US inflation will soar if America doesn't undergo reindustrialization, investment manager says

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• Prices in the US could keep going up if the US doesn’t “reindustrialize” its economy, Richard Bernstein said.
• The US has a “massive” trade deficit at a time when world trade is becoming fragmented, he noted.
• Deglobalization could disrupt supply chains and push up costs, market experts have warned.

Inflation will climb higher if the US economy doesn’t reindustrialize its economy, according to investment manager Richard Bernstein.

The Richard Bernstein Advisors CEO pointed to the US’s “massive” trade deficit, with the difference between imports and exports clocking in at $773.4 billion last year, according to the Commerce Department.

That trade imbalance could lead to trouble for the economy, considering the ongoing trend of deglobalization. World trade has become more fragmented since the pandemic, and rising geopolitical tensions are a sign that the trend is continuing, he said.

That suggests the US needs to reindustrialize its economy or face higher prices as a long-term consequence, he warned.

“It has to happen. If it doesn’t … we’re going to have tremendous inflation here in the United States,” Bernstein said to CNBC on Monday. “We’re dependent on the world for everything at a time when globalization is starting to contract. Not a good combination. It changes the story from secular disinflation to secular inflation.”

Market commentators have warned that deglobalization could be a major factor keeping inflation elevated for years to come. Billionaire investor Ken Griffin predicted last year that high prices could stick around for decades as fragmented world trade will disrupt supply chains and push up costs for consumers.

Reindustrialization efforts in the US are already underway, with the government offering billions in aid for companies to build new infrastructure and produce key goods, like semiconductors, EVs, and solar panels. More firms are already choosing to manufacture their goods in America, a JPMorgan paper found.

Bernstein has been calling for a reindustrialization of the US economy over the past decade. In 2012, he published a whitepaper calling for an “industrial renaissance,” which would take US manufacturing back to levels recorded in the 50s and 60s. That renaissance will be the predominant theme in the market over the next 10 years, he said in a note earlier this year.

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