(Bloomberg) – As President Joe Biden embarks on a tour to promote the impact of his economic agenda in the United States, it is already causing a stir around the world.
The package of policies adopted so far amounts to a US industrial policy with massive state intervention in the economy and compels governments from Europe to Asia to respond accordingly.
The law of fleas and science invests around US$50 billion in domestic semiconductor manufacturing. The law for the reduction of inflation includes almost $400 billion in cleantech funding. Management consultancy McKinsey & Company predicts some $2 trillion in new federal spending will be freed up over the next 10 years.
Foreign investors fear that companies active in areas eligible for US funding will relocate to take advantage of the subsidies on offer. Swedish battery manufacturer Northvolt is one of countless companies currently evaluating whether to build new facilities in Europe or the United States.
European Union launches series of grants in response. South Korea passed its own ‘K-chip law’ today, while Canada allocated funds in the budget this week to weaken the gravitational pull to the south. The UK, stripped of EU firepower, announced its response today.
Biden’s measures are aimed at boosting jobs and investment in the United States, but they are also aimed at keeping the country at the forefront of key technologies and countering China. In this sense, they act as an arm of foreign policy.
Washington’s ally Japan has already reached a tax relief deal with the United States on essential minerals for electric vehicles. The EU is working on a similar agreement.
It’s already clear that the new American approach forms the core of a 2024 Biden re-election campaign, should he run.
What is also clear is that the global economy is transforming accordingly.
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Original Note: How US Industrial Policy is Changing the World: The Balance of Powers
—With the collaboration of Michael Winfrey.
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