For years, China has been the global leader in manufacturing. Everything from technology to medical equipment is made in China. That is why it is so surprising that India displaced China as the number one manufacturer of iPhones. While the iPhone is one product, this trend demonstrates a potential strategy for the U.S. to diversify away from China. Doing so not only benefits us economically, but also for national security reasons.
The rise of China as a manufacturing powerhouse has been a story many years in the making. Deng Xiaoping's opening of the economy after the death of Chairman Mao opened the world to a source of labor that was as plentiful as it was cheap. China’s rise has been so rapid, especially since the turn of the century, that its share of manufacturing output rose from 9% of global output in 2004 to almost 30% in 2023.
Despite this dominance, there is a crack in the armor developing. A stagnating economy, draconian COVID-19 measures, and the trade war are all contributing factors in companies moving out of China. India, Vietnam, and Mexico are some of the countries benefiting from this. Nevertheless, China’s manufacturing prowess remains.
It is not just commercial items that China produces, but also goods vital to America’s national security. One example of this arose during the pandemic, when we learned how dependent the U.S. is on China for pharmaceuticals as well as Personal Protective Equipment (PPE). If China were an ally of the U.S., this wouldn’t be a problem, but the fact that China is a rival of the U.S. in the best of times is cause for concern.
The U.S. military also has supply chain concerns related to China. While we certainly don’t buy any equipment from China, we do buy rare earth metals from China. These metals are needed in the production of all kinds of military equipment, from fighter planes to missiles. China cut off the export of these critical minerals in its trade war with the United States. If the U.S. were to go to war with China, it would lose access to the number one producer and processor of these elements. Therefore, it is vital for the U.S. to find other sources for rare earths. Deals with places like Ukraine are a good start, but there is a long way to go in breaking China’s monopoly.
So how do we secure the supply chains of resources critical to both our healthcare and military industries? A good start is moving our manufacturing base to friendly or allied nations. A process sometimes called ‘friend-shoring.’ Like China, India has a large and relatively cheap labor force. Unlike China, it is not an enemy of the United States. By securing better trade deals and diplomatic ties with countries like India, we can move the manufacturing of critical goods to friendlier nations. To accomplish this, we need fewer tariffs and more deals. President Trump should consider using more honey and less vinegar to secure our relationship with the second most populous country on earth.
There are policy changes the U.S. can make to increase manufacturing at home. Contrary to popular belief, U.S. manufacturing is as productive as it's ever been. However, that doesn't mean there isn’t more to be done. By cutting regulations, the U.S. can make itself a more attractive market for investment in manufacturing.
Friend-shoring is also a vital part of reducing America’s dependence on China for rare earths. Australia, India, Vietnam, and Saudi Arabia are all countries that could supply the U.S. with these crucial resources. In addition, the U.S. should look internally as a source for rare earths. Opening a new mine in the U.S. takes longer than almost anywhere else in the world. Streamlining the process for approving new mines is vital to our national security.
The Chinese and U.S. economies are deeply tied, with the U.S. deeply reliant on China for critical products such as pharmaceuticals, PPE, and rare earth elements. Therefore, the U.S. must continue friend-shoring these industries to friendlier nations. Policymakers should capitalize on the rise of countries like India by deepening economic ties through trade deals. Our national security depends on it.
Matt Cookson is an alumnus of the Young Voices Contributor Program and was a Middle East History and Policy Fellow with Young Voices. He also works in the supply chain for a U.S. Defense Contractor. His commentary has appeared in the Mises Institute, Real Clear Politics, the National Interest, Providence Magazine, China Source, and the Idaho Freedom Foundation. You can follow him on X @MattCookson95.
