Editor's note: The world's major powers are taking on China. As Joel Litman from our corporate affiliate Altimetry explains, countries are making new efforts to control supply chains... and it's beginning to feel familiar. In this issue, recently published in Altimetry Daily Authority, Joel covers how China's industrial dominance is reviving an old system – and creating ripple effects through the global economy.
For decades, the world economy moved in one direction...
Tariffs declined, and global trade became smoother. Companies had the freedom to search the globe for the cheapest factories, labor, and raw materials they could find.
Supply chains were optimized for efficiency, and governments largely trusted that the goods they needed would be delivered.
But that network is unwinding.
Around the start of the COVID-19 pandemic, global trade began to slow. Countries suddenly found themselves lacking essential goods.
That was just the beginning of the move away from globalization. Around the world, economic policy has become increasingly tied to national security. Countries want control over critical industries and raw materials... And they want enough domestic capacity to withstand a trade fight.
China is driving much of that shift...
Its massive manufacturing base has given Beijing the resources to build its industries at a scale few countries can match.
And as China gains leverage, it's driving other major economies to build defenses of their own.
Today, I'll explain how China's economic model is forcing other countries to respond... and how investors can profit from this shift.
What China's Industrial Strength Means for the U.S.
China has built a gigantic industrial war chest...
Its gross national savings (the amount of income consumers and businesses save) reached 43% of GDP in 2025 – compared with 17% for the U.S.
That leaves China with an immense pool of capital available for investment.
A huge share of that has gone toward industrial capacity. In 2024, China added nearly as much manufacturing value as the U.S. and the Eurozone (which is made up of 21 euro-based countries) combined.
Two decades ago, China lagged behind the U.S., the Eurozone, and Japan in manufacturing value added. But it has been the clear leader over the past 15 years.
That has helped it dominate several crucial industries... For example, it's the leading producer of solar panels and lithium-ion batteries. It also controls several rare earth materials.
These goods sit at the center of everything from electric vehicles and power grids to advanced electronics. That gives China leverage when trade tensions rise, like we're seeing today.
A country that controls a critical market input can influence far more than the price of that single product. It can impose trade restrictions and even bans – limiting other nations' supply of an essential resource or cutting it off altogether, regardless of global demand.
And China has another advantage... Its broad manufacturing base reduces the number of foreign suppliers it has to rely on.
However, China's domestic economy has slowed dramatically...
Its economic growth fell to 4.3% in the second quarter after averaging more than 10% per quarter over the past two decades.
Real estate was long considered the safest asset in China... until the 2021 property boom collapse led to a significant drop in home values.
This has left the country with fewer attractive places to invest its massive savings. And household consumption has remained too weak to pick up the slack.
Despite that, Chinese factories keep producing... meaning more of the nation's output is heading overseas. China's manufacturing trade surplus has climbed to roughly 2% of global GDP.
This is how one country's industrial policy starts reshaping the rest of the world...
Companies outside of China are facing intense competition from China's huge production capacity.
The U.S. has gone on the defensive via tariffs and domestic supply-chain investments. Europe is moving in the same direction.
This is what modern mercantilism looks like...
Mercantilism is an economic practice that looks to shore up a nation's wealth. Countries following this approach aim to export more goods than they import. They may even protect their trade interests by using force – or, at least, by building up intimidating armies.
China has spent years scaling its industries and reducing its dependence on foreign suppliers. Now the U.S., and other parts of the world, are catching up.
That's fueling a global race to secure supply chains and access to key materials.
And it's creating a strong tailwind for U.S. companies operating in the industries Washington wants to protect and expand. Investors should take note...
The goal is to close the manufacturing gap with China and reduce U.S. reliance on vulnerable foreign supply chains.
Domestic manufacturers, energy producers, semiconductor companies, and businesses tied to critical materials will all benefit as the U.S. fights back.
Investors who focus on these companies on U.S. shores are likely to profit.
Regards,
Joel Litman
Editor's note: While China poses an economic threat, the Iran war shows that other nations are still willing to fight the U.S. directly. Joel, who has served as a consultant for the Pentagon, recently took viewers behind the scenes of the government's largest defense-spending wave since World War II. He says it's the biggest stock market event in 45 years... Check out his urgent briefing tomorrow at 10 a.m. Eastern time.
Further Reading
Between China's rising might and the conflicts in the Middle East, the global economy looks more chaotic today than it has in years. But that uncertainty is actually a tailwind for one key international industry.
Under President Donald Trump, tariffs have become central to U.S. trade policy. They make foreign competitors more expensive – but domestic producers are shielded from those penalties. And if you know how to play it, this setup can produce some quick windfalls.
