Industrial policy is the federal use of subsidies, tax credits, loan guarantees, and direct investment to encourage domestic production in industries deemed strategic. Recent U.S. legislation — including major investments in semiconductors and clean-energy supply chains — represented the largest peacetime industrial-policy push in decades.
Supporters argue that without coordinated federal action, key supply chains migrate to geopolitical rivals and the U.S. loses critical capabilities. Critics argue that picking winners is inherently distortive, fosters cronyism, and substitutes political judgment for market signals.
Debate also turns on design: whether incentives should be technology-neutral, whether they should attach conditions (e.g. on labor, exports, or buybacks), and how to evaluate success once funds are obligated.