US “National Power Industries” Are in Deep Jeopardy; Washington Needs New Strategy to Counter China’s Strategic Threat, New Report Warns
WASHINGTON—China is engaging in a concerted industrial war against the United States, and the United States is in grave danger of losing its geostrategic advantage unless Washington adopts a new strategy to strengthen a select group of advanced “national power industries” that underpin the country’s economic strength and national security, according to a new report from the Information Technology and Innovation Foundation (ITIF).
“America faces an existential challenge from China’s systematic campaign to dominate the advanced industries that enable national power in the 21st century,” said ITIF President Robert D. Atkinson, who authored the new report. “This is not normal economic competition between market economies. China is orchestrating a multi-decade campaign to displace U.S. industrial capabilities, weaken allied nations, and reshape the global order under CCP leadership. Unless the United States reforms its techno-economic and trade policies to reflect that some industries matter far more than others, it will slide into second-tier status while China converts dominance in these industries into geopolitical supremacy over the West.”
ITIF’s new report provides an analytical framework for the industrial war with China and enumerates the stakes, including the Chinese Communist Party’s (CCP) intent. In that context, the report proposes the concept of “national power industries,” classifying U.S. industries into four categories based on their relative importance: defense industries, industries that produce dual-use technologies used in both military and commercial applications, “enabling” industries that support the broader industrial commons, and nonstrategic industries.
The report critiques the failings of prevailing policy doctrines that dominate Washington debates on the economy, industrial development, and trade. It concludes by drawing on corporate strategy literature to outline what a coherent and effective strategy to avoid losing the national power industry war with China should look like, and it examines the practical political economy of implementing such a strategy.
“National power in the 21st century depends on strength in a specific set of industries. Global leadership in those industries allows nations to project military strength and wield economic leverage,” said Atkinson. “But the policy debate about China is dominated by international relations experts who downplay the nature and stakes of techno-economic and trade wars—and an even deeper problem is that the prevailing economic policy doctrines in Washington are fundamentally mismatched to this era of national power industry competition. So, America is starting in a losing position.”
In a companion report, ITIF shows that, from 2007 to 2022, America’s “enabling” and dual-use industries—the core of its manufacturing strength—suffered the steepest declines in employment, establishments, capital investment, and value added.
“Instead of treating manufacturing as a monolith to be revived, policymakers must focus on national power industries,” said ITIF Research Assistant Meghan Ostertag, who authored the companion study. “These industries account for just 22 percent of all U.S. industries but determine nearly all our national power and economic security. Allowing them to weaken would hollow out supply-chain security, reduce innovation, and increase dependence on China.”
To avoid that outcome, Atkinson’s report argues that U.S. policymakers must pivot away from free-market economics on the Right, redistributive populism on the progressive Left, and even conventional competitiveness and innovation policy. Status quo policies will not suffice. America needs a national power industry strategy that adapts business strategy principles and treats competition with China as a win-or-lose proposition.
Accordingly, a national power industry strategy must recognize five core truths:
- Industries differ fundamentally in strategic importance. Semiconductors and furniture are not equivalent. Defense, dual-use, and enabling sectors must be prioritized even at short-term cost.
- Markets are indifferent to national power. Unregulated competition will not preserve strategic capabilities; the government must deliberately shape industrial structure.
- China is not a normal trading partner. Beijing’s mercantilism demands both defensive measures and offensive support for domestic champions.
- Production matters as much as innovation. Inventing technologies that China then produces undermines U.S. power.
- Long-term positioning trumps short-term efficiency. Redundant capacity and higher near-term costs are acceptable prices for enduring strategic advantage.
Building on these principles, ITIF identifies two key aspects of strategy: restricting Chinese power industry advancement and defending U.S. and allied power industries.
Defending U.S. and allied power industries requires four main areas of policy action:
- First, allied nations need to invest much more in the foundations of technology-based competitiveness—including R&D and skills development in science, technology, and engineering—specifically targeting national power industries.
- Second, policymakers must jettison the entire idea of free trade agreements in favor of forming strategic national power industry partnerships with allies that are willing to stand up against the CCP’s techno-economic aggression.
- Third, work to change American capitalism and corporate financing from a finance-driven system that presses companies to be asset-light and prioritize short-term returns to a production-driven system focused on long-term investment.
- Fourth, craft industry-specific strategies within an overarching national power industry strategy, recognizing that industries differ in structure, competitive forces, and technology needs, and tailoring support to ensure U.S. firms can compete effectively in global markets.
“The techno-economic war with China is the defining challenge of the 21st century,” said Atkinson. “Unless Washington adopts a radically new and coherent strategy to rebuild its national power industries, America will keep trading away the foundations of its strength. Industrial weakness today means strategic weakness tomorrow.”
“Time is not on our side,” Atkinson cautioned. “Every industry we lose makes it harder to recover; every year China expands its advantage shifts the balance further; every failure to act—whether from free-market dogma or progressive hesitation—surrenders ground that may be impossible to regain.”
“It is time for a historic pivot in policy focus and industrial expansion on par with America’s previous national pivots in the wake of the War of 1812, the Civil War, and World War II,” said Atkinson. “This time, America’s new national mission must be not losing the national power industry war to China. Without major structural change, our national power industries will weaken, and with them our ability to compete, deter, and defend.”
Read both reports:
- Robert D. Atkinson, “Marshaling National Power Industries to Preserve America’s Strength and Thwart China’s Bid for Global Dominance“ (ITIF, November 2025)
- Meghan Ostertag, “US National Power Industries Are at Risk” (ITIF, November 2025)
Contact: Sydney Mack, [email protected]
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The Information Technology and Innovation Foundation (ITIF) is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized by its peers in the think tank community as the global center of excellence for science and technology policy, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.
