Manufacturing investment hit new peak in January as Biden bets on green transition

Thanks in part to the Biden administration’s major investments, the switch to cleaner technologies and energy sources is underway, and the global economy is being physically restructured to accommodate it.

Although it seemed to hit a high of about $200 billion last summer, private companies Investment in manufacturing construction continues to rise. New spending in January reached a seasonally adjusted $225 billion, an increase of more than 180% from normal levels (about $80 billion annually over the past decade).

This funding, encouraged by business tax breaks, is being used to build facilities that manufacture electric vehicles, batteries, semiconductors, electronics, and other energy products. These facilities are being removed from traditional manufacturing sites in China and integrated into new international value chains.

“Some of our key supply chains, including clean energy, are now disproportionately concentrated in China,” Treasury Secretary Janet Yellen said last weekend at chemical company Albemarle’s lithium processing plant in Antofagasta, Chile. Stated.

Albemarle plans to open a lithium mine in North Carolina in the next few years using tax credits passed as part of the bipartisan Infrastructure and Inflation Control Act, two of the Biden administration’s flagship bills. is standing.

Yellen said Saturday that lithium demand is expected to more than triple over the next decade. This is one of several long-term trends related to the green transition that are now beginning to appear in economic data.

Although investment in factories has not yet led to an increase in manufacturing activity, it is still largely achieved. Average level over the past 10 yearspolicymakers and manufacturers are boldly optimistic.

“If we can continue on this trajectory, this resurgence, we’ll be well on our way by the end of the decade, by 2030,” Jay Timmons, CEO of the National Association of Manufacturers, said in his annual address to member companies last month. “Imagine the situation in the manufacturing industry.” Timmons said the boom in green manufacturing will likely be featured in President Biden’s State of the Union address this week, and he also gives Biden credit for it.

“President Biden will probably give some credit to what manufacturers have accomplished. That’s fair,” he said.

Mr. Biden has made manufacturing a centerpiece of both his economic policy and his re-election campaign.he has often been described as the most prominent figure Pro-union president in U.S. historywas among the first to join the active picket lines when the United Auto Workers went on strike last fall.

But despite surprisingly strong economic indicators during his time in office, he has struggled to convince Americans about his economic policies, consistently ranking low in opinion polls on his response to the economy. It has been evaluated. The promised boom in factory jobs, which is very likely the result of all the manufacturing investment, also hasn’t taken off yet.

The fight to be perceived as a candidate friendlier to American workers is a challenge, especially as former President Trump touts protectionist economic policies that promise across-the-board tariffs on imports into the United States. This should be the economic feature of the presidential election.

According to a breakdown of new manufacturing spending released by the Ministry of Finance last year, expansion in electrical and electronic equipment accounted for the majority. The sector received billions of dollars in additional funding and tax breaks from the CHIPS and Science Act, which aims to increase domestic production of semiconductors used in everything from dishwashers to cars.

The legislation allocated a total of $52.7 billion for chip manufacturing, research and development. On-the-job training. Coordination with allies through 2027 is also planned, according to the Congressional Research Service.

Citing Deutsche Bank Equity Research, the Treasury Department reported in July that construction of 18 new semiconductor manufacturing facilities began between 2021 and 2023.

More than 50 new semiconductor projects, including high-cost facilities known as manufacturing plants or “fabs,” have been announced in response to the CHIPS Act, according to the Semiconductor Industry Association, an industry group representing chipmakers. It was done.

“Major fab” [are planning] “U.S. expansion: 6% year-on-year production capacity increase in 2024,” market researchers at Deutsche Bank wrote in a February note to investors, as chipmakers TSMC, SK Hynix, Samsung, Intel, and Micron He mentioned projects underway in five different states.

Battery production is another focus of burgeoning manufacturing investment, and the expansion of this industry is poised to displace long-term demand for fossil fuels, one of the main causes of climate change and global warming. It should be helpful.

One of the centers of battery production activity is Arizona, where multiple new facilities are being built. One of American Battery Factory’s Tucson-area projects, which manufactures lithium iron phosphate battery cells, has received $1.2 billion in initial capital investment and will require approximately 1,000 full-time staff.

“[The] “This is an important milestone for Arizona’s battery industry,” Arizona Gov. Katie Hobbs (D) said at an event on the factory grounds in October.

Heath Vescovi-Chioldi, economic development director for Pima County, Arizona, where the American Battery factory is being built, said federal subsidies and incentives are driving investment in manufacturing across the state. told Hill.

“From a federal level, we see a lot of unique and targeted grant opportunities,” he said. “Energy, semiconductors, wafer manufacturing, battery manufacturing, you name it… all of that is because we’ve seen a lot of activity coming from the federal government and Arizona being able to take advantage of that. ”

According to the Paris-based news agency, international energy agencyAlthough global greenhouse gas emissions have not yet plateaued, fossil fuel use will decline at some point this decade as “the robust expansion of clean energy reduces overall fossil fuel demand and emissions.” There is a possibility that it will hit a plateau.

Changes in trade patterns and value chains, shaken by national economic shutdowns during the pandemic, are laying a new international foundation for domestic reindustrialization.

Experts say the increasing U.S. trade deficit with Mexico and increased trade with Southeast Asian countries reflects a rebalancing of U.S. trade away from China.

“If you look at the data, you’ll see that the U.S. trade deficit with Mexico has increased significantly. If you think of the global trading system as a long balloon and squeeze China, that balloon is inflating with Vietnam and Mexico. ,” Lori Wallach, director of the trade advocacy group Rethink Trade, told The Hill.

“On the supply side, a range of tax incentives and subsidies for building new domestic manufacturing capacity, and on the demand side, stronger rules of origin and Buy American, this combination will generate significant growth in manufacturing jobs. “By 2025,” she said.

The Fed’s research predicted this phenomenon, which central bank researchers described as a “massive redistribution” to Mexico and Vietnam, where low-wage workers would replace workers in China.

“Available data points to an impending “Great Redistribution” in supply chain activities: US direct sourcing from China will decline and Alternative locations (particularly Mexico) are increasing their share of imports,” found a National Bureau of Economic Research paper by Laura Alfaro and Davin Cho presented at the Fed’s Jackson Hole Symposium last summer.