The domestic industry is still there, only instead of mass-market DRAM it has started making higher-valued varieties of the same stuff. If there's a trade war, they can easily reconvert to making the mass-market stuff, just at much higher cost. You can't expect more than that, since they never really were as big or as low-cost as the lowest cost suppliers can be in normal times. That's not "losing" capacity, it's just acknowledging that you can't create capacity out of thin air.

No, the domestic industry stagnates (at best) or disappears (at worst).

You can't just spin up a 2nm wafer fab when the latest you've been running is a 300nm process.

Compare: US shipbuilding industry to China or SK.

> If there's a trade war, they can easily reconvert to making the mass-market stuff

Factories, tooling, supply chains, and engineering knowledge aren't fungible in the way they would need to be for your statement to be true.

> If there's a trade war, they can easily reconvert to making the mass-market stuff, just at much higher cost.

"easily" is doing a lot of work in that sentence. Depending on the good and what they switch to making, this may neither be easy nor quick.