Current US policy is reactive, fixing compromised supply chains like semiconductors. A proactive 'offensive' strategy would identify nascent, critical industries (e.g., humanoid robotics) and build the entire supply chain domestically from the start, securing a long-term economic and national security advantage.

Vulnerabilities like semiconductor dependency on Taiwan or cloud provider concentration are not accidents. They are the logical result of a bipartisan, market-driven focus on efficiency and shareholder value. This pursuit has systematically dismantled redundancy and created fragile, single points of failure across the global economy.

Blindly outsourcing manufacturing based on "comparative advantage" erodes a nation's knowledge base and creates supply chain choke points. When geopolitical rivals control critical resources like rare earth metals, the economic advantage of globalization transforms into a severe national security risk.

Instead of pure defense, a proactive, alliance-based 'counter-coercion' strategy is needed. This involves sharing industrial intelligence to identify and hold an adversary's own economic choke points at risk, creating a credible threat of retaliation that deters them from using economic coercion in the first place.

US policy and funding are often drawn to high-profile, 'sexy' areas like AI. However, the most pressing vulnerabilities lie in 'unsexy' domains like munitions production volume and basic manufacturing capacity. This focus on the frontier neglects the foundational industrial base required for sustained conflict.

Policymakers find it easier to implement offensive measures like sanctions because they appear decisive. In contrast, building domestic industrial resilience is a harder political sell, as it requires significant, long-term spending with no immediate, tangible benefit to voters until a crisis hits.

Government intervention is most effective when targeting industries that meet three criteria: they must be critical to national security or the economy, compromised by foreign dependence or choke points, and fundamentally changeable through targeted financial incentives that can shift their long-term economics.

The Fed's policy of raising interest rates to combat consumer inflation has the unintended consequence of making long-term, capital-intensive industrial projects unviable. This hollows out the manufacturing base and prevents the reshoring of critical materials processing essential for US security.

The Federal Reserve under Kevin Warsh is expected to pivot from its independent, inflation-targeting mandate. It will likely become an integral part of US economic statecraft, aligning its policies with national security and strategic industrial goals, a significant change from past regimes.