The recent energy crisis has brought energy prices back to the forefront of industrial concerns. While much of the debate has focused on this issue, another key determinant – too often overlooked – plays a critical role in shaping industrial competitiveness: fiscal policy and its impact on demand. Expansionary fiscal policies can erode competitiveness by pushing up prices, which in turn weighs on exports. On average, over the past three decades, a 1% increase in demand in advanced economies has resulted, within three years, in a 1.8% decline in exports of manufactured goods. However, the impact on value added depends on the degree of trade openness. In sectors with low exposure to international trade, domestic sales can offset declining exports, meaning that stronger demand boosts manufacturing value added. By contrast, in highly open sectors, the fall in exports outweighs gains in domestic sales, ultimately reducing value added.