Every country must aim for manufacturing self-sufficiency

If there is one lesson governments cannot afford to ignore from the COVID-19 pandemic, it is this: every country needs to build its own manufacturing base. The supply chain breakdowns of 2020 and 2021, followed by a fresh cycle of disruptions caused by geopolitical tensions, natural disaster-related shocks and now the new trade barriers under the second Trump administration, have made self-sufficiency — not just in essential goods but also in advanced industrials — a strategic imperative.

This is not to argue for every country to shun global trade and embrace economic autarky. Nor is it realistic to expect all countries to become entirely self-sufficient. But in vital sectors such as healthcare, semiconductors and industrial machinery, the ability to produce and meet at least a sizable share of domestic demand is no longer just an economic advantage. It is a matter of national security.

Although fading rapidly from memory, the world’s wealthiest nations found themselves, at the height of the pandemic, in the uncomfortable position of bidding against one another for face masks, ventilators and vaccine components. The World Health Organization reported that more than 90 percent of countries experienced some form of supply chain disruption in essential medical goods in 2020. Even the most globalized economies suddenly had to look inward.

In vital sectors, the ability to produce domestically is no longer just an economic advantage but a strategic imperative

Arnab Neil Sengupta

Countries with stronger domestic manufacturing ecosystems bounced back faster. India, for instance, rapidly boosted production of personal protective equipment and generic drugs. Vietnam and South Korea were similarly able to respond swiftly due to their local industrial capabilities. Meanwhile, nations dependent on imported goods, including advanced economies in Europe, were left grappling with shortages.

Few countries have demonstrated like China how industrial self-sufficiency pays dividends in moments of crisis. Its “Made in China 2025” policy, launched years before the pandemic, aimed to strengthen local production in critical areas such as robotics, biotechnology and aerospace. That long-term bet helped the country insulate itself from Western export controls, maintain supply chain continuity and absorb the impact of sanctions that would have crippled less prepared economies.

The US, once the champion of globalization, has been reshoring strategic manufacturing under both Democratic and Republican administrations. The second Trump administration this month doubled down on the president’s “America First” industrial policy, announcing sweeping new tariffs — including a baseline 10 percent tax on all imports and a 25 percent tariff on foreign-made cars and auto parts — in an effort to boost domestic production.

These measures build on earlier initiatives like the CHIPS and Science Act and the Inflation Reduction Act, defying warnings of higher consumer prices and renewed inflationary pressures. The mantra of the architects of the Trump administration’s trade policies is even more blunt: A country that cannot manufacture its own medicines, ships and semiconductors is not truly sovereign.

It is scarcely surprising that the world’s two largest economies — China and the US — are both moving in the same direction, albeit for different reasons. Xi Jinping’s China seeks to reduce its reliance on Western technology. Donald Trump’s America is using tariffs and deregulation to reclaim lost industrial ground, including rolling back climate and environmental rules to ease the path for domestic manufacturers. Both recognize that sovereignty begins with the ability to produce.

It is not just about reacting to pandemics or political standoffs. The world has entered an age of disruption — be it the Red Sea attacks, an earthquake in Taiwan affecting chip production or droughts cutting hydroelectric power in manufacturing hubs. In 2024 alone, global supply chain disruptions surged by 38 percent, with extreme weather and geopolitical crises compounding the risks. The top five impacted industries — life sciences, healthcare, general manufacturing, high tech and automotive — underscore the structural, long-term nature of these vulnerabilities.

Self-sufficiency also creates local jobs and stimulates innovation. Manufacturing has among the highest economic multipliers of any sector. It brings with it a chain of suppliers, logistics firms, service providers and skilled workers. That, in turn, promotes a culture of vocational training, research and development, and industrial competitiveness. Indeed, Japan’s post-pandemic policy to subsidize companies relocating operations out of China was aimed not just at reducing risks, but also at reviving dormant domestic industries.

The push toward self-sufficiency is also visible in the healthcare sector. The EU’s Health Emergency Preparedness and Response Authority was set up in 2021 to ensure that the bloc can manufacture essential vaccines and therapeutics without relying too heavily on third countries. The logic is simple and unquestionable: in a crisis, no global supply chain can be trusted to deliver at scale and speed.

Countries that want to avoid being left vulnerable to the next global shock must build the capacity to make more at home

Arnab Neil Sengupta

To be sure, self-sufficiency comes with trade-offs. Critics are right to point out that it is not always economically efficient. Producing domestically can be costlier than importing from low-wage countries. That could mean higher prices for consumers and greater fiscal burdens on governments that subsidize local manufacturing. The latest US tariffs, for example, are already raising concerns about inflation and supply chain bottlenecks.

Another concern is that not all countries have the resource base or scale to build wide-ranging industrial ecosystems. Small, import-dependent economies may struggle to replicate the Chinese or American model. But the goal is not self-sufficiency across the board; it is to identify vulnerabilities and reduce exposure where it matters most.

There is also the danger that an aggressive pursuit of domestic industry could morph into protectionism. Trade wars, retaliatory tariffs and a race to the bottom in industrial subsidies would only deepen global fragmentation, say economists. The challenge is to strike a balance between safeguarding strategic interests and remaining constructively engaged in global commerce.

But these caveats do not undercut the central argument. The COVID-19 pandemic was not a one-off event; it was a stress test of the global economic model. And the system failed to deliver. The logic of maximizing efficiency at the expense of self-sufficiency has run its course, as it were. Countries that want to avoid being left vulnerable to the next global shock — whether that is a pandemic, war or natural disaster — must build the capacity to make more at home.

For countries in the Global South and the Middle East, the moral of the story is: total self-reliance may be impossible to achieve, but strategic self-sufficiency is within reach. The time to start is not when the next big crisis hits but now, while there is still time to prepare.

• Arnab Neil Sengupta is a senior editor at Arab News. X: @arnabnsg