America's future lies in innovation — not factories
US President Donald Trump has put tariffs aggressively back on his policy agenda in his second term, reigniting debates about America’s ability to reclaim its industrial past through protectionist policies. The administration argues tariffs will level the playing field, shrink the trade deficit, and restore jobs lost to globalisation. But, as portfolio manager RASHAAD TAYOB argues, America’s future lies in innovation, not factories.
Tariffs failed to meaningfully rebalance trade or revive US manufacturing during Trump’s first term. While certain sectors briefly benefited, overall gains were undone by supply-chain disruptions, retaliatory measures, and rising consumer prices. Investors hoping for a renaissance in American manufacturing are likely chasing a mirage. I believe that markets are underestimating the costs of this protectionist strategy.
The popular narrative that the US can restore its post-war manufacturing dominance is fundamentally flawed. America’s post-World War II industrial supremacy was never sustainable. It was a temporary anomaly created by the destruction in Europe and Asia. Once the world recovered and economies like China and India entered global markets, America’s share of manufacturing inevitably shrank. Much of this shift was driven by the rise of the Global South (see Did You Know?). History teaches us that wealthy economies naturally evolve from industrial production towards high-value services and innovation.
Today, the US faces structural — not cyclical — headwinds. Tariffs won’t reverse decades of economic transformation. Instead, protectionism risks embedding inefficiency, raising prices, and stifling growth. Investors should therefore be cautious about exposure to US companies depending on domestic manufacturing revival, as trade barriers may produce short-term gains but long-term losses.
True economic prosperity lies in innovation, not protectionism. America’s historical strength has always been its ability to develop new, high-value products and services that the world hungrily consumes. But domestic policy missteps are eroding this competitive advantage. Declining public investment in research and development, entrenched corporate monopolies, and policy stagnation have diminished America’s innovative edge.
Federal R&D spending as a percentage of GDP has fallen sharply — from nearly 2% in 1965 to less than 0.7% today — coinciding with the significant reduction of US manufacturing share globally. At the same time, established industries in finance, healthcare, and education have grown powerful through regulatory capture rather than innovation and genuine competition.
For the US to regain a competitive advantage, it must pivot decisively towards cutting-edge sectors like artificial intelligence, biotechnology, and clean energy — areas where it can genuinely lead globally. Attempting to reclaim low-cost, high-volume manufacturing from economies like China is misguided and self-defeating. China is already taking the lead in many of these sectors — from electric vehicles and renewable energy to advanced manufacturing and now artificial intelligence — challenging the notion that America still holds a natural advantage.
For investors, this suggests opportunities lie not in traditional manufacturing but in innovative companies with high-quality, global franchises able to sustain long-term growth through technological advancement and market leadership. Foord’s portfolios reflect this thinking — we maintain selective exposure to global innovators with sustainable competitive advantages, rather than companies banking on artificial trade barriers or unsustainable protectionist measures.
Ultimately, America’s economic future and market opportunities depend not on turning back the clock to factory floors, but on embracing and investing in innovation-led growth. Tariffs promise short-term political wins but deliver long-term economic pain. Investors must look beyond simplistic protectionism to find genuine value — exactly as Foord seeks to do.