The Green Industrial Divide: A Race America Keeps Re-Starting
A fault line of U.S. industrial policy runs through the intersection of national security, climate ambition, and critical infrastructure. The Trump Administration’s industrial policy marks a seismic rupture, restoring reliance on fossil fuels and sidelining clean energy. Policymakers have operationalized this shift through slashed funding for renewable energy research, elimination of tax incentives and subsidies, tariffs on wind turbines and essential inputs, and the use of transactional diplomacy. Together, these measures entrenched a model of “energy dominance” that defined security in opposition to sustainability. This framing obscures a fundamental reality: ceding leadership in clean energy technologies means dependence on adversarial supply chains for rare earth elements, advanced batteries, and grid infrastructure that underpin both the defense industrial base and energy infrastructure. The converging pressures of geopolitical competition and climate change demand a green industrial policy that embeds both security and sustainability as the twin pillars of a resilient U.S. industrial strategy. Otherwise, the result is strategic paralysis as the People’s Republic of China (PRC) advances.
Policy Whiplash: Funding Reversals and Strategic Drift
The Biden Administration bet that integrating decarbonization with industrial policy could restore U.S. technological leadership. The Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) represented the largest federal clean energy investment in history—modernizing the grid, funding research into emerging technologies, and using tax credits to drive private capital into manufacturing. Clean energy investments were framed as critical to national security, linking climate policy to industrial and defense strategy.
The strategy began to show results: Deployment accelerated. Domestic manufacturing expanded. Tens of thousands of jobs followed. Critics argued the measures distorted markets, fell short of climate targets, and had uneven effects across the nation. The direction was clear: build capacity, attract investment, and compete with the PRC.
That foundation crumbled within months. Upon taking office in 2025, President Trump signed Executive Order 14154, which paused clean energy funding and signaled a return to fossil fuels. Congress followed, accelerating the sunset of wind and solar tax incentives, terminating electric vehicle credits, and clawing back $27 billion through budget reconciliation.
The Department of Energy announced plans to cancel over 600 awards totaling $23 billion. By October 2, 2025, more than 300 grants had already been terminated. These projects spanned energy generation, grid infrastructure, and advanced manufacturing—the building blocks of industrial competitiveness. Julie McNamara of the Union of Concerned Scientists warned the cuts would “undermine grid reliability, deepen fossil fuel dependence, and hamstring the country’s capacity to lead on the technologies and jobs of the future.”
This is not just a policy disagreement. It is institutionalized whiplash. Markets cannot plan when administrations reverse course every four years. Companies cannot invest when subsidies vanish, and tariffs appear without warning. Supply chains cannot stabilize when demand signals swing between budgets. By contrast, the PRC presents a much more consistent industrial posture, yielding substantial results.
Beijing is consolidating dominance across photovoltaic cells, lithium-ion batteries, critical mineral refining, and next-generation technologies. The latest milestone has been advancements in hydrogen electrolyzers needed to produce low-emissions hydrogen and decarbonize critical sectors, such as petrochemical refining and steel-making. These hydrogen electrolyzers may even inadvertently hand the PRC a competitive advantage in carbon-intensive exports, especially in European markets subject to a carbon border adjustment mechanism.
Made in China 2025, which codified its industrial strategy, embraces the green transition and rests on consistent state investment and coordinated planning across decades—not election cycles. While rising fiscal and financial vulnerabilities have accompanied these technological advances, their industrial might remains unquestioned. The PRC continues to capture market share. The United States debates whether climate change is real.
Tariffs: Industrial Self-Sabotage
Beyond program cancellations and tax reversals, tariffs have emerged as a central instrument in the administration’s trade and industrial policy. Section 232 of the Trade Expansion Act of 1962 authorizes the President to impose tariffs on imports identified by the Bureau of Industry and Security (BIS) as posing a threat to national security. BIS opened investigations into wind turbines and processed critical minerals, signaling potential tariffs that could raise costs and delay renewable energy deployment. However, in both cases, tariffs would be imposed without viable domestic alternatives, risking deeper entrenchment of the vulnerabilities they claim to address.
On August 13, 2025, the Department of Commerce initiated a Section 232 review of wind turbines and related components. The investigation targets an industry already reeling from subsidy eliminations, project cancellations, and existing tariffs. New tariffs would compound these pressures, raising equipment costs for an industry operating on razor-thin margins.
The stated rationale invokes national security concerns about foreign dependency. However, in 2024, 83% of imports came from allies—Mexico, France, Germany, India, and Denmark. The United States lacks the domestic capacity to replace them. Manufacturing turbines requires precision casting facilities, specialized steel production, rare earth magnets for generators, and blade fabrication plants—infrastructure that takes years to build and requires sustained policy support. The IRA had begun seeding this capacity through manufacturing tax credits and loan guarantees. Canceling those programs while imposing tariffs eliminates the bridge between current dependency and future autonomy, making tariffs a tax on dependency rather than a path to independence.
If wind turbines reveal a contradictory policy, critical minerals expose a more profound strategic vulnerability. The PRC dominates the refining of 19 of 20 strategic minerals, a dependency that took Beijing decades of strategic investment to create. Breaking it will require at least a decade of sustained commitment to domestic mining, processing infrastructure, and workforce development. In both instances, the administration imposes premature tariffs as capacity-building efforts produced initial gains but not their intended long-term impact.
Instead, the administration must prioritize existing mechanisms to increase competitiveness: streamline permitting processes, extend tax incentives, support workforce development, and invest in research and development. The transition between Presidents Biden and Trump undermined consistent implementation, resulting in mixed outcomes. Industry groups have recommended delaying the imposition of tariffs for three years to allow manufacturers to retool existing supply chains and alleviate current dependencies.
President Trump has already spurred investment from the Department of War and the Department of Energy and negotiated agreements with Japan, Australia, Malaysia, and Thailand that promise to accelerate the processing and development of critical minerals. A reactive trade policy cannot replace a forward-looking industrial policy, one that takes time and stability to build. Abroad, the same reactive impulse reverberates.
Transactional Diplomacy: Exporting Fossil Dependence
Tariffs are a dual-use policy tool: designed to ‘protect domestic manufacturing’ and coerce partners and allies. These transactional deals extract concessions from allies and partners, often at the expense of soft power, and simultaneously export the administration’s fossil-fuel-centric agenda. Short-term gains are prioritized over long-term industrial strategy.
On July 27, 2025, President of the European Commission Ursula von der Leyen and President Donald Trump announced the Framework on an Agreement on Reciprocal, Fair, and Balanced Trade, following negotiations centered on reciprocal tariffs. The deal lowers tariff barriers, calls for greater economic security cooperation, and reinforces fossil fuel exports and supply chains.
The agreement obliges the European Union (EU) to procure liquefied natural gas (LNG), oil, and nuclear technology products valued at $750 billion by 2028. However, economists have noted that the region’s demand peaked years ago and will fall short of the $250 billion annual target. This raises serious questions about the feasibility of meeting the Framework’s commitments.
At the same time, these purchase commitments clash with the EU’s green energy transition and even risk restoring fossil fuel dependency. Current efforts face significant investment and technological gaps. The European Central Bank estimates that the total investment shortfall between 2025 and 2030 will exceed €2 trillion, equivalent to around 2% of the EU’s GDP. Meanwhile, the PRC dominates manufacturing for lithium-ion batteries and photovoltaic cells, capturing over 80% of the market. The agreed Framework only exacerbates these shortfalls and leaves the continent weighed down by dependencies between Russia, PRC, and the United States.
The United States risks replacing cooperation grounded in values with transactions driven by leverage. European leaders have characterized it as a “dark day” for Europe, or the “least bad alternative” to a no-deal scenario. Such critiques highlight a growing trend in which the United States is no longer considered an ally but rather a necessary partner, revealing fractures in alliances that have underpinned America’s global influence.
A comparable dynamic emerged in the administration’s dealings with Japan. President Trump leveraged tariff threats to secure concessions that would otherwise be politically and economically untenable for Tokyo. Prime Minister Ishiba later resigned following his party’s electoral defeat, partly reflecting public discontent with his handling of relations with the United States.
His successor, Prime Minister Takaichi and President Trump have since fleshed out the previous framework agreement. She agreed to have the Japanese government invest up to $550 billion in the United States’ energy and LNG infrastructure. The resulting outflow of capital not only risks importing inflation into Japan but also represents a scale of capital that may test U.S. investment screening regulations.
Taken together, these cases represent a fundamental break from the Washington Consensus that shaped U.S. economic statecraft for three decades. The United States championed market liberalization, rules-based trade, and multilateral institutions. It now deploys bilateral coercion. This shift erodes not just economic influence but ideological credibility, the soft power that made American leadership sustainable.
Strategic Realignment: Toward Durable Industrial Policy
These contradictions are avoidable. They stem from treating industrial policy as a lever for political advantage, rather than a framework for strategic positioning. Realignment requires three fundamental shifts redefining industrial policy.
First, the United States must embrace a consistent, consensus-based industrial strategy. The National Defense Industrial Strategy recognized that industrial policy operates on a decade-long horizon, while democratic accountability spans two- and four-year cycles. Institutional mechanisms are needed to insulate core investments from administrative reversals. It means structuring commitments through instruments that survive transitions—multi-year appropriations, statutory requirements for program cancellation mechanisms, and bipartisan oversight to enforce continuity. Though politically difficult, these measures are strategically necessary.
Second, sequence trade tools with capacity-building. Tariffs imposed without domestic alternatives do not offer a path to autonomy. The administration’s critical mineral agreements with Japan, Australia, Malaysia, and Thailand demonstrate recognition that breaking Chinese dominance requires partnership and time. That logic should extend to trade policy: current and future administrations must delay tariff implementation until a strong domestic capacity has been established.
Third, the United States must securitize clean energy and green technologies, framing investments as critical to national security and competitiveness, rather than as climate policy. Climate change is one of the greatest threats confronting the United States. While politically contested stateside, our allies recognize this threat and have embraced clean energy. By ceding leadership in clean energy technologies, the United States risks creating a strategic European dependency on the PRC, nurturing a strategic ambivalence in Brussels toward Beijing, and weakening transatlantic alignment.
The United States faces a pivotal choice: continue oscillating between fossil fuel priorities and green ambitions, or adopt a forward-looking, bipartisan industrial strategy that secures technological leadership, strengthens alliances, and safeguards national security. Without such a strategy, policy whiplash will persist, vulnerabilities to adversarial supply chains will deepen, and America risks ceding not only markets but strategic influence to the PRC. A durable industrial policy is not just an economic imperative—it is a strategic necessity for a country seeking to lead in the 21st century.
Views expressed are the author’s own and do not represent the views of GSSR, Georgetown University, or any other entity. Image Credit: Langithitam, Canva