Drew DeLong, global lead of Geopolitical Dynamics at consultant Kearney, advises executives and board directors on navigating transnational instability and other global risks to their organizations. With a career start in the White House and at the State Department during the first Trump administration, DeLong joined Kearney in 2021. He offers his take on tariffs, the US-China relationship, an EU–US trading bloc, and the makings of a new state capitalism.
Global Finance: What did you see taking shape in the first Trump administration that now looks like US industrial policy?
Drew DeLong: In the State Department, there was discussion around great-power competition and the US and China. There was also this growing trend of industrial coordination—and on the economic side, a very nascent recognition by the US of an uneven playing field. We saw at that time the pushback by the Trump administration on Huawei and on ZTE.
The first time around, we saw steel and aluminum tariffs. There was some work on auto, but it never went into effect. Now we have copper and auto tariffs in place. It is highly probable we will see semiconductors and pharmaceuticals come online. There are several others in the pipeline: aircraft, aircraft parts, heavy trucks and heavy truck parts, drones, polysilicon, timber, lumber, wind turbines. I believe the administration has another four or six in the loading bay that have not been announced.
Those [moves] give a very clear indication that it doesn’t matter where you are bringing in your product from; we want these things here. They give a very clear road map for where the administration wants to accelerate reshoring.
GF: How does a strategic economic block emerging between the US and the EU fit into those plans?
DeLong: I was fascinated when the US-EU joint statement came out [last month]. They did not really mince words: The US and the EU are going to work together to counteract third countries utilizing critical mineral export controls. The statement talked about ring-fencing the economies from overcapacity.
For the US right now, a strategic block appears to be forming at some level on critical industries. You’ve got the EU committing to $40 billion of AI-chip purchases from the US, $750 billion in energy. There are things like generic pharmaceuticals being treated at the lowest MFN [most-favored nation] threshold and pharmaceutical intermediates being given no big tariffs. That’s a direct shot at China’s practice of redefining the country of origin of a product, to make sure that the beneficiaries of this deal are the US and the EU.
What does this mean? It counterbalances, in many ways, China’s strategy of being an export-driven economy and achieving 5% GDP growth by accessing the EU [and other regions]. It means, in many instances, trading military partnership in Europe for economic partnership. I can paint a scenario where, four years from now, things look quite a bit different.
GF: Are US negotiators focused on driving China out of markets?
DeLong: It is a delicate, delicate game. What China did on rare earth export controls, I cannot emphasize enough, woke up a lot of people. Those export controls came online and the industry paid attention, because [companies] stopped getting their rare earths. I started getting phone calls, and colleagues started getting phone calls, asking, “What do we do?”
In the span of a month or two, you saw the US Department of Defense become the top equity stakeholder in MP Materials. You saw startups in North Carolina announce huge Series A capital raises on completely vertically integrated, non-Chinese rare earth supply chains. Colleagues of mine are flying right now to Zambia to secure tungsten mines.
I think there is a duality happening within the White House. Trump wants a deal with China. He wants it at the APEC [Asia-Pacific Economic Cooperation] summit at the end of October. The 90-day [China tariff deadline] extension that was granted over the last couple of weeks happens to overlap with the APEC summit. TikTok is still operating. The White House launched a TikTok account as a kind of vote of confidence. A lot of things are happening right now that clearly look like Trump saying, “Hey China, here.”
On the other hand, you also have the US sending letters to everybody in Southeast Asia to clamp down on trans-shipment. There’s a push to get China out of other economies. They really want to close the valves on export oversupply. It’s a direct hit against what China is trying to do to support 5% GDP growth. You also have the US government pushing for open access for US technologies in mainland China.
GF: What advice do you give to Canadian companies facing large tariff impacts on their business?
DeLong: One is, get compliant with the USMCA [United States–Mexico–Canada Agreement]. If you are compliant and you’re hit by a section 232 [the US trade law restricting imports], you’ll still get hit a little bit, but not as much. I’ve been in Canada more in the last six months than I have the last six years. I’ve talked with some clients, and 80% of their supply is from the US. If you’re a retailer right now in Canada who’s importing from the US and putting stuff on the shelves, you’re getting hit by the retaliatory tariffs. On the market side of things: Because it’s a US product, people don’t want to buy it, so you’re getting hit by both sides.
In six months’ time, when the USMCA is reevaluated, I hope that Canadian Prime Minister [Mark] Carney comes to the table with Mexico’s President [Claudia] Sheinbaum and they renegotiate the USMCA together.
GF: Are there companies that come to you and seem completely behind when it comes to learning the effect of tariffs on their own products, exports, or business?
DeLong: I would be surprised if there is any boardroom or executive team that hasn’t done some type of a tariff analysis at this point. I think companies are still wrapping their heads around the fact that, at times, there are pieces put on the board that then go away. They are one-offs: Colombia doesn’t accept a plane of deported migrants; Trump threatens over the weekend to put a higher tariff on Colombia. If you’re importing coffee from Colombia, you are calling an emergency meeting on a Sunday afternoon, and by Sunday evening, the tariff goes away. Wild.
There are also things the administration is doing that are interlinked; and in those moments, I try to emphasize that it’s important to look at both the tree and the forest. Pharmaceuticals is an example. The White House sent 17 letters to pharmaceutical CEOs mandating that they drop their drug prices in the US, that they roll out a direct-to-consumer model for their drugs, and that they expand access to Medicare, Medicaid, and third-party platforms. It’s a huge, huge change for the Big Pharma players. In that same letter, it also says, But we will work with you to use the US trade representative to go into Europe and make sure that those prices get raised.
GF: The US government just acquired a 10% stake in Intel. On the corporate side, does that concern people?
DeLong: You have the administration now saying, “Well, we may do this more.” You’ve got the commerce secretary saying, “We would look at doing more of these for the Defense Department or defense contractors,” as an example.
I think DoD’s taking an equity stake in MP Materials is fundamentally different from what we saw with Intel: taking an equity position in a company that missed a critical R&D cycle and therefore put the US at a disadvantaged national security position on critical technology.
Right now, if you look at the spot price on many rare earths, it is higher than the spot price for the refined material, which inherently wouldn’t make sense. But because there are so many incentives, the market is not at equilibrium. DoD comes in and sets a price floor and says, “We will buy whatever you can make at this price so that MP Materials can operate. Everything above a certain price will [be part of] a profit-sharing agreement.” That, to me, is trying to address a series of market failures.
There’s a fundamental question right now that industry is going to have to weigh. Is the US going to adopt a state-backed capitalism model where they will support national champions in industries that are national security priorities?
