On January 20, 2025, with Donald Trump’s inauguration for a second term as President of the United States, the global economy entered an unprecedented period of upheaval. Announcements of sweeping tariffs, renewed clashes with China, and a reversal of trade policies with close allies such as Canada, Mexico, and Israel sent shockwaves through financial markets. The Dow Jones Index dropped by 5% during the first thirty days of the year, while international media warned of a looming global trade war. In Israel, where about 17% of exports depend on the American market, analysts estimated that export costs could rise by 10-15%, sparking a heated public debate about the future of economic relations.
At the center of this economic storm, alongside Trump himself, stands the new U.S. Treasury Secretary, Scott Bessent—a former senior economist at Goldman Sachs and a longtime Trump advisor appointed to the role this past January. Bessent quickly became the leading voice of economic policy and declared in a March 5 interview with Fox Business: “Americans understand it’s better to endure some turbulence now, so we don’t crash in the next decade. This is not about isolationism or turning inward—building a smart, modern, and sovereign economy that will strengthen our global standing. The world will have to get used to it.”
Bessent, nicknamed “the architect of the economic revolution,” brings three decades of experience in financial markets. He blends a pragmatic approach with populist rhetoric that strongly resonates with Trump’s base.
To understand this vision, one must look at the deep roots of the crisis the Trump administration seeks to address: the erosion of the American middle class, a result of decades of trade policies that favored global corporations over the average worker. Two historic events—the accession of China to the World Trade Organization (WTO) in 2001 and the signing of the North American Free Trade Agreement (NAFTA) in 1994—played a central role in destroying American industry and became symbols of betrayal of the working class.
The Art of Unfair Competition
The road to towns like Dayton, Ohio, or Flint, Michigan, tells the story of a crumbling American dream. Once, steel and automobile factories were the beating heart of these communities, offering stable jobs with wages that provided a home, education, and a pension. Today, abandoned neighborhoods and rusted factories are silent witnesses to the crisis. Since the beginning of the 21st century, the U.S. has lost about 3.4 million manufacturing jobs, many due to trade policies that favored cheap imports over local production.
China’s accession to the WTO in 2001 was a significant catalyst. After 15 years of negotiations, China gained free access to Western markets, including the U.S., in exchange for promises to open its markets and protect intellectual property. In practice, China exploited low labor costs—around one dollar per hour compared to $15–$20 in the U.S.—and government subsidies to flood markets with cheap goods.
When China joined the World Trade Organization (WTO) on December 11, 2001, it wasn’t just signing a trade agreement—it was receiving an unprecedented key to global markets and the opportunity to reshape the world economy. After 15 grueling years of negotiations, China was granted equal status to Western countries, with promises to open its markets, protect intellectual property, and integrate into the global economy in good faith. In reality, it took advantage of the WTO’s liberal rules—and their weaknesses—to become the “factory of the world,” leaving the American working class to pay a heavy price. This story is not only about trade; it’s about competition, sovereignty, and the consequences of decisions made in the optimistic 1990s that led to a crisis still shaping today’s politics and economy.
China’s entry into the WTO also granted it “most favored nation” status, meaning all WTO members—from the U.S. to Japan—were required to offer it the best trade terms, including low tariffs and free market access. As a result, tariffs on Chinese products plummeted dramatically, from an average of 25% in 1997 to 9% by 2005. With low labor costs and without strict environmental regulations, China could produce goods 30–50% cheaper than American products. The result was immediate: Chinese imports to the U.S. soared from $100 billion in 2000 to $462 billion in 2024, and American markets were flooded with cheap Chinese textiles, electronics, and toys. Entire industries, like textiles in South Carolina, collapsed under the pressure. In towns like Gastonia, where factories once employed thousands, poverty rates climbed to 20%, and communities became dependent on government assistance.
However, the influx of cheap goods wasn’t only a result of cheap labor. China turned unfair competition into an art form. Despite WTO rules prohibiting government subsidies that distort competition, the Chinese government heavily supported its industries with grants, low-interest loans, and subsidized energy. For example, China’s steel industry received about $100 billion between 2000 and 2010, allowing it to sell steel at 20–30% lower prices than American manufacturers like U.S. Steel. Factories in Pittsburgh and Gary, Indiana, closed, leaving thousands of workers unemployed. China also artificially maintained a weak yuan, further lowering the price of its exports and making competition nearly impossible for American industries. Between 2001 and 2015, about 2.4 million U.S. manufacturing jobs disappeared due to Chinese imports, with sectors like electronics and furniture taking heavy blows. Companies like Dell and HP moved production lines to China, leaving towns like Detroit and Cleveland grappling with unemployment rates that reached 12% by 2005.
A central part of China’s success stemmed from its ability to exploit WTO weaknesses, especially regarding intellectual property. As part of its accession, China committed to enforcing laws to protect patents and copyrights, but in practice, enforcement was lax at best. Chinese companies, often with government backing, copied Western technologies on a massive scale. Huawei, for instance, utilized Qualcomm’s 5G technologies, causing damages estimated at $5 billion a year. The American pharmaceutical industry, including companies like Pfizer, lost about $2 billion annually due to drug copying. Estimates suggest total damages of $50–$100 billion a year to American companies—money that could have supported research, development, and jobs in the U.S. China also required foreign companies, like General Motors, to establish joint ventures with Chinese firms as a condition for operating in the market, leading to the transfer of technology that fueled the rise of competitors like BYD and Lenovo. WTO enforcement mechanisms, which rely on formal complaints and prolonged negotiations, were too slow to stop this theft. A complaint filed by the U.S. in 2006 regarding Chinese subsidies in the automotive industry, for example, was only resolved in 2014, after years of damage.
The WTO’s weakness wasn’t limited to intellectual property. The organization relied on the good faith of its members but lacked direct enforcement power. Sanctions required mutual agreement, and China, with its growing economic power, knew how to delay processes and exploit loopholes. It continued subsidizing strategic industries, like solar panels, leading to the collapse of the American solar sector by 2015, with companies like Solyndra going bankrupt in the face of Chinese panels that were 40% cheaper. China also exploited its status as a “developing economy” within the WTO to secure extended transition periods for implementing reforms, allowing it to maintain discriminatory policies like internal tariffs on foreign companies. As a result, American companies like Apple struggled to penetrate the Chinese market, losing significant revenues—about 10% of Apple’s digital services sales in China were blocked due to local restrictions.
Power Through Deception
The combination of market access, unfair competition, and weak enforcement made China an economic powerhouse. Its exports soared from $250 billion in 2000 to $3.4 trillion in 2023, and its GDP grew at an average rate of 6% per year starting in 2011, making it the second-largest economy in the world. These revenues funded infrastructure, technology, and geopolitical initiatives like the Belt and Road Initiative, funneling $100 billion into energy projects across Africa and Asia. Yet while China built an empire, the U.S. faced a trade deficit of $419 billion in 2018, along with a dangerous dependence on critical Chinese products—80% of antibiotics and 70% of imported smartphones came from China. America’s working class paid the heaviest price: industrial states like Ohio and Michigan became crisis centers, with poverty rates of 20–25 percent in towns like Flint and Youngstown. The social consequences—opioid addiction, collapse of public services, and a pervasive sense of abandonment—contributed to Donald Trump’s success, as he promised to bring jobs back home.
The reason the WTO failed to stop China lies in its very structure. It was built on a belief in free trade as a driver of prosperity, but was unprepared to face a country like China, which combined a closed economy with aggressive trade practices. American corporations like Walmart profited from cheap products, and consumers who bought smartphones and televisions at low prices reduced the enforcement pressure. In hindsight, the decision to integrate China into the WTO, once seen as a step toward an era of cooperation, became a major blow to America’s middle class and ignited an economic struggle that continues to shape the world.
The decision to allow China to join the WTO stemmed from the global optimism of the 1990s. President Bill Clinton, who signed the U.S.-China Trade Relations Act in 2000, believed integrating China into the global economy would encourage democracy and shared prosperity. With bipartisan support, Congress approved the move, driven by corporations like Boeing and Walmart, which dreamed of the vast Chinese market. But the promises proved illusory.
China failed to enforce intellectual property laws, causing damage of $50–100 billion a year to American companies whose developments were effectively stolen by Chinese firms. Meanwhile, according to Pew Research, the U.S. trade deficit with China soared from $83 billion in 2001 to $419 billion in 2018, leaving entire American communities burdened with chronic debts of about $50,000 per household. The U.S. became dependent on China for critical products like pharmaceuticals, electronics, and medical equipment, exposing itself to supply chain vulnerabilities, as seen during the COVID-19 crisis 2020.
The NAFTA agreement, signed in 1992 by President George H.W. Bush and enacted in 1994 under Clinton, added fuel to the fire. The agreement, which created a free trade area between the U.S., Canada, and Mexico, eliminated tariffs and made it easier to move factories to Mexico, where the average wage was about two dollars an hour. By 2010, around 700,000 American jobs had disappeared, mainly in the automotive and textile industries, according to EPI. Factories in Detroit were relocated to Mexico City, and the trade deficit with Mexico climbed from $1.7 billion in 1993 to $74 billion in 2010. Supporters, including corporations like Ford and Chrysler, expected NAFTA to boost U.S. exports, but the opposite occurred: imports from Mexico outpaced exports, leaving American workers without jobs.
The American Middle Class is Crumbling
This devastation dismantled entire communities and left a generation that no longer envisions a career in industry. The American middle class, once the backbone of the economy, comprising workers with stable incomes like factory workers, technicians, and drivers, aspired to fulfill the American dream: owning a home, providing quality education for their children, and securing a stable pension. But today’s reality is vastly different. Data from the Bureau of Labor Statistics (BLS) shows that the real income of middle-class households has dropped by 12% since the start of the 21st century, with the steepest declines recorded in rural areas (18%) and old industrial states (15%). Globalization, which moved factories to low-wage countries like Mexico and Vietnam, coupled with rising living costs, eroded the purchasing power of many families. For instance, in Cleveland, where the unemployment rate neared 10% in 2024, families reported spending 40% of their income on housing and food, compared to 25% in 2000.
The crisis worsened with the surge in food and housing prices. A 2024 report by the Food Research & Action Center noted that food prices rose by 8% within a year, with staples like milk (up 12%), bread (9%), and meat (10%) becoming luxuries for many families. Meanwhile, average wages rose by only 2%, creating unprecedented economic gaps. For example, meat prices in Detroit rose from $5 per kilogram in 2020 to $7 in 2024, prompting many families to reduce their protein intake.
At the same time, the housing crisis exacerbated the situation: a 2024 Urban Institute survey revealed that only 58% of American families owned homes, compared to 65% a decade earlier. Housing prices rose by 20% over the past five years, with average down payments ranging from $50,000 to $100,000, depending on the region. In cities like San Francisco and Seattle, prices have doubled since 2019, and the median salary of $70,000 per year is not enough to buy an average home priced at $800,000.
This economic hardship has led many to quit their jobs or cut back on working hours, feeling there is no incentive to improve their situation. About 40% of middle-class households report being unable to save for retirement or their children’s education, according to a 2024 survey by the National Endowment for Financial Education. The phenomenon hits especially hard among blue-collar workers—industry workers, drivers, and service employees—who experience deep despair. A 2023 Brookings Institute report noted that in 120 of the 300 largest U.S. metropolitan areas, the average real household income declined over the past decade, with the trend worsening in regions where the population is aging, young people are migrating to larger cities like Austin and Denver, and public services like education and healthcare are collapsing due to a shrinking tax base. In Youngstown, for example, the poverty rate rose to 25% in 2024, and local schools reported a $10 million budget shortfall.
Hopes of the Working Class
Ultimately, the economic crisis also influenced political voting: surveys by Edison Research show that 56% of union members, most non-academics, supported Trump in the 2024 elections—a dramatic shift compared to their support for Hillary Clinton in 2016 and Joe Biden in 2020. Treasury Secretary Bessent claims this support reflects deep frustration and a demand for policies prioritizing local interests. “Most of the people felt betrayed,” he said in an interview with CBS in March 2025. “Decades of policies that served corporations and China left the American worker behind.”
To address the crisis, the Trump administration established a new Cost of Living Council, led by a newly created “Price Czar” tasked with monitoring and regulating the costs of basic goods such as housing, food, and transportation. The council, operational since February 1, 2025, has already introduced emergency legislation for tax relief to families earning up to $75,000 annually, in cooperation with states like Ohio and Michigan. For example, Michigan announced a $500 million housing affordability program to provide up to $10,000 in subsidies for first-time homebuyers. Additionally, the administration launched a “Back to Work” program offering professional training for workers in traditional industries, with a budget of $2 billion for 2025.
As presented in an interview with Tucker Carlson in early April 2025, Bessent’s economic vision rests on three pillars: strengthening the middle class, bringing manufacturing back to the U.S., and using the economy for international struggle. “Americans have lost faith in the economic system,” Bessent began, “for decades, we promoted policies that served global corporations and China, not our workers.” He emphasized the direct connection between the economy and national security: “You can’t defend your borders if you rely on your rivals for chips, medicines, metals, or energy. It’s not just about money—it’s about sovereignty.” Bessent compares the current situation to the Cold War, when the U.S. used its economic power to defeat the Soviet Union, noting, “China is the new challenge, and the economy is our weapon.”
To realize this vision, the administration launched a series of ambitious initiatives:
- Broad Tariffs with Selective Relief: The administration imposed tariffs of 10–25% on a range of imported products, focusing on China (up to 145%), while other countries received reductions in exchange for investing in American jobs. The trade deficit, which reached $600 billion in 2024, is a central target for reduction. For example, an agreement with Canada to reduce tariffs on oil and natural gas in exchange for a $10 billion investment in Alabama infrastructure has already created 3,000 new jobs. A similar agreement with Mexico, signed on April 10, 2025, promises reduced tariffs on auto parts in exchange for a Toyota plant in Texas, expected to create 5,000 jobs.
- Tax Reforms: A proposal to lower the corporate tax rate to 15% for companies that repatriate manufacturing to the U.S., alongside a $50 billion investment fund for small and medium-sized businesses, focusing on industrial states like Michigan and Indiana. Ford, for example, received a $200 million grant to build a new plant in Detroit, which is expected to create 2,000 jobs by 2026. Additionally, General Electric announced the return of a medical equipment production line from Mexico to Connecticut, with a $150 million investment.
- Sovereign Wealth Fund: A plan inspired by the Norwegian model, based on revenues from taxes on foreign investments to support strategic industries like semiconductors, green energy, and advanced medicine. The fund is forecast to reach $100 billion within a decade, with initial investments of $10 billion in 2025 in projects such as TSMC’s chip factory in Arizona, expected to generate 10,000 jobs by 2028.
- Crypto Reserve: Announced on March 7, 2025, the initiative includes purchasing Bitcoin as part of strategic reserves, with a plan to invest $5–10 billion over five years. The move aims to diversify financial reserves and respond to initiatives like China’s digital yuan. It has attracted attention from companies like MicroStrategy and Square, which announced increased Bitcoin holdings. However, critics argue that Bitcoin’s volatility (an 18% drop in March 2025) could endanger financial stability. Bessent remains optimistic, hinting at a hybrid regulation plan balancing oversight and innovation, including a $2 billion national blockchain development program. The plan has attracted investments from companies like IBM and Microsoft, which are developing blockchain-based solutions for securing international trade. For example, IBM signed a contract with the U.S. Department of Commerce to create a blockchain-based supply chain tracking system, expected to save $500 million annually in logistics costs.
All initiatives received enthusiastic support from Trump’s base and ridicule from liberal economists like Joseph Stiglitz, who argued that “the tariffs could lead to a global recession without structural reforms.” In contrast, conservative economists like Larry Kudlow argued that the policy represents “a return to Ronald Reagan’s principles,” combining tariffs and tax cuts to restore American economic growth in the 1980s. Early data show progress: a U.S. Department of Labor report from March 15, 2025, notes a 1.2% increase in manufacturing sector employment since the start of the year, mainly in states like Indiana and Kentucky, where new factories have opened. In Gary, Indiana, a refurbished U.S. Steel plant created 1,500 jobs within three months.
Impact on Israel: Challenge and Opportunity
As a close ally, Israel did not escape the effects of the policy. In March 2025, tariffs of 17% were imposed on Israeli products such as semiconductors, polished diamonds, medical equipment, and cosmetics. Bessent clarified that “no countries are exempt”—the policy is based on the benefit to the American worker. According to the Israeli Central Bureau of Statistics, the trade volume between Israel and the U.S. in 2023 stood at $24 billion, with 17% of Israeli exports (mainly in high-tech, defense equipment, and chemicals) directed to the U.S.. Technology companies like NICE, Amdocs, and Check Point, which rely on the U.S. market for 60–70% of their revenues, are concerned about regulatory costs and exchange rate volatility. NICE’s stock, for example, fell by 8% in March 2025, and analysts estimate a 12–15% increase in export costs. Israeli pharmaceutical company Teva reported a 10% rise in drug export costs to the U.S., which is expected to reduce its profitability by $200 million in 2025.
In response, on March 15, 2025, Israel removed all tariffs on imports from the U.S.. Prime Minister Benjamin Netanyahu secured a commitment to reconsider the list of tariffed products during a meeting with Trump on March 20. However, as of April 2025, the policy remained unchanged. The Israeli Ministry of Economy established a task force to encourage manufacturing investments in the U.S., offering grants of up to 200 million shekels to companies that open joint plants, especially in semiconductors and green energy.
For example, Intel, which operates a plant in Kiryat Gat, is considering expanding operations in the U.S., potentially making Israel a strategic partner in the American effort to bring manufacturing home. Mobileye, based in Jerusalem, also signed an agreement with General Motors to establish a research center in Michigan, with a $100 million investment. However, exporters’ organizations have called for a 1 billion shekel emergency fund to support affected businesses.
Expectations for Success Amid Initial Risks
Since January 2025, U.S. stock markets have experienced unusual volatility, with the S&P 500 dropping by 7% in the first 52 trading days—the worst start since 2008. The technology sector was hit hardest, with Nvidia losing $250 billion in market capitalization due to export restrictions on AI chips to China. Federal Reserve Chair Jerome Powell warned on March 15, 2025, of inflationary risks from tariffs, particularly in energy and manufacturing sectors where the U.S. still relies on some imports. For example, fuel prices have risen by 5% since January 2025, increasing transportation costs and sparking protests from truck drivers in Texas. Nevertheless, Bessent remains confident. “We are not here to please Wall Street, but to build an economy that endures,” he said on Meet the Press on April 10, 2025. He pointed to historical precedent: 2018 initial market declines due to tariffs balanced out within eight months, and the economy grew by 3% in 2019.
Another historical comparison is the Reagan era, when tariffs on Japanese imports in the 1980s forced companies like Toyota to establish factories in the U.S., creating 100,000 jobs in the automotive industry. Bessent argues that the current policy will replicate this success on a larger scale. However, the risks are evident: prices of consumer goods like televisions and smartphones have risen by 10% since January 2025, leading to a 5% decline in private consumption, according to a report from the Department of Commerce. Retailers like Walmart and Amazon reported a 3% drop in sales in the first quarter of 2025, raising concerns about a potential economic slowdown.
