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.
Source: Bloomberg
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.
Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770. The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.
