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US Manufacturing Commitments Double after Biden Subsidies Launched

Companies have committed more than $200bn to US manufacturing projects since Congress passed sweeping subsidies last year, as president Joe Biden’s effort to spark a new industrial revolution gains momentum. The investment in semiconductor and clean tech investments is almost double the commitments made in the same sectors in the whole of 2021, and nearly twenty times the amount in 2019, according to data compiled by the Financial Times. While the FT identified four projects worth at least $1bn each in these sectors in 2019, there were 31 of that size after August 2022. There has been more than $40bn in planned capital spending since the start of the year. Asian giants LG, Hanwha, and LONGI have all announced deals in the past month, taking total large-scale investments to $204bn on April 14. “We see right now the tectonic plates are shifting with respect to investment in the United States,” said US energy secretary Jennifer Granholm this week, referring to the surge of investment in recent months. The Inflation Reduction Act, which became law last August, includes $369bn of tax credits for clean technologies as the Biden administration of pledges to decarbonise the US economy. Another law passed last August, the Chips and Science Act, includes $39bn in funds to stimulate semiconductor manufacturing and $24bn worth of manufacturing tax credits. Both are also designed to break US dependence on Chinese supply chains.

The industrial policies have drawn fire from European and Asian allies, who have claimed their deep subsidies and made-in-America requirements amount to protectionism. Emmanuel Macron, president of France, who visited China last week in an attempt to improve Paris’s relations with Beijing, has said the IRA could “fragment the west”. The EU unveiled a rival industrial strategy last month with provisions to match subsidies for projects at risk of going abroad. While most US manufacturing commitments since August have come from domestic suppliers, roughly a third are from foreign-headquartered companies, according to the FT’s data. Taiwan, South Korea and Japan make up the bulk of the foreign investment. The FT tracked more than 75 manufacturing projects worth at least $100mn each for plants to make semiconductors, electric vehicles, batteries, and renewable energy components, that have been announced since the bills became law in August. The announcements would create about 82,000 jobs, according to the analysis. More projects are expected to be announced in the coming months as the US government provides more guidance on the tax credits. “The magnitude of these investments together is pretty staggering,” said Cullen Hendrix, senior fellow at the Peterson Institute for International Economics. “This is attempting to go from zero to 100 miles an hour in terms of supply chain development in a way that we haven’t seen in quite a while.”

Source : Financial Times