It's 'Trump vs. Harris' For Americans, But For U.S. Manufacturing, It's 'Subsidies vs. Tariffs'
Whether it's Biden, Harris, or Trump, they are all keen to see the reflow of American manufacturing; yet under the same goal, the paths taken by the Democratic and Republican parties seem to be distinctly different - The Biden administration is committed to attracting global cutting-edge companies to establish factories in the U.S. with enticing subsidies and accelerating the reconstruction of the American industrial chain; At the same time, Trump is keen on using a blanket tariff stick to achieve his America First strategy.
Behind this significant difference, many U.S. industry insiders are worried that the factory construction boom stirred up by subsidies during Biden's tenure might come to an abrupt halt if Trump takes office.
Data shows that, adjusted for inflation, private fixed investment in U.S. manufacturing construction reached an annualized rate of $236 billion in the third quarter. This figure is more than double the peak during Trump's presidency. The last time U.S. factory investment grew this fast was during the height of the space race in the 1960s.
This prosperity is undoubtedly related to the CHIPS and Science Act and the Inflation Reduction Act introduced during Biden's tenure - the former provides $53 billion in subsidies and tax relief for semiconductor manufacturing facilities, while the latter authorizes trillions of dollars in tax relief and loans for low-carbon technologies. President Biden signed both acts into law in 2022.
Trump Is Ready To Spoil the Party
The CHIPS Act during Biden's tenure aims to expand the U.S. semiconductor production base, which is crucial for countless products from automobiles to artificial intelligence (AI) systems and military hardware, and the act also aims to reduce dependence on goods from geopolitically sensitive areas. The Inflation Reduction Act aims to accelerate the transition to low-carbon energy and support the domestic manufacturing of electric vehicles and batteries, among other devices.
However, Trump clearly disdains these two pieces of legislation. In his view, these acts are just giving away money, and a more effective approach is actually to impose tariffs.
On October 26th, in a podcast interview, Trump said, We put up billions of dollars for rich companies to come and borrow the money and build chip companies here, and they're not going to give us the good companies anyway. All you had to do is charge them tariffs.
Currently, Trump has promised to achieve his advocated industry revival by reducing taxes, deregulating, and imposing 10% to 20% tariffs on goods imported from elsewhere in the world. As for the two major acts during Biden's tenure, whether it's Trump himself, advisors in his campaign team, or some Republican congressmen, they all seem intent on terminating them after taking office...
The latest statement occurred last Friday- House Republican Speaker Johnson said that if Republicans control Congress after this election, they may seek to repeal the CHIPS and Science Act. Harris's campaign team quickly shared the video. Johnson later clarified that the CHIPS Act is not on the repeal agenda, but Republicans may seek to further simplify and improve the main purpose of the act by canceling regulatory and environmental provisions.
Earlier, in a speech to the New York Economic Club in September, Trump also vowed to rescind all unspent funds under the Inflation Reduction Act. In a recent interview, John Paulson, a potential Treasury candidate in a potential Trump administration, also said that he would cooperate with Musk to cancel green energy subsidies in the Inflation Reduction Act.
Can Trump Really Revive Everything?
Many economists surveyed by the media have recently estimated that if Trump is elected, his policies may result in lower manufacturing employment than if Harris is elected.
Democrats also say that Trump is putting American manufacturing at risk. Harris's campaign spokesperson Matt Corridoni pointed out that Trump is threatening to withdraw subsidy funds and cancel thousands of manufacturing jobs across the country.
Of course, whether Trump can or will cut subsidy funds is not clear. A future Trump administration is unlikely to retract already issued grants or loans. Refusing to recognize tax credits under the Inflation Reduction Act would require changing the law, and even if the Republicans can control both houses, Trump would find it difficult to do so. The CHIPS and Science Act previously received bipartisan support.
Tedeschi believes that even if Trump finds it hard to completely overturn legislation, he may halt or delay the use of funds after taking office, which could disrupt planned projects.
The U.S. Department of Commerce has announced a preliminary total of $36 billion in grants for the chip sector to support chip factories being built in the U.S. by companies such as Samsung, Intel, TSMC, GlobalFoundries, and Micron Technology. However, only $123 million has been disbursed so far, namely the grant provided to Polar Semiconductor last month.
James Lewis, a technology expert at the Center for Strategic and International Studies, said that Trump may not be able to repeal the CHIPS Act, but he may prevent the anticipated second round of funding.
Moreover, although the tariffs Trump plans to impose may help some domestic manufacturers compete with imported goods, economists say these tariffs will also increase the input costs required for U.S. factories to produce finished goods and provoke retaliatory measures from trading partners.