Trump’s trade war meets the ashes of America’s factory economy
With President Trump launching a trade war to reindustrialize the U.S. economy, the long decline of America’s manufacturing base has come into sharper focus, carrying steep economic and social costs. Much of that lost industrial capacity has shifted to China, which has been a major beneficiary of global manufacturing growth.
The Guardian recently compared levels of “extreme poverty” in China and the United States, tracking the share of people living on less than $3 per day using data from the World Bank.
In the early 1990s, nearly 80% of China’s population lived below that extreme-poverty line. Since then, the rate has fallen steadily and dramatically, reaching near zero by the late 2010s, reflecting decades of rapid economic growth, industrialization, and urbanization.
By contrast, the U.S. poverty rate under the same threshold has remained low but largely stagnant, fluctuating between roughly 0.5% and 1.2% over the past three decades, with periodic spikes during times of economic stress.
While the comparison has drawn criticism over the use of poverty benchmarks, Jostein Hauge of the University of Cambridge argued that the methodology is consistent. “The methodology appears to be the same for both countries,” Hauge wrote, adding that the report mirrors the figures presented in the World Bank data set.
The real story, however, is the rapid rise in U.S. industrialism compared to America’s apparent stagnation.
The human cost of America’s manufacturing decline
The United States was once a global industrial powerhouse, particularly across the so-called Rust Belt, where industries such as automotive manufacturing, steel, machinery, and chemicals formed the backbone of regional prosperity.
However, decades of manufacturing decline have fueled population loss in many former industrial cities and helped drive lower incomes, rising poverty, and widening inequality, especially among workers without college degrees.
A 2021 study from the Massachusetts Institute of Technology examining the racial impact of manufacturing losses found similar patterns across demographic groups. The research linked factory closures and industrial decline to falling wages, weaker employment outcomes, lower marriage rates, declining home values, and higher poverty.
Against this backdrop, the administration of President Trump made reindustrialization a core pillar of its economic agenda, arguing that globalization and free trade hollowed out U.S. manufacturing.
By the second quarter of 2025, manufacturing’s share of U.S. gross domestic product had fallen to 9.4%, according to data from the Federal Reserve Bank of St. Louis. That figure stood above 13% before the 2008 financial crisis.
When the crisis hit, America’s manufacturing base contracted sharply, and despite periods of recovery, the sector has never fully regained its former weight in the economy.