Canadians Really Did Boycott the U.S. — and It Cost America Billions
Canadians Really Did Boycott the U.S. — and It Cost America Billions
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https://www.fodors.com/world/north-america/canada/experiences/news/canadians-really-did-boycott-the-u-s-and-it-cost-america-billions
Travel to the U.S. fell 25% in 2025 due to President Trump’s policies.
Canadians were not joking around with their U.S. travel boycott. Unimpressed with threats of annexation and tariff policies, the neighbors reduced their trips last year and found other destinations. The result? Canadians spent $3.3 billion less in the U.S. in 2025 compared to the previous year, and small businesses have deeply felt this loss.
In 2025, Canada registered 7.1 million fewer trips to the U.S. compared to 2024. A Canadian report highlighted that there was a decrease of 25% in return border crossings. The 11-month year-over-year decline has been unprecedented, excluding the COVID-19 pandemic and 9/11 attacks, and the first four months of 2026 also show a significant decline in visitors compared to 2024. Thus, the downward trend is persistent.
As warned by experts, the slump in tourism had an inverse effect on the U.S., as spending by Canadian visitors was reduced by $3.3 billion. Businesses in the U.S., especially in border states, have felt the difference as Canadian travel slowed to a trickle, and there have been marketing campaigns to bring the neighbors back, including attractive discounts. In April, May, and June, there has been a slight uptick in travel, but it is still not enough to close the gap to 2024 numbers.
But Canadians did not forego travel altogether—they picked domestic and overseas destinations. Their spending on overseas trips increased by $3.5 billion to reach $22.8 billion last year. Trips to Asia soared 16.7% year over year, while Europe also welcomed 13.6% more people from Canada last year.
The Canadian government report also hinted at why this has happened. “Following the change in the U.S. administration in early 2025 and the implementation of America First policies, Canadians’ travel plans shifted abruptly.”
President Donald Trump enraged Canadians last year after he made comments about making the country the 51st state of the U.S. There were also remarks about annexing the sovereign nation. The U.S. also slapped its neighbor with trade tariffs, igniting more fury. The actions banded Canadians together against their closest-friend-enemy, and thus began a U.S. boycott. Businesses encouraged sales of homegrown brands, including liquor and groceries, and travelers canceled trips.
It still might not be over, as President Trump has announced new tariffs on Canadian goods this month. The 50% duty on exports like wine, cement, dairy, paper, furniture and others is sure to sour relations further.
Apart from trade wars and controversial remarks, other U.S. policies are also giving travelers from foreign nations pause. The U.S. does not acknowledge gender identity and only recognizes two sexes, male and female, after President Trump signed an executive order in 2025. Thus, Canada added a warning to its travel advisory for people with an “X” gender identifier on their passport that they “might face entry restrictions in countries,” not specifically the U.S., but broadly any that don’t recognize transgender travelers.
Canada now also warns travelers that U.S. border agents can search their phone, tablet, laptop or other electronic devices without offering a reason. Refusing to cooperate can lead to delays or denial of entry. “Before crossing the border, put your device in airplane mode to ensure remote files don’t get downloaded accidentally.”
Why the best hotel leaders make themselves less indispensable
https://hotelsmag.com/news/why-the-best-hotel-leaders-make-themselves-less-indispensable/
Story contributed by Amanda Wickham, vice president of culture & communications, Ivy Hospitality.
The most dangerous feeling in hotel leadership isn’t irrelevance. It’s indispensability.
It’s the property that hums when you’re there, and only when you’re there. It’s the team that calls you with every decision they could probably make on their own. It’s ownership telling you, again, that they don’t know what they’d do without you. Every hospitality leader I know has felt some version of this, and most of us have quietly enjoyed it.
That feeling isn’t wrong. The results are real and the recognition is earned. But it is one of the most effective traps in our industry, and it accounts for more of our burnout problem than we tend to admit.
Consider what indispensability means from the other side of the desk. Every person who needs you for an answer hasn’t been built to find one on their own. Every gap that only you can fill exists because no one else has been developed to fill it. When a team performs because you’re watching, the standard doesn’t live in the team. It lives in you. When you leave, it leaves with you.
A statistic about a room, not individuals
Axonify’s 2024 survey of 500 front-line hospitality managers in the United States found that 47 percent were burned out, and 64 percent had lost someone on their team to it. Turnover across accommodation and food services runs near 74 percent a year, according to the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover survey.
Those numbers are not a story about people who can’t hack it. They’re a story about how we build hotel leaders, and what we ask them to carry once they’re built.
People are not being let go. They are choosing to leave.
Hospitality has always promoted heroes. The general manager who stayed late. The director of sales who won the account no one else could win. The chief engineer who came in at two in the morning. There’s nothing wrong with that, and I’d argue there’s a lot right with it. A property that has never had a heroic moment is a property that has closed.
But heroics are individual skills, and individual skills don’t scale. The more we promote leaders for heroics, the higher we push people whose whole identity is being the one who does the thing. And then one day, someone hands them a team. They look at that team the way they’ve always looked at a problem: how do I fix this? The answer their whole career has taught them is do it yourself.
That’s the quiet math behind the burnout numbers. The skill that gets a hospitality leader promoted is often the opposite of the skill the new job actually requires.
The job nobody handed you
There is a second job description that arrives with every promotion in this industry, and nobody hands it to you: it’s the job of building the people who do the work, rather than doing the work yourself.
Slower. Less visible. Rarely rewarded in the moment. It is also the only version of the job that scales past your own capacity.
So what does it look like in practice? Not in a workshop, not in an annual review; on a Wednesday morning, when a front office supervisor walks into your office with a problem you’ve solved forty times. You know exactly what to do. Two sentences would resolve it, and they’d walk out grateful.
The developmental move is to keep those two sentences to yourself, and ask one question first. What do you think we should do?
Leaders who develop their people and leaders who don’t spend roughly the same number of hours with their teams. The hours are the same. What happens inside them isn’t.
Developing leaders ask. Non-developing leaders answer.
The answer your supervisor finds on her own, even if it takes longer and even if it isn’t as clean as yours would have been, belongs to them in a way your answer never will. The next time that problem shows up, and it will, they won’t be standing in your office. They’ll handle it at the front desk, because the standard has finally moved from you into them.
The standard that holds
There is a question every hospitality leader owes themselves, honestly, and most of us are afraid to ask it.
When you leave this role, whether that’s next year or in ten years or in a way you don’t get to choose, what happens to your team?
Does the standard hold? Do the people you developed rise into what you built them for? Or does something quietly come apart, because the standard was always living in you, and you took it with you when you went?
The leaders who build something that lasts in this industry, in my experience, aren’t the ones who were indispensable. They are the ones who spent years making themselves less necessary, one small conversation at a time. That is the work—and the industry, right now, needs more of us willing to do it.
At 250, sustaining America’s competitive edge
https://www.mckinsey.com/mgi/our-research/at-250-sustaining-americas-competitive-edge
By
America’s history of reinvention holds compelling lessons as the nation confronts a future of immense if uncertain opportunity
At a glance
- At 250 years old, the United States is the world’s most competitive economy. It generates 26 percent of global GDP and is home to 59 of the world’s top 100 firms. In the past several years, accelerating US productivity growth and announced foreign direct investment inflows have sharpened its edge over other advanced economies.
- It’s a new world. AI is unveiling an ever-expanding realm of possibilities, just as geopolitical contention is growing and fertility rates are falling. The United States is a global technology leader today and spends 27 percent of the world’s research and development dollars—but will that be enough to sustain its current 59 percent share of top firms?
- Some US historical competitive advantages are becoming liabilities. Current generations owe it to future ones to address deteriorating fiscal health, eroding infrastructure, declining educational achievement, fading manufacturing know-how, and sustained disparities in income and wealth.
- Safeguarding an economic edge requires evolving, as America has before. The United States has repeatedly adapted its economic model to meet, and then shape, new technologies and geopolitical realities. Since the country’s founding, American competitiveness has shifted but sustained across four historical chapters: agricultural, industrial, scientific, and digital. A new one is coming.
- A culture of innovation and natural abundance are abiding strengths on which to draw. By our count, Americans created or supported 76 of the 100 most important inventions since 1776, from steamboats to smartphones, from the electrical grid to generative AI. Over its history, the country has profited from twice as much agricultural land per capita as any other large economy, and it was largely self-sufficient in energy for 200 years, including since 2019. These are just a few examples of its resource wealth.
- We the people will write the coming chapter. Collective effort from American individuals, business, and government can ensure energy abundance, an infrastructure backbone, education that builds minds and skills to match new technology, and the financial strength to pay for it all. The prize is continued growth, national economic security, and economic opportunity for everyone.
Chapter 4.
Looking ahead: Securing competitiveness in the next era
Today the United States may be entering a new chapter. Tech, especially AI, is advancing rapidly. Postpandemic macroeconomic disruptions persist, marked by a recent 40-year high in inflation. And heightened geopolitical tensions have produced a growing tide of protectionism reflected in both higher tariffs (the US average tariff rate is now 12.7 percent, the highest since World War II) and industrial policies such as the Inflation Reduction Act and the CHIPS and Science Act. Current trajectories suggest that these forces, along with persistently high capital costs and aging populations, are likely to set the competitive context for the United States and other major economies in coming years.
The opportunity is immense. Future-shaping industries including AI, biotechnology, and robotics are expected to have market sizes in the trillions in the coming decade. By one estimate, AI could add up to 0.6 percentage point to annual productivity growth through 2040.
To seize this opportunity, the United States must prepare to confront looming challenges, including rising demand for energy, infrastructure gaps, and growing national debt. Success also means business strategy, operations, and innovation systems transforming to embrace AI. In parallel, business and society need to proactively train US workers to share their jobs with AI. Should those challenges be met, the net effect would be an American economy that innovates and operates in faster, bigger, and better ways. All this needs to be done with an eye to national economic security amid growing geopolitical fractures.
The magic of US competitiveness to date is that it has not been the result of top-down planning but rather has developed organically from its foundations of natural abundance and entrepreneurialism (which in turn have been harnessed through infrastructure and institutions). Overly specific prescriptions for how to attain the next wave of competitiveness risk missing this important point. Whatever steps US firms, governments, and institutions take, they should ideally be informed by what’s worked in the past: adapting US abundance and entrepreneurship into continued economic leadership on the global stage.
In that spirit, we see five overarching prerequisites for US competitiveness in the next era. Two draw on the country’s institutions of entrepreneurialism: (1) an AI-fluent workforce and (2) sustained long-term investment. Two more relate to the foundation of natural abundance: (3) power that meets the needs of future technology and (4) new and improved infrastructure. A final prerequisite acknowledges a new geopolitical environment: (5) national economic security in a volatile world. In this chapter, we dive into each of these prerequisites, discussing both current challenges and those on the horizon, as well as proposing near-term actions that can help the country stay on track (for a brief summary, see sidebar “A near-term agenda for leaders”).
1. An AI-fluent workforce
Throughout the country’s history, America’s firms, widespread public education, and leading universities have built a dynamic workforce. Education, fundamentally rooted in general knowledge, encouraged problem-solving and flexibility, while universities and knowledge ecosystems instilled deep levels of skill. Beyond building home-grown talent, these systems have also attracted the world’s best minds (along with deep pools of capital). Americans have enjoyed economic opportunity while strong human capital has in turn promoted innovation and scale, driving more prosperity.
As discussed, AI promises significant potential to boost productivity growth and generate meaningful work at high wages. Capturing this will require business strategy, operations, and innovation systems transforming to embrace AI. As that happens, the contract between businesses and their workforces will need renewal. As businesses transform, they will require a trained and ready workforce, and at the same time individuals will need the requisite preparation to thrive. This requires upskilling and labor market dynamism to a degree unprecedented in recent history. Altogether, this shift will be predicated on the workforce’s ability to quickly adapt and learn. An aging population and expected worker shortages, particularly in specialized areas, raise the stakes.
Work is poised to fundamentally transform
The path of innovation is notoriously difficult to forecast, especially when it is moving so fast. Yet the state of technology as it stands today suggests that fundamental change is coming: About 57 percent of American hours worked could, in theory, be performed by agents and robots.
That’s not a prediction of job loss. Throughout history, inventions have given rise to new work and changed some jobs while making others obsolete. “Computers” were once people doing sums. Today’s computers have created a range of jobs, from hardware technician to software engineer. Data scientist is also a new job, but in a sense it is just the latest incarnation of older roles, for example the people the US Census Bureau employed in the late 1800s to process demographic data about the growing country.
No matter how automation proceeds, many human skills will remain relevant. About 80 percent of skills used in the workplace today are needed for activities that cannot be automated with today’s technology. But many of those skills are also used for activities that theoretically could be automated. Consider the skill of data analysis. While AI excels at rapid pattern detection and automating the drudgery of data cleaning, humans are better at interpretation and asking new questions. In many such cases, work may be done by people and AI together.
Everywhere and all at once, AI skills are increasingly important (Exhibit 14). Ultimately, workers of all stripes will need to adapt and reskill for an automated world and a transformed structure of jobs. While that full evolution may take time—and technology will evolve along the way—the next few years are crucial.
Things could get rocky in many ways. Historical precedents of new jobs forming quickly in the wake of new technology may not hold for an innovation as unique as AI. Firms could be slow to adopt AI, stultifying growth. New and improved jobs might be created, but without matching systems to efficiently connect labor to work. Or workers might not have access to sufficient opportunities to learn the skills of seamless work with agents and robots.
Exhibit 14
Three bar charts compare the number of employees in jobs demanding AI‑related skills in 2023 versus 2025, split into STEM and non‑STEM roles. Roles requiring “AI fluency” (using or managing AI) grow from about 1.0 million to 7.0 million (6.8×), while roles requiring technical AI skills (developing or governing AI) rise from about 2.1 million to 3.3 million (1.6×). Overall AI‑related skill demand grows from about 2.2 million to 7.5 million (3.5×), with much of the increase occurring in non‑STEM occupations. Takeaway: AI is becoming a broad workplace capability, not just a technical specialty.
One reason for optimism is labor force dynamism, a source of strength for the United States relative to other major economies throughout history, particularly in the closing decades of the 20th century. That said, trends over the past several decades point to a gradual loss of labor market fluidity. The job reallocation rate, a measure of labor force dynamism, has dropped by roughly a third from the mid-1990s to today (save for a blip during the COVID-19 pandemic). Relatedly, geographic mobility has also declined. The exact mix of factors behind declining dynamism is debated, but there is relative consensus on some changes that would help. These include reducing frictions many workers face when switching jobs—such as differences in occupational licensing across states and non-compete agreements—and undertaking more skills-based hiring. Easing new business formation would also help create new job opportunities. And of course, improving elementary and secondary education, grounded in general knowledge, would improve long-term workforce adaptability, as it has historically.
An aging workforce
Mass retirement provides an additional challenge. The primary driver of US economic growth over the past two decades has been a rise in the number of total hours worked, a proxy for overall labor supply. As fertility rates have fallen over the past several decades, the population has aged, and the labor force is beginning to grow noticeably older, affecting sectors across the board. Nearly all occupations have an older workforce than they did 15 years ago (Exhibit 15). For example, 20 percent of construction workers are over 55, up one-third since 2010. For healthcare support, the number is 25 percent, nearly a 50 percent jump.
Exhibit 15
A horizontal bar chart shows the share of workers age 55+ by occupation in 2011 and 2024, with the change over time. The largest increases appear in jobs such as building and grounds maintenance, healthcare support, production, installation/repair, construction, and farming—many of which involve standing or physical work. Some professional and office occupations show smaller increases or relatively stable shares. Takeaway: workforce aging is widespread, but it is most acute in roles that are harder to automate and physically demanding, raising risks of labor shortages.
Worker shortages across a range of high- and low-skill occupations are already a concern. Many of the sectors experiencing recent shortages have historically been harder to automate and have seen stubbornly low rates of productivity growth. Healthcare, for example, has had persistently high vacancy rates, while vacancies in construction, logistics, and utilities have more than doubled over the past few decades. In a 2024 survey, more than half of US construction firms reported project delays due to worker shortages. Many of these jobs require a large portion of human-centric skills, in which AI or automation has lower near-term potential to help fill workforce gaps.
Taking into account aging and higher expected demand, the skilled trade jobs critical for both growth and competitiveness in coming years—for example, construction and engineering—are expected to grow by 20 times the number of overall net new jobs through 2032. The current pipeline of engineers suggests future shortages and the potential loss of technological leadership in the world; while the United States has a quarter of Mainland China’s population, it has just one-tenth of the engineering graduates. In mechanical engineering specifically, which is critical in fields such as robotics, China produces about 350,000 newly minted grads each year compared to about 45,000 in the United States. A 2023 report by the Semiconductor Industry Association estimates that 58 percent of 67,000 projected new jobs in the semiconductor industry could go unfilled, based on current degree completion rates. Pipeline challenges have been noted in other critical technologies, such as biotechnology.
Rejuvenating labor for an AI future
Labor markets are a linchpin of economic competitiveness. To maintain their edge, and capture the gains from AI, the United States can consider the following near-term actions:
- To begin capturing gains from AI, begin building and procuring agents and robots, and integrating them into business models; reconfigure jobs as needed to account for higher automation and new types of tasks; and lay the groundwork for full-scale transformation.
- To seamlessly transition labor markets into an AI-centric future of work, train the workforce on AI skills while also expanding upskilling opportunities to the population in full.
- To boost labor force dynamism, improve the matching of workers to job opportunities and reduce frictions for labor mobility through steps such as expanding opportunities for remote work, hiring for skills rather than credentials, and streamlining occupational licensing; easing new business creation and knowledge diffusion would also help.
- To address current workforce shortages, especially those related to value chains for critical technologies (for example, construction workers and engineers), marshal coinvestment from corporations and public programs for targeted skills training programs and to provide incentives such as scholarships and research grants to study engineering.
- To develop a flexible workforce equal to the challenge of rapid changes in technology and skill demand, achieve higher K–12 education outcomes while retaining the principles of general education.
- To deepen skills needed for the industries and world of tomorrow, ensure that the US university system remains the strongest in the world; encourage students to pursue engineering and other in-demand technical fields while prizing free and creative thinking.
- To remain at the forefront of discovery and innovation, continue to attract top talent from all parts of the United States and from around the world, to study at a US university and to found or work at US companies.
2. Sustained long-term investment
Entrepreneurs and researchers need financial capital to build their businesses and push the bounds of knowledge. The United States has long benefited from deep, trusted financial markets that both provide plentiful home-grown opportunities for wealth creation and attract the world’s capital. Since the end of World War II, the US dollar has been the world’s reserve currency and US Treasury securities have been considered the world’s safest asset. As a result, US companies, entrepreneurs, and innovators have enjoyed plentiful capital.
Growing scale and innovation in the long term will require even greater amounts of funding for capital projects, education and upskilling, and R&D. Maintaining confidence in the United States—in its economic future and the stability of its institutions—is critical to ensure that American firms continue to attract funding to make these needed investments.
The growing US national debt threatens investor confidence
The federal debt today stands at $38 trillion, or 120 percent of GDP. This is higher than the 119 percent recorded in 1946 in the aftermath of World War II and barely less than the all-time high set in April 2020 at the height of the COVID-19 pandemic. The United States has one of the highest national debt levels relative to GDP of major economies, behind only Japan, Greece, and Italy in the OECD. From 2000 to 2024, $2.40 of US debt was created for every $1 of net new investment (compared to $1.90 on average globally).
When interest rates are low, growing debts are more manageable, as was the case in the decade following the global financial crisis. However, as inflation took hold after the COVID-19 pandemic, ten-year Treasury yields, the basis for most market interest rates, more than doubled their 2010s average. Interest payments in fiscal year 2024 shot up 34 percent, to $949 billion, exceeding defense spending for the first time (Exhibit 16). This continued into 2025.
Exhibit 16
Stacked bars show US federal deficits as a share of GDP, separating the primary deficit from net interest payments (average 1975–2023, 2024, 2025, and 2035 projections). Recent years show total deficits around six percent of GDP, with interest payments making up a large portion, and an annotation noting interest now exceeds defense spending. Projections show interest costs rising further by 2035. A callout notes general government debt is roughly 1.2× GDP as of 2025. Takeaway: debt servicing costs are a major driver of elevated deficits and a growing constraint on fiscal flexibility.
Persistent higher rates relative to expected growth rates could drive up debt growth in years to come. There is reason to believe that rates will remain structurally elevated above prepandemic levels. Investment needs are rising alongside a decline in economy-wide savings as the population ages, wage growth among lower-income segments that are less likely to save, high and rising fiscal deficits that absorb more capital, and slower growth in emerging markets (which have historically invested excess savings in the United States).
Growing levels of uncertainty or a loss of confidence may also put pressure on US long-term interest rates. About half of outstanding debt is set to roll over this year and next. As these Treasuries come on the market, will demand match the supply? If not, rates may rise and contribute to unwanted growth in the national debt. Another unhelpful effect: Higher interest rates can crowd out both private investment and other government spending priorities, including the ability to respond to future crises. The effects can spill into equity markets as elevated rates curb long-term investment and increase economic uncertainty, ultimately threatening household wealth and broader market confidence.
Finding investment dollars as capital costs rise
Knowledge ecosystems are famously capital-light. But competitiveness in the next era will require substantial capital investment. As we discuss below, power generation, distribution, and infrastructure are underfunded. US data centers are in the spotlight; an additional $3 trillion is needed through 2030 to keep up with the compute demands of AI. More money will have to be found to bolster production capacity for critical goods, domestically and among allies (as we discuss below). Beyond capital expenditure, significant spending will be needed for skills development and for R&D.
Much of this is difficult to counteract. But if the United States could reduce its level of debt—saving more or borrowing less—pressure on interest rates would ease, opening the way for economy-wide investment in newly critical technologies and infrastructure. Investors are increasingly focused on whether the government has a credible plan to manage deficits and debt over the medium term. Deficit reduction, of course, will need to be done thoughtfully; overtightening could drive a demand shock throughout the economy, prompting a recession.
Higher productivity, for example from AI, can help, but it cannot solve the debt problem on its own. For one, any potential labor market disruptions could drive up costs such as unemployment insurance. And higher growth adds some degree of higher fiscal costs. Higher wages resulting from higher productivity mean higher social benefits and public-sector labor costs.
Higher interest rates could also threaten households and corporations. Notably, US household and corporate balance sheets have become healthier since 2010, but pockets of risk remain as debt maturity “walls” approach. Relatedly, as both investment demands and capital costs rise, companies need to access capital, and the broader financial system must channel savings to the most productive investments. This requires a shift from the status quo of the past couple of decades, when more savings were held within corporations and capital was directed disproportionately to chasing financial returns rather than productive investment. Maintaining resilience and fostering a productive financial system are imperatives for both policymakers and corporate- and financial-sector leaders.
Attracting sustained investment
Sustaining investment fundamentally means maintaining confidence in the dollar, US Treasuries, and US equity markets.
Actions that can help include the following:
- To reduce pressure on interest rates, commit to a path to reducing deficits, on the order of three percentage points of GDP.
- For businesses to capture gains even in the face of higher interest rates and potential volatility, invest in and adopt automation technologies to grow productivity; secure access to labor and materials; and reassess the business portfolio mix.
- To make investment productive and stimulate growth, ensure that regulatory and supervisory frameworks encourage the flow of capital to productive businesses, big and small.
- To maintain resilience for households and businesses amid macroeconomic shifts, ensure that financial planning is not predicated on assumptions of ongoing low interest rates, and create new financial products that help with long-term saving and investment.
3. Power that meets the needs of future technology
Future technology will also have immense physical requirements, the most salient of which currently is energy. All signs point to energy remaining a core input to economic growth over the long term and perhaps even growing in importance, especially given its fundamental role underpinning both computing (at least based on today’s AI models) and advanced manufacturing.
Today, the United States is the world’s largest producer of oil and natural gas, which has helped keep energy both more affordable and more reliable than in other major economies. Further, US power is more diversified than ever before, with carbon-free sources constituting 44 percent of electricity generation in 2024. However, bottlenecks in expanding power supply could pose a risk that the United States will not be able to keep up with recent growth in demand, especially from data centers, a fundamental component of the AI value chain.
Surging demand
In recent years, power demand in the United States has started to grow after being stable for much of the past two decades. From 2010 to 2022, power demand grew at an average annual rate of 1.0 percent; it accelerated to 1.7 percent from 2022 to 2025. Data centers account for more than half of this recent growth.
Supply is struggling to keep up. Delayed maintenance makes the challenge worse; a growing share of new transmission infrastructure is built just to preserve reliability. Utilities’ fixed costs from refurbishing and replacing existing distribution and transmission infrastructure are a factor in growing retail electricity prices in some states. The wait for generator grid connections alone increased eightfold from 2014 to 2023. Today there is a backlog of hundreds of gigawatts of projects waiting for new wires or substation upgrades.
Several factors are at work. As coal and gas plants reach retirement age, bringing on new baseload and dispatchable generation is costly, and the market offers few incentives. Supply chain challenges for critical equipment, such as transformers and turbines, add further bottlenecks, with lead times of two to five years. Greater reliance on renewables increases energy system variability, requiring careful management.
Furthermore, long queues for permits, along with skills shortages, are slowing the growth of power supply. Average federal permitting takes 4.5 years for clean-energy projects and 6.5 years for transmission, with many stretching beyond a decade. As of July 2025, more than 650 projects were awaiting federal approval. Energy and upstream equipment manufacturers also face shortages of engineering and construction labor (as discussed).
The problem will become acute
In the coming era, when technologies such as AI become integral to work and society, power demand is likely to surge further. Growing geopolitical competition also means a likely push to build more domestic manufacturing for critical products like semiconductors, which will require more energy. By 2040, the United States is likely to need 60 percent more electricity than it produces today to power-thirsty data centers and transportation electrification and to meet growing industrial demand (Exhibit 17).
Exhibit 17
A stacked bar chart projects US power demand by sector (2010–2040) in thousands of terawatt‑hours. Demand is roughly flat through 2020, then rises from about 4.2 in 2025 to 6.7 by 2040 (about +58%), implying a total CAGR of 3.1% from 2025–2040. Data centers and transport show the fastest growth rates, while buildings are flat to slightly declining and industry grows modestly. Takeaway: rapid load growth—especially from data centers and electrification—will require major grid and generation expansion.
What’s needed now
Expanded energy infrastructure will ensure that rising power demand supports productivity growth and innovation and does not become a binding constraint on economic competitiveness. This will mean building new generation and grid capacity at a pace that has not been seen in decades while also maintaining affordability and reliability during the buildout, achieving the difficult balance of business profitability and household well-being.
Over time, doing so will likely require greater coordination among regulators, corporations, and investors. It likely means maintaining legacy power systems while boosting investment and innovation in technologies such as batteries, nuclear, and enhanced geothermal technology.
The following near-term actions could help start to make this happen:
- To ensure system stability, increase collaboration between power generators and regional grid operators to ensure that supply keeps up with demand.
- To enhance grid capacity quickly, deploy existing technologies, including demand response systems, storage, and grid-enhancing technologies that help, for example, manage the grid more effectively during weather events.130
- To build new power generation and grid infrastructure faster, resolve supply-side bottlenecks via permitting reform and speed up collaboration across regulators, invest to expand production of scarce equipment such as transformers, and provide targeted skills training for engineers and construction workers.
4. New and improved infrastructure
Throughout the country’s history, US infrastructure has helped harness its natural abundance and support productivity growth. However, over the past several decades, this historical strength has waned because of underinvestment, and today the United States faces notable gaps, for example in transportation. In the long term, rapid growth in technology, greater domestic production (in the face of geopolitically fracturing trade), and climate change will place greater demands on infrastructure.
Infrastructure, if renewed, could boost innovation and productivity—or it could become a bottleneck for future competitiveness. Like energy, it is a necessary physical input to the next era.
Coming up short
In 2025, the American Society of Civil Engineers issued a report card that gave US infrastructure a C. In half of 18 specific categories, the country received worse than a C-minus. No US port ranks among the world’s top 50 for vessel time in port. Forty-five percent of US bridges are more than 50 years old. Congestion in freight corridors, ports, and logistics systems costs the economy nearly $166 billion annually. Approximately 20 million Americans still do not have access to broadband internet. Cyberattacks on North American utilities, meanwhile, increased 88 percent from 2024 to 2025.
By one estimate, just restoring current infrastructure to good working order requires an additional $3.1 trillion over the next decade (in addition to a $600 billion energy shortfall). Today’s gaps are the result of underinvestment, slow permitting processes, and growing wear and tear. In 1959, US public investment in transportation and water infrastructure was 3.0 percent of GDP, 40 percent of which was operations and maintenance. By 2023, that figure was 2.3 percent of GDP, nearly 60 percent of which was spent to keep the systems running. And when investment does go to new construction, permitting delays materially raise costs—often by 24 to 30 percent—through inflation, labor escalation, and added overhead.
New era, greater demands
Just as the United States built railroads to connect coal mines to factories to launch the industrial powerhouses of the late 19th century, it now needs modernized physical and digital infrastructure for the next chapter. This means more is needed beyond filling today’s gaps.
Geopolitical competition also increasingly features infrastructure, both domestic and in countries with commercial or military ties. China, in particular, has dramatically scaled its infrastructure, and its developers face fewer barriers than Americans. AI data centers, for example, are completed six to 16 months faster in China than in the United States. China’s Belt and Road Initiative has invested in more than 150 countries, with projects in transportation, energy, and digital connectivity, explicitly expanding China’s presence in emerging markets. Since 2012, China has invested roughly $1.4 trillion through the initiative in energy, mining, and other infrastructure projects, with more than $200 billion in 2025 alone. Geopolitical competition also means a renewed push for resilience in critical goods manufacturing, which would come with further infrastructure requirements, as discussed below.
Climate change will also place higher demands on infrastructure, such as irrigation, stormwater, and drainage systems, flood barriers, and power grids with more air conditioning, as climate hazards become more widespread and sometimes more severe. By 2050, the United States will need to scale up infrastructure-related climate adaptation threefold, to about $36 billion annually, to maintain today’s levels of protection.
Should the United States fall further behind, whether by historical standards or global measures, US businesses and households will face higher energy, transportation, and communication costs. That would mean missing out on innovation, including new technologies and processes, that come from building large-scale infrastructure projects. And it might mean that the United States loses global influence.
Getting infrastructure on track
Investing in infrastructure yields sizable returns. It promotes growth of industry and technology, generates innovation, and improves household well-being.
Actions that can help deliver new and improved infrastructure sooner rather than later include the following:
- To restore roads, bridges, and other basic infrastructure to good working order, maintain recent heightened momentum in infrastructure spending, which could fill 60 percent of total expected infrastructure needs over the next decade.
- To speed construction of transportation and digital infrastructure, streamline permitting processes and improve coordination across regulators (at the federal, state, and municipal levels), and invest in targeted skills training for engineers and construction workers.
- To lower long-term costs, integrate digital technologies throughout infrastructure systems to improve efficiency, resilience, and predictive maintenance, and prepare for future capital and operational expenditures for climate resilience, estimated at $36 billion annually through 2050.
5. National economic security in a volatile world
The prerequisites we’ve outlined so far—rejuvenated labor markets, sustained investment, ample power generation, and expanded infrastructure modernization—will all need to take place in a more contentious and fractious world.
A fifth prerequisite is to enhance national economic security. Like the others, national economic security has been a historical US strength, thanks to the country's natural abundance, relative geographic isolation, and leadership in manufacturing and tech.
Today, Mainland China leads the world in manufacturing, producing 45 percent of global output compared to 11 percent for the United States. In some cases, this transfer of share was direct: American companies welcomed the low-cost environment that China (and other developing countries) offered. While the United States remains the second-largest manufacturer in the world, over time it has lost a share of its capacity to produce a wide range of products—from athletic shoes to smartphones, from dysprosium to data processors, from ships to chips—presenting questions about future resilience.
The critical conundrum
Every year, the United States imports about $1.2 trillion in critical goods, those central to resilient supply chains and national security (Exhibit 18). For example, advanced semiconductors are required to run power grids and telecommunications; specific active pharmaceutical ingredients are necessary to produce life-saving antibiotics; specialized high-capacity batteries keep our transportation and defense systems operational.
When US imports of a critical product are not entirely reliable, the situation can pose risk. Altogether, about $1.4 trillion in US imports are concentrated—the country relies on three or fewer nations for the supply of a given resource or manufactured product. When things go smoothly, this is not a problem. But when there is disruption and a country no longer can or will keep shipping, supply might be shut off. For example, Taiwan and South Korea produce nearly all of the world’s most advanced semiconductors. When the pandemic caused new surges in demand for some products and disrupted supply chains, American households and companies realized just how dependent they were on a handful of countries for semiconductors as well as other products they had not previously considered. The United States saw temporary shortages of products as varied as face masks, aluminum cans, and sriracha.
Geopolitics deepens the conundrum. A total of $160 billion of US imports are critical, concentrated, and come from geopolitically distant trading partners (see sidebar “Defining geopolitical distance”). This bull’s-eye of potential exposure may seem small, but it contains a wide range of extraordinarily important goods. What’s more, for about three-quarters of these, Americans depend on imports for more than 90 percent of their consumption. If imports are cut off, current domestic production comes nowhere close to filling the gap.
Exhibit 18
A Venn diagram breaks down US manufacturing imports (about $3.25T) by three risk factors: critical imports, concentrated sourcing, and geopolitically distant suppliers. The chart shows large totals in each category (about $1.23T critical, $1.44T concentrated, and $444B geopolitically distant) and a meaningful overlap exposed to all three risks (about $164B). Labels provide examples of products in high‑risk intersections, such as semiconductors, solar panels, laptops, and rare‑earth minerals. Takeaway: a majority of manufacturing imports face at least one dependency, creating potential vulnerabilities in critical supply chains.
Some of the most exposed goods are critical materials central to economic security, such as rare earth metals, which power and defense systems depend on. The United States sources 70 percent of its rare earths (and 99 percent of heavy rare earth) from China. Demand for rare earths and other minerals such as lithium, nickel, and copper is rising rapidly; global lithium demand alone is projected to increase roughly eightfold by 2040. Chinese firms own the facilities responsible for refining roughly 80 percent of the world’s cobalt, 70 percent of lithium, 60 percent of nickel, and 40 percent of copper. These dependencies translate directly into national-security risk. Each F-35 fighter requires more than 400 kilograms of rare earth materials, and advanced naval vessels need thousands of pounds.
Critical manufactured products in a range of technologies are also at risk. The three largest product exposures are smartphones ($56 billion in imports in 2024) and laptops ($48 billion), essentials of daily life for millions, followed by lithium-ion batteries ($22 billion), which are heavily used in those and other consumer electronics, electric transportation, and large-scale energy storage. Other product exposures are smaller in terms of import value but no less vital. Consider pharmaceuticals. China supplies more than 90 percent of US imports by volume for a range of both finished drugs (for example, the anti-inflammatory prednisone and the antibiotics penicillin and streptomycin) and active pharmaceutical ingredients (including for antibiotics, ibuprofen, and hydrocortisone).
Building resilience for the future
Of course, the United States needs to prepare for resilience tomorrow rather than focusing on gaps of the past. Exposure points have emerged in industries of the future, which will shape the global economy in years to come. For example, while the United States has made massive moves to boost its semiconductor manufacturing capabilities—attracting more than $450 billion in investment commitments between 2022 and 2025, including some $200 billion in announced FDI focused mainly on leading-edge chips—some production inputs are exposed. Consider printed circuit boards and chemicals used in fabs, where China accounts for 30 percent and 60 percent, respectively, of US imports.
For other goods critical to industries of the future, imports are concentrated, though not, for the moment, with geopolitically distant exporters. As AI data centers scaled rapidly in 2025, imports of logic chips and networking equipment (mainly from Taiwan) were the fastest-growing segment, at about 50 percent annually. And in quantum computing, where accuracy is existential, concentration is acute: Japan specializes in blue gallium laser diodes, Finland in high-precision timing devices, and Sweden in the highest-quality low-temperature amplifiers. In all of these areas, China has been rapidly building its own competing manufacturing capabilities. But the immediate competition is to be the first to build a robust quantum computer, not to build at scale.
How can America address these exposure points, building resilience while striking a thoughtful balance between openness and entrepreneurship, on the one hand, and the urgent needs of national security, on the other? Here, history may not be the best guide. The next uncertain era certainly recalls the third historical chapter, from World War II to the end of the Cold War. Both feature a rapidly shifting technology landscape, growing geopolitical tension, and the fracturing of a global economic system.
But it’s unlikely to be anything like an exact repeat of that chapter. Today’s trade crisscrosses the globe, China is the world’s top manufacturing powerhouse, and US tech development is shaped and funded disproportionately by firms rather than by government (business-funded R&D was equivalent to 2.6 percent of GDP in 2022, compared to 0.6 percent for federally funded R&D). And today’s biggest firms are largely globalized and not focused on the implications of business decisions for national resilience.
One step is clear: The United States will need to bolster its ability to procure or develop critical materials and to address manufacturing gaps that could become strategic choke points. In some cases, diversifying sourcing to more geopolitically aligned economies may be sufficient. In just the last year, supply chains for some products have shifted significantly. For example, US imports of both smartphones and laptops stayed constant from 2024 to 2025; both were about $50 billion. But in the same span, imports from China fell by about $17 billion for smartphones and $23 billion for laptops.
In parallel, America may need to invest in new production capacity, requiring a fundamentally revamped industrial footprint. Ramp-up ratios—the factor of domestic production increase that would be equivalent to current imports—for products in the bull’s-eye of exposure (critical, concentrated, and geopolitically distant) are nearly double for medical and scientific instruments, five times for machinery, and more than six times for electronics. For some products, ramp-up factors are much higher. For example, the figures are 13 times for laptops, 17 for smartphones, and 26 for medical gloves.
Increasing domestic production adds urgency and magnitude to all the other prerequisites discussed, requiring even more skilled labor to use cutting-edge robotics, sustained funding, energy, and infrastructure. Attracting more FDI can help. The benefits go beyond simple funding: Cross-border investments that take root also transfer knowledge and spur ongoing domestic investment. In a virtuous cycle, building production know-how can generate even greater innovation and productivity growth, along with greater employment.
The United States has done well recently. Across sectors from 2022 to 2025, the country nearly doubled its announced annual FDI inflows compared to the pre-pandemic period, with Japan, South Korea, and Taiwan the primary contributors. The CHIPS and Science Act, for example, spurred new waves of investment, particularly in US production of semiconductors. In this same period, the United States received the most announced semiconductor FDI globally. These new investments come with a great deal of production know-how.
National economic security will be assured only by greater partnership between government and business. This will help with the twin objectives of securing critical materials and expanding domestic production capacity, as well as promoting the technological innovation needed to stay ahead in the first place. Government will likely need to increase its investment, “crowding in” further investment from the private sector. Public funding has been central to major historical breakthroughs including semiconductors, biotechnology, and the internet. Low rates of private investment in some next-era critical technologies such as quantum, which have long time horizons and high degrees of uncertainty, suggest the need for public spending.
Next steps in boosting economic security
The spotlight is increasingly on national economic security. A variety of developments are evolving at a national level that may help. Some, such as the CHIPS and Science Act, are already established; others, such as America’s Talent Strategy and America’s AI Action Plan, are relatively new. Still others are in discussion and deserve continued focus.
Central to national economic security is achieving the needed degree of resilience in sourcing critical products, whether from abroad or production at home. Businesses and government entities that are deep on the intricacies of production and supply networks will need to align on which critical goods are top priority. Defense supply chains are especially vital. Securing these, whether from stockpiling, shifted sourcing, or targeted investments in new capacity, is a critical next step.ed
That will test the ability of government to make the needed investments in defense and technology infrastructure and to respond to crises. As discussed in the context of sustained long-term investment, a high national debt burden, particularly in a time of high interest rates, might reduce government’s ability to raise funds when it next needs them most.
All that said, the best defense is a good offense. Continued resilience will also depend on the country’s ability to do all the other things it is best at while ensuring that its companies are strong and that the economy works for all Americans. The pace and magnitude of technological change make this more urgent than ever.
These are acute challenges. But as Alexis de Tocqueville wrote, “The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults.” If there’s one country that has proven itself capable of reinvention when circumstance demands, it is the United States.
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