Pannebecker represents a key part of Trump’s coalition, and his observation of the death of industry is entirely correct. Where he goes wrong is the idea that Trump will fix the problem. Trump’s policies will surely attract companies back to the US. Yet these won’t be companies United Auto Workers members will work in, or will want to work in. Manufacturing will return — but not Pannebecker’s kind of manufacturing.

What happened in places like Detroit is the consequence of one of the most powerful ideas of economics going horribly wrong: David Ricardo’s theory of comparative competitive advantage. The simplified version of his idea is that countries should voluntarily give up doing things they are good at for things they are better at. This is how the US and the UK got out of manufacturing. It is how Detroit lost car plants, and how China and Germany gained them.

There is one big problem with this idea. It is people like Pannebecker. Ricardo was right in aggregate: the winners of globalization won more than the losers lost. But what matters for politics is that there are more losers than winners. In the language of statistics: economists care about average incomes, or total incomes. Politics cares about median incomes. It is the median voter who swings elections.

While the diagnosis of what went wrong with hyper-globalization is not difficult to make, it is harder to think about what comes next. We live in a world created by a nine-year period of trade agreements that began with the North American Free Trade Agreement between the US, Canada and Mexico in 1992; continued with creation of the World Trade Organization in 1995; and was concluded by China’s accession to the WTO in 2001. Worldwide, these changes brought a massive expansion of global trade. In the US, they triggered industrial off-shoring. This was over 20 years ago, and the world of industry has since changed beyond recognition.

What old industry used to do is take delivery of raw materials like steel or plastics — the “product” referred to by Pannebecker — and work them into a finished product. Plants employed thousands, sometimes tens of thousands of workers. If you live in Scunthorpe, in north-eastern England, chances are that you are a steelworker, or that you have a steelworker in your family. If you lived in Detroit in the Sixties, you were either in the auto business or into music.

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Globalization did not only push companies out of the US and the UK. It changed the way industrial companies work. Modern manufacturing companies are quite unlike those industrial plants of old. It is best to think of them as global supply chain networks rather than companies with a plant and a workers’ canteen. West European manufacturers get their raw materials from China, and recently also from Russia. They get their intermediate goods, which are used in the production process, from eastern Europe and other parts of the Eurasian continent. Many of the plants you see in Germany are final assembly plants. The main job of these plants is to put the Made-in-Germany stamp on the finished product.

Where, after that press conference in the Rose Garden, does that leave European car makers, such as Jaguar, Land Rover, Audi, and Porsche, that sell cars in the US but do not have production plants there? To nullify the tariffs, they would have to build factories in the US, thus reinventing their entire supply chain. Some will do this, but many will not.

The supply chain revolution was the big event in industry in the last 30 years. But there will be another big industrial revolution soon: Industry 4.0. Version number one was the industrial revolution in the late 18th century. Number two was the invention of mass production. Then came the digital revolution. Industry 4.0 is about the digitalization of industry, and it will be epitomized by smart factories.

To understand the concept of the smart factory, recall the Internet of Things. That is the term for the bringing together of physical items into a digital network. Think about the refrigerator that knows the sell-by date of everything that’s inside it. Now apply this idea to a factory. Smart factories will be operated by robots, and they will be full of sensors that will be in constant communication. They will still need raw materials to make stuff, but they will be less reliant on complex global supply chains. This is why everybody in the world, not just Trump, is focused on securing supplies of critical raw materials like lithium and rare earth metals.

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But what really distinguishes Industry 4.0 from its predecessor is the reliance on massive volumes of data, which will be stored and processed in energy-hungry data centers of the kind only China and the US currently have the capacity to develop at scale. It will take another generation of mobile communications, 6G, to be able to transmit the data from the factory sensors to the data centers. The data centers will be powered by cheap energy and supervised by a digitally literate workforce. These factories will still employ people, but these employees will have an educational background closer to that of tech workers in Silicon Valley than that of Pannebecker and his former co-workers.

Of all countries in the world, none is better placed for Industry 4.0 than China. The US might get there too. But we Europeans are hopelessly behind. While we struggle with our rollout of 5G mobile communications, the Chinese are already developing 6G. The Chinese government has just approved the construction of a massive hydropower dam on the Yarlung Tsangpo River in Tibet. The expected output of this dam will be 60 gigawatts, which is about the average annual electricity consumption of Germany. The output will be roughly three times that of the Three Gorges Dam, hitherto the biggest of its kind. The construction of the dam will affect local populations, displace entire villages and submerge ancient monasteries. It will also impinge on the livelihoods of communities that live downstream in Bangladesh and India. But its biggest impact will be on how industry works.

There is no way that a Net Zero focused Europe can compete with this. Germany, for example, was one of the big winners of the global supply chain revolution. But it does not have cheap energy, especially after the closure of its nuclear power stations and the stoppering of its supply of cheap gas from Russia. Nuclear fusion could change the picture, but this is still decades away. Industry 4.0 is not going to wait that long. It will come soon, and it will be powered by dams, American fracking, nuclear power, and gas. If there is one Western country capable of exploiting the commercial advantage of Industry 4.0, it is Trump’s America.

I see a lot of wishful thinking among the macroeconomists and other commentators who keep telling us that Trump’s policies are bound to fail. The German poet Christian Morgenstern once wrote: “For, he reasons pointedly / That which must not, can not be.” I keep an open mind on whether Trump will fail or succeed. But if he succeeds, I am absolutely certain it will come as a total shock.

The most likely avenue for Trump to succeed is through Industry 4.0. It is a scenario that few of his critics have on their radar. This goes especially for economists who are primarily focused on the effect of tariffs on GDP. Their focus might lead us into drawing the wrong conclusions. I myself understood the economics of Brexit when I saw an obscure statistic, published by the Department of Work and Pensions in the UK, according to which the median British voter had suffered a fall of real disposable income in the 10 years leading up to the 2016 referendum. If you stared only at GDP, unemployment and the usual official metrics, you would not have seen this. The Ricardo-indoctrinated economics fraternity did not see Brexit coming, nor did it see the backlash to globalization.

Trump may well underestimate the difficulty of disentangling global supply chains. His tariffs are crude. But I think he is onto something. So was Joe Biden with his misleadingly-named Inflation Reduction Act, a large subsidy program to lure global industries to relocate to the US. Some companies will relocate to the US. Apple has already announced that it will step up production in the US. So has TSCM, the world’s largest manufacturer of semiconductors, based in Taiwan, and Eli Lilly, the pharmaceutical company. What will not come back is old industry, with its unionized shop-floor workers.

One of the 20 ex-colleagues Pannebecker took with him to Trump’s Liberation Day jamboree was Chris Vitale, a third-generation auto worker. He told the Detroit News that de-industrialization had hollowed out his community. This is why Trump got elected. But even if he succeeds in bringing industry back, I fear Vitale’s community may remain hollowed out.

These thefts were motivated by a phenomenon that commodity traders call a supercycle, meaning an extended period of high prices for raw materials. Since the Industrial Revolution, the world has seen five supercycles, coinciding with major bursts of economic development or war. Those manhole covers had become valuable because the price of iron, an ingredient for the production of steel, was surging. And most of the demand was coming from one country in particular. China was beginning its rise as an industrial giant.

Iron ore was the signal substance of Chinese growth — by 2024, its price was almost 1,000% higher than in 1995 — but all kinds of resources were sucked into the whirlwind: oil and coal, nickel and copper, soybeans and rubber and wool. In recent months, though, analysts have been announcing the end of the two-decade China supercycle. Chinese iron ore consumption is starting to come down, along with steel production. Some reckon its demand for oil may be peaking too. This does not mean that China will stop growing, but the economic patterns are shifting.

As Donald Trump’s tariff experiment now lurches into an escalating trade war with China, it is worth considering the epochal shift that brought us here. The supercycle was an epic chapter carved into the material substrate of our world, reverberating in every corner of the globe. It has raised China, in the space of a generation, from a poor and largely rural society to a superpower that is competing at the frontiers of technology, while controlling the most important resources for the future. It has transformed the developing world. It is implicated with the rise of Trump and, in various ways, with European weakness.

“If you don’t have steel, you don’t have a country,” declared Trump in 2018. The British government seems to agree, as it haggles with Jingye, a Chinese company, to save the UK’s last two remaining blast furnaces. These strands of history can be traced back to the start of the century, when those manhole covers were being cut up into scrap, shipped across oceans, melted down, and fed into Chinese steelmaking converters.

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What set the supercycle in motion? Until the Eighties, China still measured affluence through the humble quartet of a bicycle, a wrist watch, a sewing machine, and a radio. By the turn of the century, however, the country was reaching an inflection point. Its GDP was approaching $4,000 per person, the level at which a society’s demand for resources tends to leap upwards, as consumers buy more manufactured goods and governments build more infrastructure. Crucially, though, China’s transition was supercharged by global trade in the decades following the Cold War. With its enormous, cheap labor force, and its authoritarian government, it was perfectly positioned to become the world’s factory. Just as China was reaching the $4,000-per-head threshold, it gained admission to the World Trade Organization.

China began sucking in the world’s resources like a drain emptying a bath, turning them into vast cities and infrastructure projects as well as products to be shipped back out to the world. What happened next is best captured in numbers, since language can scarcely convey its sheer scale. In 1995, China’s economic output was one-tenth the size of America’s. By 2021, it was three quarters. Over the same period, the Chinese share of world manufacturing output went from 5% to 30%. Whereas just one-in-five Chinese people lived in cities at the turn of the century, today more than three in five do. So rapid was this urbanization that, between 2000-2010, China’s villages disappeared at a rate of 300 per day.

In 2003, China had no high-speed rail, but by 2011 it had the world’s biggest network. The country produced more steel in two years than Britain has in almost two centuries. Similarly, China poured more concrete between 2018-20 than the United States has done in its entire history. China melts and refines almost half the world’s copper supply. Chinese oil imports, at 11 million barrels per day, are more or less equivalent to the entire output of Saudi Arabia. China burns 30% more coal than the rest of the world combined, and its consumption is still rising. This means that the Chinese energy system is, by far, the biggest factor determining the future of the climate.

If global trade helped to set this engine running, the Chinese Communist Party pushed it into higher gears. Rather than directing the proceeds of growth towards social safety nets or consumer spending power, the CCP has, until recently, sought to funnel them back into material production. This strategy has helped China become utterly dominant in key supply chains underpinning the modern world, but it has also resulted in prodigious waste and, ultimately, instability. The country’s enormous, debt-swollen property sector, which went into crisis in 2021, threatens to drag the entire economy down. Dozens of concrete “ghost cities” are still awaiting residents, though some are so poorly constructed that they might collapse first. An overworked population faces one of the world’s most daunting fertility deficits. Polluted industrial areas have poisoned their residents and spawned ecological catastrophes.

But Chinese economic development has not only taken place within China itself. A large share of the resources fueling China’s growth has come from poor and developing regions of the world, whether Brazilian iron ore and soybeans, Congolese copper, Malaysian rubber, or Indonesian nickel. Many of these places have received big Chinese investments in infrastructure, and have become markets for Chinese construction firms and manufactured goods.

The results have been especially dramatic in the world’s poorest continent: Africa. China is the leading purchaser of a wide spectrum of African metals and fossil fuels, and it imports large quantities of African food products, timber and tobacco (China has almost one-third of the world’s smokers). Chinese companies, many of them state-owned, have built more than 300 dams, almost five-dozen power plants, and thousands of kilometers of roads and railways right across Africa. They have constructed an immense apparatus of pipelines and other facilities to access the petroleum reserves of more than a dozen African countries. That’s not to mention the airports, hospitals, and sports stadiums, or the nearly 200 government buildings.

This relationship has undoubtedly brought Africans some benefits, in the form of much-needed government revenues and basic infrastructure that would otherwise not exist. On the other hand, much of this development is designed for resource extraction rather than the needs of ordinary Africans. Much has been financed through exploitative debt arrangements, and much Chinese spending has merely lined the pockets of African politicians. China has stripped African forests for timber, ravaged African wildlife for traditional medicine, and supplied African governments with advanced tools for surveillance and repression.

In 2002, shortly before all of those manhole covers started to vanish, 1,000 Chinese workers arrived in Dortmund, a city in Germany’s Ruhr region. They had come to dismantle a large steelworks. Steel had been produced at the site since 1843, employing 10,000 workers at its peak. Now ThyssenKrupp, a German conglomerate, had agreed to sell the plant to the Chinese firm Shagang.

The enormous industrial edifice, complete with a seven-storey blast furnace, would be packed into crates and shipped 9,000 miles to Handan, a city on the Yangtze River north of Shanghai. It took the Chinese workforce less than a year, toiling 12 hours a day, seven days a week, with scant regard for health and safety precautions. Tens of thousands of parts were meticulously labelled and packed, down to individual screws, requiring some 50 container ships to move. The documents detailing the reassembly process alone weighed 40 tonnes.

Shagang’s steelworks in Handan — which also incorporated equipment from France and Luxembourg — is now the largest in the world. It has helped China’s steel output to surpass that of every other country combined. Back in Dortmund, the site of the former plant is unrecognizable. It has been redeveloped into the Phoenix-See, an artificial lake offering water sports, surrounded by restaurants and ranks of pristine white villas in the International Style. This post-industrial idyll has not, of course, managed to fill the void left by the city’s coal and steel sectors, which employed more than 75,000 people in 1960. When the journalist James Kynge visited Dortmund after the departure of the steel plant, he found widespread unemployment and social disintegration. “Do we look like yachtsmen to you?” a jobless steel worker asked. A local Lutheran priest had a starker message: “Our identity is lost.”

The implications of this story are not exactly what we might expect. Since 2015, when Trump first ran for the presidency, we have become familiar with his account of the “China shock”, or the impact of Chinese growth on manufacturing in the West. According to Trump, China had stolen American blue-collar jobs and grown rich selling America goods that should have been made there. Trump’s trade war against China during his first term was the opening salvo of the radical tariff program we are seeing today. This view of China’s rise has not gained the same political traction in Europe, but it has become a kind of conventional wisdom. It is because China makes everything, we assume, that areas like the Ruhr or northern England no longer do.

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But Western de-industrialization is a much longer story. It was well underway before the China shock arrived, thanks to competition from countries like South Korea and Japan, and it is still going on today. Those Chinese workers who came to Dortmund were dismantling the last vestiges of unprofitable industries which had been closing down for decades. Germany had already shifted to sectors like cars, machinery, and chemicals, where China was not initially a competitor.

The impact was greater in the US, where according to one commonly cited estimate, the China shock cost a million manufacturing jobs, and 2.4 million jobs in total, during the first decade of the century. Still, what made Trump’s pitch so politically potent was not the number of lost livelihoods, but their concentration in Rust Belt states that helped him to win election in 2016. These areas were suffering from a manufacturing recession at the time, but one that was caused by the dollar’s appreciation against the Euro, not by China.

If we want to understand how the China supercycle has reshaped and undermined the political economy of Western countries, we should focus not just on the losers, but on the winners. Chinese growth offered significant benefits to the Western business and governing classes, and these benefits ultimately made them complacent. In Europe especially, elites became tacitly reliant on China to help them avoid difficult choices. They did not want to acknowledge that their advantages were only temporary, and that they were storing up problems in the longer term.

China rose in a global trading system dominated by America, and American big business reaped the rewards. Multinationals like Apple and Walmart benefited from Chinese manufacturing, which was not only cheap but highly skilled and innovative, allowing them to develop new products and sell them around the world. In 2018, Forbes suggested that an iPhone would cost “in the $30,000 to $100,000 range” if Apple had to make it in the US, which may be an exaggeration but gets the point across. Likewise, business and financial interests poured capital into China to take advantage of the country’s growing market.

The wealth generated by this system incentivized the belief that, somehow, Chinese growth would not pose a major threat to America’s own power. This was despite clear evidence in the 2010s that China was rapidly scaling the technological ladder, while leveraging its own advantages in resources, production, and trade to secure a controlling position in the global economy. Since 2016, US politics has been overshadowed by these misjudgments, with both parties competing to appease the working class and trying to slow China’s advance.

A similar story can be told about Germany. The German car industry, which has played such an outsized role in European politics over the years, was another winner in China. The big three German carmakers — BMW, Mercedes and Volkswagen — together accounted for a quarter of the Chinese market in 2019. But they failed to anticipate that China would rapidly develop its own world-beating automotive industry, focused on EVs and software. In fact, in this and other important areas, China has now become a direct competitor. And Germany is ill-prepared for this challenge, since its earlier successes disguised an irresponsible political consensus that, in the name of fiscal restraint, has starved the country of much-needed investment.

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Even Europe’s moral aspirations look like a complacent fantasy when China’s role is taken into account. European politicians claim to lead the world in two areas: ensuring the welfare of their citizens, and protecting the environment. But in 2007, when the New York Times ran a report on the aftermath of the Dortmund steel transfer, it could already see that this model of virtuous prosperity was “illusory”. Europe’s clean air, the authors noted, was only possible because Chinese cities like Handan had become a nightmarish “miasma of dust and smoke”, poisoning their residents and driving up global CO2 emissions. Chinese steel mills produced three times more carbon dioxide than German ones, and did so in part to supply Europeans with cheap goods. As an economist at China’s Ministry for Commerce admitted, “the shortfall of environmental protection is one of the main reasons why our exports are cheaper.”

In other words, Europe built its green ambitions on the back of China’s rise as the biggest polluter in history. Britain is especially guilty here. UK governments have boasted about cutting the country’s emissions by about 40% since 1990, but when imported products are taken into account, the figure falls to 23%. Last October, to great fanfare, Britain marked the first day of coal-free electricity in its history. Yet this is basically irrelevant when global coal consumption, led by China, continues to reach new highs every year. Even the transition to renewable energy is being largely driven by coal. Everything from solar panels and electric vehicles to the metals used by green technologies are produced cheaply in China thanks to coal energy.

The solar panels now carpeting the English countryside also rely on the forced labor of Uyghur Muslims in the Chinese region of Xinjiang, where much of the world’s polysilicon is mined and processed. Meanwhile, China’s fishing fleets plunder the world’s oceans and its petrochemical factories pump out plastics for Shein garments, all to the benefit of European consumers.

Since January, the instability rippling across the world has been seen, understandably, as a result of the revolution taking place in the United States. The Trump administration has undermined old alliances and appeased old enemies, extorted trading partners and nakedly coveted the resources of other nations. Now it is trying to fashion a new economic order with the bluntest tools it can find. But even if America is responsible for the dramatic shape and pace of events, we should not lose sight of the dynamics operating in the background, dynamics unleashed by the supercycle.

The US has been trying to pivot its military forces away from Europe and towards Asia since the days of Barack Obama. The disregard in Trump’s circle for Ukraine and NATO is a more extreme expression of the same logic, which is ultimately dictated by the need to contain Chinese power. And recall that Joe Biden prosecuted his own trade war against China, raising tariffs on steel, aluminum, solar cells and EVs — the latter tariff was 100% — and tried to limit Chinese access to advanced computer chips. The Biden administration also coordinated Western investments in African railways and other infrastructure, as part of an effort to counter Chinese control of natural resources on the continent.

Likewise, Europe’s frantic efforts to regain a measure of autonomy are not only a response to Trump’s betrayal, but a belated attempt to gird the continent against Chinese economic might. The enormous investment packages recently passed by Germany’s parliament, reversing two decades of fiscal policy, are aimed at strengthening German industry as well as building defense capacity. European governments and the EU itself are reassessing environmental schemes that threaten security and economic competitiveness. Regulations on combustion cars are being relaxed, while carbon tax exemptions and the recent “clean industrial deal” actually protect polluting industries. If Europe wants to defend itself, then carbon-intensive sectors like steel may need to be subsidized after all.

Even the incipient sense of anarchy in the world is not entirely Trump’s doing. In recent decades, stability came not only from American supremacy, but from the structure of the supercycle, which anchored the world’s supply chains in China. But raw materials traders have long been gearing up for the next supercycle, which is now commencing. This one will be driven by the minerals used in renewable technologies and advanced computing. And rather than the stabilizing framework of American-Chinese cooperation, it will take the form of a competitive scramble for resources. Numerous countries will want access to lithium, cobalt, and nickel for batteries, copper for transmitting electricity, platinum for electronic components, and a host of exotic rare earths — gallium, palladium, neodymium and more — for the hardware that underpins artificial intelligence. They will also want oil for the tons of plastic that go into every wind turbine and electric vehicle.

The problem for Western countries is that, thanks to the last supercycle, China has a massive head start in this race. It controls two-thirds of all lithium and cobalt processing, almost 70% of rare earths, and around 80% of battery production. Nor is this only a material question. Western commentators sometimes imagine that industrial capacity can simply be summoned into being by relaxing planning laws and providing financial incentives. But advanced manufacturing requires deep pools of experience and skill, which China has developed over time and the West, in many areas, has not. As Apple CEO Tim Cook put it a few years ago, “in the US you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China you could fill multiple football fields.”

Look at Europe’s struggle to make batteries. Last year, around two decades after those workers came to Dortmund to dismantle the steel plant, another Chinese contingent was in the Swedish town of Skellefteå. This time they had come as experts, installing machinery for Northvolt, a beleaguered company that was being billed as Europe’s battery champion. As one engineer told the Financial Times, referring to China’s skill base, “they are established and they have already done it. So they’re just better. We are late to the party.” Northvolt went bust in March. China may not have cracked advanced semiconductors, but neither has America. In Arizona, efforts to kick-start an industry with Taiwanese assistance have been bogged down by a shortage of skilled workers.

Insofar as there is a consistent logic in Trump’s economic plans, it appears that he wants the US to be more like China — to have more heavy industry, more manufacturing jobs, more exports, and more self-reliance. Yet his tariffs are a self-destructive way to pursue these goals. They have already caused American manufacturing to seize up, because it relies on the very materials that Trump is making more expensive to import. As Michael Strain has pointed out, for every job making steel in the country, there are 80 jobs that use steel to make something else. And bringing back factories back to the US is not the same as bringing back jobs, since companies will seek to avoid the higher wage costs through automation.

If the China supercycle taught us anything, it is that the ability to make things depends on raw materials and supply chains far beyond a country’s borders. For all its industrial power, China too is vulnerable in this sense, and that is why it has invested so much effort in building up global networks through its Belt and Road Initiative. Trump, by contrast, prefers threats of conquest and the erratic theater of the “deal”. To compete in the next supercycle, America will need leaders with a more subtle sense of how to run an empire.