US Energy Investments Take Priority Over Manufacturing

Japan, South Korea and the European Union are focusing on energy investments in the United States rather than bringing large-scale Manufacturing operations back to the country because of concerns over profitability, according to Kazuto Suzuki, director of the Tokyo-based Institute of Geoeconomics and a professor at the University of Tokyo’s Graduate School of Public Policy.

Suzuki argues that the US ambition to restore domestic manufacturing under the “Make America Great Again” (MAGA) agenda faces significant economic obstacles, including high production costs, expensive energy and workforce constraints. In his assessment, foreign companies understand that manufacturing in the US may not be financially attractive for many industries, even as Washington uses tariffs and investment pressure to encourage changes in global supply chains.

In an interview with The Indian Express on the sidelines of the Kautilya Economic Conclave earlier this month, Suzuki said the current trade conflict reflects deeper tensions between free trade and national sovereignty. He described the relationship between economic efficiency and sovereignty as a “perpetual confrontation”, arguing that countries must find a balance rather than expect either objective to dominate completely.

US Manufacturing Push Faces Economic Challenges

Suzuki said the MAGA objective of bringing manufacturing jobs back to the United States conflicts with the economic principles that have shaped global free trade. Under an open trading system, companies can reorganise production and move operations to locations where supply chains are more efficient and costs are lower.

That restructuring has contributed to manufacturing shifting away from the US in some industries, while investment has flowed into other countries. Suzuki argued that China is not the only country involved in this process. Brazil, Japan, Southeast Asian economies and India can also benefit when companies move production to more efficient locations.

According to Suzuki, the challenge facing US policymakers is that domestic production can be expensive. He pointed to the cost of electricity, gas and land, as well as constraints in the available workforce, as factors that can discourage companies from relocating manufacturing operations from China to the US.

These considerations complicate the goal of rebuilding domestic industrial capacity. Tariffs may encourage companies to reconsider where they manufacture goods, but they do not automatically make production in the US more competitive or eliminate the underlying costs of operating there.

Suzuki argued that Washington is therefore using its market power to encourage allies to invest in the US as part of its broader industrial strategy. However, he said foreign investment does not necessarily mean companies will prioritise manufacturing, particularly when the financial returns are uncertain.

Japan, South Korea and the EU Prioritise Energy Investments

Suzuki said Japan, South Korea and the European Union are directing investment towards the US energy sector rather than committing primarily to manufacturing projects. He cited six projects agreed between the US and Japan, saying four were related to energy and only one involved manufacturing synthetic diamonds for next-generation semiconductors.

The distinction is important because investment in energy infrastructure and investment in manufacturing serve different economic purposes. Energy projects can support electricity and fuel supply, while manufacturing investments involve producing goods and establishing or expanding industrial operations.

For companies assessing investment opportunities, the decision depends on factors such as costs, expected returns, access to markets and the availability of infrastructure. Suzuki’s argument is that political pressure to invest in the US does not necessarily override these commercial considerations.

His assessment challenges the assumption that tariffs and diplomatic pressure will automatically lead foreign companies to rebuild manufacturing capacity in America. Even when governments agree to investment arrangements, businesses still need to consider whether individual projects are commercially viable.

Suzuki characterised the ambition to restore manufacturing through the MAGA agenda as an “illusion”, arguing that the economic realities of production make a broad return of manufacturing less straightforward than political messaging may suggest.

Suzuki Says US Trade Policy Is About More Than China

Although China is a major part of the debate over US manufacturing and tariffs, Suzuki argued that the current trade policy is not exclusively about Beijing. In his view, the underlying issue is the US effort to use its economic position to influence where production takes place and how global supply chains are organised.

He said the US uses tariffs because it has limited alternative leverage in some areas. While American technology companies, including Google, Apple and Amazon, hold important positions in global markets, Suzuki argued that restricting their services could also harm those businesses financially.

He contrasted this with China’s state-capitalist system, which he believes gives the Chinese government different ways to exert pressure on domestic industries. His assessment is that the US cannot necessarily use the same approach without creating costs for its own companies.

The broader point is that economic interdependence creates leverage for governments, but using that leverage can also produce consequences for the country applying the pressure. Tariffs, export controls and restrictions on technology or resources can affect businesses and supply chains across multiple economies.

Suzuki’s analysis suggests that understanding the current trade conflict requires looking beyond the bilateral US-China relationship. It also involves examining how Washington uses access to its market to influence the decisions of allies and trading partners.

Economic Efficiency Versus National Sovereignty

Suzuki described the central challenge in global economic policy as a continuing tension between efficiency and sovereignty. During the period when free trade dominated international economic thinking, companies and governments often prioritised efficient production and access to international supply chains.

That system relied in part on international rules, including those associated with the World Trade Organization (WTO), which provide a framework for trade relations and mechanisms for addressing certain trade disputes.

Suzuki argued that political intervention and the use of economic pressure have weakened confidence in the idea that supply chains can operate primarily according to efficiency. Governments are increasingly concerned about their ability to maintain control over strategically important goods, technologies and resources.

In this environment, countries must weigh the economic benefits of importing goods from the most efficient supplier against the risks of becoming dependent on another country. Greater domestic production or diversified sourcing may improve resilience, but can also raise costs.

Neither objective offers a complete solution on its own. Prioritising efficiency can leave countries exposed to supply disruptions or political pressure, while pursuing complete economic self-sufficiency can be expensive and difficult to achieve.

Suzuki said countries must therefore determine their own balance based on their economic circumstances, strategic priorities and exposure to external risks.

India’s China Policy Reflects the Trade-Off

Suzuki used India’s approach to Chinese technology and manufactured goods as an example of the tension between security and economic efficiency. He noted that India has restricted China-based mobile applications while continuing to import Chinese mobile phones.

He described this as a balance between reducing certain perceived risks and retaining the economic advantages of access to imported products. Although such a policy may appear contradictory, Suzuki argued that governments must often make trade-offs rather than pursue a single objective consistently across every sector.

For India, the challenge is to decide which dependencies pose significant risks and where imports remain economically beneficial. Reducing reliance on foreign suppliers can improve strategic flexibility, but replacing established supply chains may require substantial investment and time.

Suzuki said countries in the Global South often have fewer alternatives and may need to prioritise economic efficiency because domestic substitutes are unavailable or too costly. Middle powers such as India and Japan have greater opportunities to make strategic choices about which industries and technologies they want to develop domestically.

The appropriate balance will depend on each country’s priorities. Policies that work in one sector may not be suitable for another, particularly when the economic costs and security implications differ.

Defence Spending and Dual-Use Technologies Reshape Industrial Policy

Suzuki also linked trade tensions and geopolitical uncertainty to rising defence spending. He argued that modern military capabilities increasingly involve technologies such as drones and artificial intelligence, which can have both military and civilian applications.

These dual-use technologies can create connections between defence procurement, industrial development and private-sector innovation. Government spending on defence-related research and equipment may help develop technical capabilities that can also be used in civilian industries.

This relationship can affect the broader structure of national economies. Investment in advanced technologies may create opportunities for private companies, support research and development, and influence competition in emerging markets.

However, Suzuki’s comments also point to the complexity of evaluating defence spending. Its effects are not limited to military preparedness; they can extend to technology development and industrial capacity, depending on how funds are allocated and how effectively research is translated into practical applications.

Japan’s Defence Strategy Focuses on Avoiding Defeat

Discussing deterrence in East Asia, Suzuki said its effectiveness depends partly on how potential adversaries assess the consequences of taking military action. He argued that Japan alone cannot deter China in every scenario, while the Japan-US alliance plays an important role in the regional security calculation.

He said Japan wants to ensure that any attack on the Senkaku Islands, Taiwan or other areas around Japan would carry serious consequences for China. In his view, the role of deterrence is to influence an adversary’s calculations before a conflict begins.

Suzuki also described deterrence as fragile. If it fails, he argued, Japan’s objective would not necessarily be to defeat China outright but to avoid losing. He presented Japan’s increased defence expenditure as part of an effort to prepare for a more uncertain security environment.

He also discussed changes in US strategic priorities, suggesting that Washington’s approach to China differs from its approach to Russia and North Korea. These are Suzuki’s assessments of the evolving security environment, rather than a definitive statement of future US policy.

Reflecting on Japan’s wartime history, Suzuki said governments must assess their capabilities realistically and prepare for a range of possible scenarios. He argued that failing to prepare for uncertainty can carry greater risks than acknowledging limitations and planning accordingly.

Suzuki Identifies Infrastructure and Red Tape as India’s Challenges

Asked whether India was overestimating its ability to become an indispensable manufacturing and export hub, Suzuki said he believed the country was “punching above its weight” rather than overestimating itself.

He identified infrastructure as a major constraint on India’s industrial ambitions, pointing to electricity, roads and transportation. He also cited a lack of investment, including in high-speed rail, as an obstacle to improving the environment for industry.

Reliable infrastructure is important for manufacturing because businesses need consistent electricity, efficient freight movement and dependable connections between production centres, suppliers and markets. Shortcomings in these areas can increase costs and make it harder for companies to compete internationally.

Suzuki also pointed to red tape as a factor that can hinder India’s competitiveness. Complex administrative procedures and regulatory delays can increase the time and expense involved in establishing or expanding businesses.

His assessment suggests that India’s ambition to become a more important manufacturing centre depends not only on attracting investment but also on addressing practical barriers to industrial growth. Better infrastructure and a more efficient business environment could help companies take advantage of opportunities in global supply chains.

Supply Chain Diversification Offers Middle Powers More Flexibility

Suzuki argued that middle powers can respond to pressure from the US and China by investing in research and development, building more resilient supply chains and expanding access to additional markets.

He cautioned, however, that countries should not expect to eliminate their dependence on either major economy entirely. The US and China remain significant economic powers, and their influence cannot be removed simply by redirecting trade or investment.

Instead, Suzuki advocated diversification that creates alternative suppliers, markets and sources of technology. These alternatives can give governments and businesses more flexibility if one country imposes tariffs, restricts exports or uses its economic position to apply political pressure.

He noted that the US accounts for around 13% of global gross domestic product, according to his assessment, meaning a substantial share of the world economy lies outside the American market. Countries can therefore explore opportunities to expand trade with other economies while maintaining commercial relationships with the US.

Nevertheless, the size and influence of both the US and China mean that maintaining business ties with them will remain important. Suzuki’s argument is not that countries should abandon these relationships, but that they should avoid excessive dependence by building additional options.

Why the Balance Between Trade and Sovereignty Matters

Suzuki’s analysis highlights a central challenge for governments navigating a period of tariffs, industrial policy and geopolitical competition. The pursuit of efficient global supply chains can reduce costs, but concentrated dependence may expose businesses and countries to disruption or political pressure.

On the other hand, efforts to bring production home or secure domestic control over strategic resources can increase costs and require significant investment. Tariffs and political agreements may influence business decisions, but they cannot guarantee that every manufacturing project will be profitable.

For Japan, South Korea and the European Union, the investment choices described by Suzuki illustrate the distinction between meeting political expectations and allocating capital according to commercial considerations. For India, infrastructure development, regulatory efficiency and supply chain diversification are among the issues that could shape its ability to expand its industrial role.

The broader challenge for middle powers is to preserve the benefits of International Trade while reducing vulnerabilities in strategically important sectors. As economic and security priorities increasingly overlap, countries will need to make choices that reflect both commercial realities and national interests.

Suzuki’s central argument is that neither complete dependence on global efficiency nor an attempt at total economic independence offers a simple answer. Instead, countries must identify critical risks, develop credible alternatives and determine how much they are willing to pay for greater economic and strategic resilience.