Europe and South Korea are both concerned about the “Made in America” initiatives and rivalry of President Joe Biden with China, which is having an impact internationally. The US government is expanding its dual-pronged strategy of assisting critical businesses like artificial intelligence, semiconductors, and electric cars while attempting to stop China from making military advancements in the same disciplines. The new policy’s impacts have already begun to distort international supply chains. The US has approved money totaling $420 billion to promote domestic chips and clean-energy technology production. The infrastructure bill that was signed in 2021 also stipulates that all building supplies must be produced in the US. Over a ten-year period, the federal government will spend approximately $2 trillion on these policies.
US money has a gravitational pull on international companies.
Businesses from other countries are drawn to the US in order to use the money made available by the Chips and Science Act and the Inflation Reduction Act (IRA). Northvolt AB, a Swedish battery manufacturer, is emphasizing growth in the US above Europe. Volkswagen AG, a German automaker, is constructing a $2 billion facility in South Carolina for its new electric Scout brand, comparing the incentives on offer to “a gold rush.” One effect of the Biden administration’s efforts to combine domestic and foreign policy in what National Security Advisor Jake Sullivan has referred to as “a modern industrial and innovation strategy” that fosters job growth at home while displaying American strength abroad is the redirection of corporate investment.
South Korea is at risk on at least two fronts.
China is South Korea’s greatest commercial partner, hence the country faces at least two threats of attack. SK Hynix and Samsung Electronics were among the businesses given a one-year exemption from US export restrictions on providing cutting-edge semiconductor technology to China. What happens after that expires in October is still a mystery. Seoul has also expressed worry that Hyundai and other South Korean automakers may suffer consequences under the IRA because their models are not eligible for federal tax incentives on EV purchases because they are not US manufacturers of EVs.
Other nations forced to submit to US will
The US has forced governments to submit to its demands or face retaliation from them, from The Hague to Tokyo. A €43 billion ($47.2 billion) Chips Act adopted by the European Union opens the door to public assistance for organizations like ASML Holding NV, a Dutch producer of chip-making equipment whose exports to China have been restricted at the request of the United States. The EU is also preparing large subsidies to offset the effects of the IRA, which will provide the Biden administration with around to $370 billion in funds to assist it achieve its climate targets. In order to attract a Volkswagen battery facility that would have been going to the US, Justin Trudeau’s administration in Canada offered incentives of up to C$13 billion ($9.5 billion) over a ten-year period. Taiwan Semiconductor Manufacturing Co. has publicly said in Japan that it is asking the government to contribute almost half of the $8 billion price tag of a new fabrication facility being built in Kumamoto Prefecture.
South Korea is prepared to cooperate with the US on national security issues
Even though South Korea is willing to cooperate with the US on national security issues, Korean private companies continue to express “deep concern” about what they perceive to be “discriminatory” aspects of Biden’s policies. Wonho Yeon of the Korea Institute for International Economic Policy made this statement during a conference on April 18 that the Wilson Center hosted to commemorate President Yoon’s visit.
Source: ©ANDREW CABALLERO-REYNOLDS/AFP via Getty Images ; Bloomberg
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