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Trade Policy at a Crossroads: Protectionism and Industrial Strategy

The empirical case against broad tariffs is well-settled — recent U.S. experience shows full pass-through to consumers, net job losses in downstream industries, and persistent negative output effects — but the harder contested question is whether targeted, performance-linked industrial policy can deliver durable industrial upgrading without capture or misallocation, a debate where East Asian evidence (including South Korea's battery supply-chain shift from 92% to 58% China-dependence without tariffs) challenges free-trade orthodoxy while market-oriented analysts dispute whether those models are institutionally replicable. Beneath this lies a structural tension the briefing names but does not resolve: the current bipartisan protectionist turn may be either a durable geopolitical realignment or a politically contingent moment, and that distinction determines whether the CHIPS Act, IRA, and similar programs are rational long-run bets or expensive rent-seeking with no longitudinal productivity data yet to judge them. Three gaps receive almost no sustained coverage and should shape how readers weigh any confident claim: the regressive distributional burden of tariffs on lower-income households, the unmeasured fiscal cost of industrial subsidies relative to their stated security benefits, and RCEP's cumulation rules — a structural workaround deliberately designed to undermine U.S. domestic-content logic that is nearly invisible in mainstream U.S. policy debate.

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