The factory funk
Do not mistake a resilient global economy for populist success
Protectionism is failing to revive manufacturing
PESSIMISTS ABOUT the world economy have had a poor run.
Global growth was probably about 3% in 2025, far higher than gloomy forecasts made in the spring and summer.
That matches the pattern of the decade.
Every year so far in the 2020s, the “Teflon economy” has beaten the World Bank forecast made in June.
In 2025 America especially defied expectations.
It slowed under Donald Trump, after accounting for the mechanical impact of lower immigration, but only a little.
Now global interest rates have fallen and, in America, China and Germany, fiscal stimulus is supporting growth.
The resilience of the world economy may flummox market liberals, because it has coincided with protectionist policies.
So far this decade industrial policy has proliferated, supply chains have fragmented and Mr Trump has levied the highest tariffs in America since the 1930s.
Yet it is hard, at first glance, to spot the damage. Populists crow that, as usual, the experts were wrong.
They are only half-right.
It is true that protectionism has not yet derailed growth.
But industrial policies and tariffs have also failed in their central aim: arresting the decline of manufacturing jobs.
That suggests the world economy is merely coping with populism, rather than flourishing under it.
As we report this week, American manufacturing is in a rut.
The sector has contracted every month since March 2025, according to surveys, which also show firms complaining about the high cost of imported parts.
Over the past year manufacturers’ construction spending has shrunk, as have their payrolls.
It is not just in America that the industry is suffering.
Globally, manufacturing has lagged behind growth for the past three years, calculates JPMorgan Chase, a bank.
From 2019 to 2025 manufacturing jobs fell as a share of the workforce on every continent except Africa, reckons the International Labour Organisation.
Bidenomics, Trumponomics, “Make in India” and the like have barely dented the long-run trend.
Do not bet on that changing.
For all the uncertainty hanging over white-collar jobs because of AI, it is factory hands who continue to be the world’s most disrupted workers.
The pace of the decline in manufacturing jobs, as a share of the global workforce, has been slightly faster in the 2020s than in the preceding three decades.
Recently job openings have dried up quicker at America’s factories than in its offices.
And although manufacturing work is not threatened directly by chatbots, AI models trained with data from sensors and cameras are making factory robots better.
On January 5th Nvidia’s boss, Jensen Huang, declared that “the ChatGPT moment for robotics is here.”
That might help output, but will probably make the jobs that politicians strive to create still scarcer.
There is one place where manufacturing is thriving and factory jobs are fairly steady: China, whose share of global manufacturing value-added, at nearly one-third, is almost twice America’s.
China’s industrial might threatens the national security of the West by giving it chokeholds over important industries, but it is hardly proving to be an economic boon.
Its leaders’ willingness to back manufacturers with state money has distorted the economy.
The resulting overcapacity in Chinese factories has contributed to its deflation problem.
Ironically, it is the adaptive power of markets that accounts for the world economy’s resilience to trade barriers.
For years supply chains have snaked around whatever obstacles have been thrown up.
And it is America’s private sector, not industrial planners in Washington, which is chiefly responsible for the AI boom.
The ongoing success of free markets is obscuring the damage protectionism is doing.
Do not mistake global economic resilience for a triumph by the likes of Mr Trump.
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