This blog post is based on an article published in El País on the 11th of May 2025. The original article can be found here.
That we learn from our mistakes, and that crises can also be opportunities, are lessons parents and teachers repeat endlessly. When the learning comes courtesy of the world’s most powerful nation, that lesson becomes even more compelling. In his second term in office, Donald Trump is once again disrupting the international trading system, now casting doubt on the dollar’s role in global finance. This all in pursuit of a single obsession: giving concrete meaning to his “Make America Great Again” slogan through a revival of domestic manufacturing.
The tariffs slapped on each country according to its bilateral deficit with the United States are meant to make foreign goods more expensive. In theory, this would offset the strength of the dollar, which is fuelled by its status as the world’s reserve currency. From the White House’s perspective, the dollar’s firmness is one of the main reasons behind the shrinking weight of manufacturing in America’s GDP. Their strategy is meant to reverse that trend, but the plan will not play out as the Trump administration expects.
The idea that manufacturing should sit at the heart of economic growth and job creation is not unique to the United States; it is a view deeply rooted in Europe as well. Its foundations are historical. Manufacturing has traditionally been a high-productivity activity, marked by greater capital intensity – in other words, more machines per worker. It was also the main conduit through which technological innovations spread, reaching society via industrial equipment and machinery.
By contrast, in recent decades services such as finance, professional activities and those linked to information and communications technologies have climbed to the top of the productivity league tables. These services are now central to economic competitiveness and generate cross-cutting innovations, the kind that can reshape the entire economy, not just one corner of it. While advances in manufacturing rarely spill far beyond their own sector, improvements in information and communications, from 5G to artificial intelligence, can be embedded across a wide range of industries. These technologies do more than refine existing processes; they create entirely new possibilities, much as electricity once did.
My colleagues and I have published a brand-new study demonstrating the transformational power of services, and how Europe can reimagine its industrial policy to steer its economy towards higher productivity levels and greater technological progress.
Globally, digital and telecommunications firms are now the world’s biggest investors in R&D, spending in 2023 roughly 10 percent more than the pharmaceutical and automotive industries combined. In Europe, over the decade from 2013 to 2022, ICT outperformed manufacturing in economic dynamism, the share of high-growth firms, wages, R&D investment and intangible capital. In other words, the role of innovation catalyst and productivity engine is no longer the exclusive preserve of industry.
The dollar’s appreciation may well have played a part in the declining weight of manufacturing in the US economy, though it is far from clear that this was the decisive factor. Indirectly, however, a strong dollar has also pushed the American economy towards specialisation in high–value-added, human-capital-intensive activities – sectors where demand is far less sensitive to exchange-rate swings. As a result, although the United States imports a large share of the microchips and semiconductors it consumes, it is also home to firms such as Nvidia, Qualcomm and Alphabet: undisputed leaders in chip design and in the innovation that drives the entire sector forward.
Those who, on both sides of the Atlantic, place industry above all else are clinging to an outdated view of prosperity and economic policymaking. The romanticisation of manufacturing borders on obsession. Today, many of the most disruptive technologies and innovations are created in ones and zeros rather than nuts and bolts, and they travel across digital networks rather than motorways. Europe’s challenge is to foster an economic transformation built on high-potential activities, where the emphasis lies on technological intensity and the ability to spread innovations into other sectors.