While President Joe Biden comes across as old and doddery, his economic agenda for America is anything but. The range of policies enacted so far by the Biden Administration amounts to a US industrial policy with massive state intervention in the economy — and is forcing governments from Europe to Asia to respond in kind.
The Chips and Science Act put $50 billion into domestic semiconductor manufacturing. The Inflation Reduction Act arranged $400 billion in funding for clean technology. Management consultancy McKinsey & Company estimates $2 trillion in US federal spending being freed up over the next 10 years.
The concern in foreign capitals is that businesses active in areas eligible for US funding will relocate to take advantage of the subsidies on offer. Many companies are now considering whether to build new facilities in the US.
The European Union is floating a raft of subsidies in response. South Korea recently passed its own “K-Chips Act”, while Canada also allocated money to counter the US appeal, as did the UK. Australia has its own responses, and the Albanese government will not want to be left behind in this race.
Biden’s measures aim to boost US jobs and investment, but they also target China by keeping America ahead in key technologies. In that respect, they act as an arm of foreign policy. The new US approach will constitute the core of a Biden 2024 reelection campaign, should he run.
Equally evident is that the world economy is being reshaped as a result.
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