While President Joe Biden embarks on a tour to promote the impact of his economic agenda on America, it's already sending shockwaves across the globe. The suite of policies enacted so far 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. Key reading: The Chips and Science Act puts about $50 billion into domestic semiconductor manufacturing. The Inflation Reduction Act brings nearly $400 billion in funding for clean technology. Management consultancy McKinsey & Company sees about $2 trillion in new 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. Swedish battery maker Northvolt is one among countless companies now weighing whether to build new facilities in Europe or the US. The European Union is floating a raft of subsidies in response. South Korea passed its own "K-Chips Act" today, while Canada allocated money in this week's budget to weaken the gravitational pull south. The UK, denied the EU's firepower, announced its answer today. Biden's measures aim to bolster 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. Washington ally Japan has won an agreement for US tax breaks on critical minerals for electric vehicles. The EU is working on a similar deal. It's already clear that the new US approach constitutes the core of a Biden 2024 reelection campaign, should he run. Equally evident is that the world economy is being reshaped as a result.— Alan Crawford |
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