The Real Path to Industrial Renewal

For decades, Washington has tried to cushion the blow of globalization with job training and relocation subsidies. It hasn’t worked.

In 1978, a reporter found John Koruschak, a laid-off steelworker from Campbell, Ohio, returning home from California, where he’d searched in vain for work. After 25 years at a mill that once employed more than 4,000, Koruschak had received a gold watch—and then a pink slip. He scraped by on unemployment checks but couldn’t find work in the glutted local market. At 58, he realized that he needed retraining to switch industries. But available programs often steered workers toward ill-suited or low-paying jobs far from home. “I’d move,” he said, “if I can talk my wife into it.”

Koruschak didn’t know it, but he was among the first victims of a wave of plant closings that would sweep through the region, wiping out tens of thousands of industrial jobs. Some workers and families left in search of better prospects; others stayed and relied on government assistance, often for years, with little success even after retraining. By the late 1980s, as many as four in ten former steelworkers in the greater Youngstown area remained unemployed. Several attempts to restart the Campbell mill collapsed.

Global competition played a role—but it was far from the only culprit. Policy missteps, regulatory overreach, and political complacency helped hollow out the American industrial base. The trade adjustment programs launched in the 1960s proved weak and poorly targeted. Local leaders failed to adapt. And federal agencies piled on costly mandates even as industry struggled to survive.

By the time a political reckoning arrived, it came not from the traditional champions of labor but from an unlikely figure: Donald Trump. His promise to restore American industry—through an assault on establishment trade orthodoxy and the imposition of tariffs on foreign goods, accompanied by aggressive deregulation—has upended decades of bipartisan economic consensus. The tariffs may grab most of the headlines, but the long-term key to any American reindustrialization is clearing away outdated rules and building an economic environment that rewards investment and risk-taking here at home.

The 1962 Trade Expansion Act gave American presidents—beginning with John F. Kennedy, who championed the legislation—greater authority over tariffs, including the power to make significant cuts. Kennedy was heavily influenced by the Heckscher-Ohlin model of international trade, developed by two Swedish economists, which held that nations prosper by shifting from self-reliance to free trade, specializing according to their comparative advantages.

Kennedy reasoned that expanding free trade would bolster the economies of our allies. “A vital expanding economy in the free world is a strong counter to the threat of the world Communist movement,” he said. Kennedy also believed that American industry would thrive in the face of foreign competition. “A vast array of American goods, produced by American know-how with American efficiency, can compete with any goods in any spot in the world,” he declared. Still, to calm critics—especially labor leaders—he created federal aid for workers and firms harmed by open markets. “Those injured by that competition should not be required to bear the full brunt of the impact,” he said. “Rather, the burden of economic adjustment should be borne in part by the Federal Government.” For the rest of the decade, this confidence seemed justified: industrial jobs grew by more than 3 million, a 20 percent increase.

But beneath the surface, vulnerabilities were emerging that Kennedy and others failed to see. In the industrial heartland—especially the Northeast and Midwest—manufacturing jobs were already beginning to disappear. In New York State, then a national industrial powerhouse, employment peaked in 1952 at just over 2 million before entering a steady decline. By 1970, the state had lost about 250,000 factory jobs, even as the nation gained more than 3 million. That trend was part of a broader retrenchment across the mid-Atlantic states, where about half a million industrial jobs vanished between the early 1950s and the early 1970s. Major manufacturing metros were already in retreat: Buffalo lost roughly 44,000 jobs—one-third of its industrial base—between 1954 and 1972. Cleveland lost nearly 45,000; Pittsburgh, about 75,000.

Underlying these losses was a broad failure—from owners to workers to politicians—to grasp how quickly technology and competition, both domestic and foreign, were reshaping key industries. In steel, smaller, more agile plants using electric furnaces instead of coke ovens or blast furnaces began to dominate. New rivals with lower costs—including cheaper labor agreements—emerged in the American South and in Japan. One study found that steel-industry labor productivity in the Northeast and Midwest grew by just 2 percent annually starting in the 1950s, well below gains elsewhere. “By the 1970s,” the study noted, “the large U.S. steel companies had found themselves trapped in their old plants and hostage to a collective bargaining process that virtually guaranteed substantial real wage increases. . . . The result was stagnation and decline.”

Politicians in these regions built their agendas on the mistaken belief that local industries were stable enough to ensure economic security. In New York, Governor Nelson Rockefeller imposed a series of anticompetitive tax hikes in the 1950s and 1960s to fund ambitious infrastructure and social programs. In New York City, Mayor John Lindsay followed a similar path—even as the city, then home to more manufacturing jobs than any other U.S. metropolis, began hemorrhaging industrial employment. Officials downplayed the decline. In 1964, Rockefeller’s commerce commissioner, Keith McHugh, dismissed the loss of 94,000 city factory jobs, claiming that, “by any standard, New York is still the leading industrial city of the United States, if not perhaps the world.” Five years later, Rockefeller himself blamed the ongoing erosion of city industry on “traffic congestion” and insisted that manufacturing would continue to thrive statewide.

It didn’t. Since then, the city has lost some 800,000 manufacturing jobs and now plays only a minor role in American industry. The rest of the state has shed another 750,000. In 2006, gubernatorial candidate Eliot Spitzer likened parts of upstate New York to Appalachia, the chronically poor region stretching through the mid-Atlantic and South. “We have to deal with the population loss, with the continual decline,” he warned.

By the late 1970s, many of the illusions about America’s industrial dominance had begun to collapse. Surging energy prices—driven by the Arab oil embargo—combined with rising interest rates and rapid advances in industrial technology and product development abroad, especially in Japan, took a heavy toll on U.S. manufacturing. The decline of the steel industry in central Ohio typified the fallout. Within a decade, the three largest steel employers in the greater Youngstown area shut down, wiping out 41,000 industrial jobs. Even more troubling, by 1987, up to 47 percent of former steelworkers in the area remained unemployed, according to one study.

Just as American manufacturers were being squeezed by foreign competition and rising taxes, Washington launched a new era of aggressive regulation. The 1970 Clean Air Act supercharged federal oversight, imposing steep new costs on industry. Within a few years, major midwestern steel producers—including the owner of the Campbell, Ohio, mill that closed in 1978—faced hundreds of millions in fines and were ordered to make costly upgrades to meet environmental standards. In 1981, six steel plants, under EPA pressure, signed a consent decree requiring $350 million in pollution control investments. The price tag proved unsustainable. Several—including the Pittsburgh and Aliquippa Works—shut down soon after. The National Association of Manufacturers estimates that, for the past 40 years, the federal government has imposed an average of one new regulation per week on industrial firms.

Kennedy’s vision of retraining workers for new jobs quickly turned into a nightmare. Most displaced workers were in their forties or fifties, with a high school education at best, and had spent their entire careers at a single plant. Many rejected government programs once they realized that the training offered only entry-level skills—with no job guarantee. Among those who did enroll, fewer than half found employment, and many remained jobless six months after completing their courses. Some simply left town. Youngstown’s population shrank by 25 percent in less than a decade.

The fallout was devastating. Mortgage foreclosures became so common that local banks began offering free used furniture to entice buyers for repossessed homes. Out-of-town creditors swamped the local library with calls, trying to verify addresses of residents behind on debts. Books like Starting Your Own Business became libraries’ most frequently borrowed titles.

Those who remained after the major plant closings held out hope that someone would revive the shuttered facilities, using federal and state aid for economic development. In Youngstown, four development agencies drafted plans to revitalize the local economy and reuse the abandoned industrial sites. Proposals ranged from reopening the plants under worker ownership to launching entirely new ventures, including a commuter jet factory and a brewery. But little came of these efforts. According to a local consultant’s report, overlapping and competing initiatives often “cancelled each other out.”

A similar story unfolded in Canton, Illinois, where prosperity had long depended on a massive International Harvester plant that once employed 3,000 workers. In mid-1982, after a prolonged labor strike and a drop in demand for farm equipment—partly due to President Jimmy Carter’s grain embargo on the Soviet Union—the plant shut down. Harvester moved its remaining operations to a smaller facility in Canada. The state designated the area an enterprise zone and sought financing, first for Harvester and then for potential buyers. Eventually, a small firm supplying parts for companies like Caterpillar bought the plant, employing just 200 people—less than a tenth of the original workforce. A few years later, that company folded, and the town, owed $400,000, seized the facility.

As manufacturing losses deepened and spread into new sectors—including apparel, textiles, and automobiles after the 1994 North American Free Trade Agreement—job losses surged in regions previously spared, such as the Southeast. By some estimates, NAFTA cost the U.S. auto industry 350,000 production jobs in a decade. Textile mill employment fell from 477,600 in 1994 to 236,900 a decade later.

Meantime, retraining programs grew even less effective. By 2000, the Government Accountability Office identified about 300 communities where at least 500 laid-off industrial workers qualified for trade assistance due to job losses tied to free trade. From 1995 to 1999, an average of 165,000 workers participated in these programs annually, with the federal government providing $1.15 billion yearly in income support as they retrained. But the programs often mismatched training to worker needs. Many workers were in their mid-forties, with only a high school education, and were funneled into fields like information systems or nursing—where jobs required more preparation than the two years allowed. Many workers needed remedial education first. The surge in demand during the 1990s strained program funding, forcing some workers to wait for new appropriations. The system regularly missed its 40-day processing deadline. “Because of these and other challenges,” the GAO concluded, “training is unlikely to complete the match between these workers and the kinds of jobs available in the current economy.”

The news only got worse for factory workers with the so-called China Shock—China’s entry into the World Trade Organization in 2001 and the U.S. granting it most-favored nation status. This opened the floodgates to a wave of inexpensive imports from China’s vast industrial base. While American consumers benefited from lower prices, the influx delivered another blow to already struggling industrial communities.

Studies estimate that the surge in Chinese imports cost U.S. manufacturers more than 2 million jobs, particularly in sectors like vehicle manufacturing, textiles, and electronics. Though industries such as retail and health care expanded amid the influx of cheap goods, recent research suggests that industrial communities and their workers have been net losers. Areas hit hardest by Chinese imports saw increases in unemployment and trade adjustment payments, disability claims, early retirements, and enrollment in publicly subsidized medical programs. Even in regions where job numbers eventually rebounded, research by MIT economist David Autor and colleagues shows that the new positions tended to pay less and were often filled not by laid-off factory workers but by younger Americans entering the workforce—or by lower-wage, foreign-born laborers.

Trump has built his electoral success in part by appealing to blue-collar workers. One reflection of that appeal is his aggressive stance on trade, targeting both NAFTA partners—Mexico and Canada—and China. During his first term, he imposed a 10 percent tariff on Chinese goods and labeled NAFTA “perhaps the worst trade deal ever made,” ultimately renegotiating it into what he called a fairer agreement. In his second term, he has used tariffs more broadly as a negotiating tool, pressuring Mexico and Canada to curb the smuggling of illegal narcotics into the U.S.

Vice President J. D. Vance has emerged as a leading voice for reindustrialization. At a March 2023 hearing, during questioning of Federal Reserve Chairman Jerome Powell, then-Senator Vance pointed to America’s struggles in scaling up artillery production to support Ukraine—while Russia was reportedly firing 20,000 shells a day. “We have a lot of financial engineers and a lot of diversity consultants,” Vance said. “We don’t have a lot of people making things.” He also argued that one downside of the U.S. dollar’s status as the world’s reserve currency is that, while it boosts consumer purchasing power, it “comes at a cost to American producers” by making foreign labor and goods comparatively cheaper.

Tariffs fit squarely within the political coalition that Trump has built. A December poll found Americans evenly split on the issue—42 percent in favor, 41 percent opposed—but support jumped among those without a college degree, who backed tariffs by nine points. Blue-collar white voters were even more enthusiastic, favoring them 52 percent to 31 percent. That aligns with their voting behavior: exit polls show as many as two-thirds supported Trump last November.

Most economists, however, remain rightly skeptical of tariffs, viewing them as blunt instruments that often raise consumer prices without delivering long-term gains in employment or productivity. Investors are wary, too. The extensive new tariff system that Trump imposed in April triggered a major sell-off of equities on Wall Street and across the globe, though markets rebounded as Trump made trade deals with individual nations. Still, their political appeal endures—especially in regions hollowed out by decades of factory closures.

Trump has staked his second term heavily on tariffs, urging both supporters and skeptics to judge his trade policies by whether manufacturing jobs return. But reviving industry will take more than confronting unfair global trade practices. Federal and local policies share considerable blame for deindustrialization—particularly the steady buildup of regulation. This burden has grown even as workplaces have become safer and the environment cleaner. In a recent survey, manufacturers reported spending $29,000 per employee annually on regulatory compliance, including $17,000 just for environmental rules. And those costs are rising—not from capital investments, firms say, but from mounting paperwork and reporting demands. Agencies like the EPA continue to tighten administrative requirements, even as atmospheric levels of lead, carbon monoxide, and sulfur dioxide have dropped by more than 75 percent since the Clean Air Act passed in 1970.

Officials in Trump’s first administration recognized the toll that federal policies had taken on industrial output. An internal study pointed to key regulatory agencies—the EPA, Department of Labor, and Equal Employment Opportunity Commission—as major obstacles. In response, the administration launched efforts to cut red tape, including shortening project approval times and requiring cost-benefit analyses before issuing new regulations. Trump also endorsed and cultivated partnerships with businesses to educate a twenty-first-century industry workforce through programs like apprenticeships, which prepare students to work in today’s increasingly automated, sophisticated manufacturing environment—a crucial component in making industrial America more competitive.These steps, along with the 2017 tax cuts—slashing the corporate rate from 35 percent to 21 percent and promoting full expensing for capital investment, moves designed to spur factory expansion and onshore production—boosted business confidence, as did expanded oil drilling to lower energy costs. When Trump took office, about 60 percent of manufacturers had a favorable view of the business environment; by mid-2018, that figure had risen to 95 percent, before slumping as Covid shutdowns began in early 2020.

The Biden administration quickly reversed course, rolling back many of Trump’s reforms—including suspending requirements that agencies conduct cost analyses before issuing new regulations. It also scrapped high-profile projects favored by industrial firms, such as the Keystone Pipeline. In a lengthy report on boosting blue-collar employment, Biden officials emphasized large public investments in “green” industries, funded by hundreds of billions in deficit spending and subsidies to sectors like chip manufacturing. But these initiatives came with costly strings attached, including mandates for union wages and diversity hiring targets, which drove up expenses rather than reducing them.

Many programs, such as Biden’s $5 billion effort to build thousands of electric-vehicle charging stations, delivered little in terms of actual infrastructure or sustained employment. By the end of his term, only 63 percent of industrial firms rated the business environment favorably.

One lesson Trump seems to have drawn from his first term is that reform must be deeper—and harder to undo. The Biden administration’s dismantling of many of Trump’s earlier efforts to reduce industrial costs was aided by a kind of regulatory “deep state”: entrenched bureaucrats across federal agencies who resist changing long-standing, often outdated, rules. The National Association of Manufacturers estimates that nearly 298,000 federal regulations affect industrial firms, including 45,000 related to production and another 21,000 tied to shipping and distribution.

In Vance, Trump has a vice president who shares his reindustrialization agenda and recognizes the scale of the regulatory challenge. “There’s a lot you can do on the regulatory side—make building nuclear facilities easier, make building natural gas pipelines easier,” Vance has said. Some of Trump’s appointees are already at work. Most notably, EPA Administrator Lee Zeldin launched a sweeping review earlier this year to streamline agency rulemaking and reduce bureaucratic hurdles—including reforms to emissions standards.

A recent survey of the CEOs of industrial firms found a growing interest in bringing jobs back from overseas—with 81 percent saying that they are now considering so-called reshoring, compared with 68 percent in 2022. “President Trump’s economic policies are simple: if you invest in and create jobs in America, you’ll be rewarded. We’ll lower regulations and reduce taxes,” Vance says.

While tariffs may energize Trump’s working-class base, genuine industrial renewal will depend less on trade barriers than on sweeping domestic reforms: cutting red tape, modernizing regulations, and creating a competitive climate for investment and production.

Top Photo: Remnants of a building on the grounds of the former U.S. Steel McDonald Works mill, Campbell, Ohio, 2016 (Luke Sharrett/Bloomberg via Getty Images)