The decline in U.S. manufacturing isn't just about labor costs. A crucial, overlooked factor is the disparity in savings. While Americans consumed, nations like China saved and invested in capital goods like factories, making their labor more productive and thus more attractive for manufacturing investment.

The belief that a country can innovate while others produce is a fallacy. Innovation is a consequence of production; solving small, banal production problems leads to revolutionary breakthroughs. By outsourcing manufacturing, the US has seeded its innovative capacity to rivals like China, who graduate from production to creation.

The trend of moving manufacturing to countries like Mexico or Vietnam to avoid China tariffs is often driven by Chinese companies themselves. They establish clone factories abroad, sometimes with Chinese labor, meaning the economic benefits largely still flow back to China.

Contrary to policy goals, tariffs on China didn't bring manufacturing jobs to the US. Data shows Chinese goods were just rerouted through third-party countries like Vietnam and Mexico, which in turn imported their components from China. This added complexity and cost without boosting US jobs.

Wage stagnation is not accidental but a result of two concurrent policies. By sending manufacturing jobs overseas and simultaneously bringing in low-wage labor, corporations create a market where domestic workers lose nearly all leverage to demand higher pay for remaining jobs.

The Western belief that free trade would cause authoritarian states like China to liberalize has proven false. Instead, this policy created a powerful manufacturing competitor whose interests diverge from the West's. The current era of deglobalization is an unwinding of this flawed foundational premise of the post-war order.

Despite significant geopolitical risks and domestic pressure to decouple, American companies cannot afford to exit the Chinese market. China is where global competitive standards are established and industry winners are decided. Leaving means becoming globally irrelevant and uncompetitive.

A flat tariff on imports makes complex manufacturing with numerous cross-border steps prohibitively expensive. It becomes cheaper to move domestic production steps out of the tariff zone and import the finished good only once, leading to the deindustrialization of high-skilled jobs.

The shift away from the post-Cold War trade system started well before Trump. As early as 2009, the Obama administration recognized that the Doha Round framework was unworkable with China's economic model and began warning Beijing that the 'benign international environment' it relied on was at risk.