach that goes beyond protective tariffs. To create lasting industrial resilience, we need a three-part strategy: first, incentives to build new production capacity; second, mechanisms to sustain operations through unpredictable market conditions; and third, programs to develop the advanced manufacturing workforce. Each part addresses a critical challenge in the manufacturing lifecycle, from initial scale-up to long-term operation and talent development.
Part 1: Building New Production Capacity
These incentives directly address the "valley of death" between pilot projects and industrial scale production. By reducing financial risk during the capital-intensive phase of scaling, incentives create a bridge across the "missing middle" of capital that often prevents promising technologies from reaching commercial viability.
What works to build manufacturing infrastructure:
Production Facility Construction & Equipment Loans: Similar to the Department of Defense Office of Strategic Finance capital loan program designed to support companies developing dual use technologies. These low-cost loans and loan guarantees target expanding manufacturing capacity for technologies deemed essential to national security, including advanced manufacturing, aerospace, battery storage, edge computing, microelectronics, quantum computing and energy generation equipment.
Federal Purchase Guarantees: Government-guaranteed purchase orders can function similarly to power purchase agreements in the energy sector. With insurance backing, these guarantees can be leveraged for construction loans, providing production demand certainty.
Part 2: Sustaining Operations Through Unpredictable Markets
These mechanisms limit the variability manufacturers need to endure to make long-term investments. They respond directly to the challenge highlighted by a recent House Energy and Commerce Committee proposal that would roll back $6.5 billion in unspent funds intended to support domestic manufacturing stability.
What works to stabilize manufacturing in volatile markets:
Price Floors for Strategic Materials: Similar to agricultural price supports for milk and other essential commodities, establishing minimum prices for critical materials like rare earth magnets, steel, aluminum and solar panels can protect domestic producers from market manipulation while ensuring stable supply chains.
Reserve Production Capacity Programs: Modeled after the M1 Abrams Tank program decision to keep the production line for the main battle tank open-even when the Army did not need new tanks at the time-in order to preserve critical manufacturing capabilities, skilled workforce, and specialized supply chains that would be costly or impossible to restart if shut down.
Part 3: Developing the Advanced Manufacturing Workforce
A recent NPR Planet Money investigation revealed a troubling paradox: despite reshoring efforts, many manufacturing positions remain unfilled due to skills gaps. Without addressing this third phase of manufacturing incentives, new production capacity and operational stability will be hamstrung by workforce shortages.
What works to build manufacturing talent:
State-Level Training Programs: Expanding "quick start" workforce programs that provide targeted training for specific manufacturing needs creates pathways for workers to fill high paying open positions. These programs can be rapidly deployed and customized to regional manufacturing needs.
Advanced Manufacturing Education: Supporting specialized programs at universities, like the Leaders for Global Operations program at MIT, develops the engineering and management talent needed to lead complex manufacturing operations in a technology-intensive environment.
The Urgency of Acting Now
The timing for implementing this three-part strategy couldn't be more critical. Current proposals in Congress would eliminate significant portions of manufacturing support across all three phases by rescinding unobligated funds for the Department of Energy's Loan Programs Office and clean manufacturing grants. According to the Department of Energy's Deputy Secretary David Turk, "Dozens and dozens of job-creating potential loans all across our country will be compromised if what's proposed is ultimately enacted." This would impact not just capacity building, but also operational stability and workforce development.
The keystone for America's industrial future will be a comprehensive strategy that addresses each critical challenge: building production capacity, sustaining operations through market volatility, and developing the skilled workforce needed for advanced manufacturing. By approaching these challenges systematically rather than piecemeal, we can create the conditions for a sustainable industrial renaissance. The question isn't whether we need incentives - it's how we can implement a coordinated strategy that effectively rebuilds America's industrial backbone for a dynamic future.
