United States Bills Backfire

In recent years, the United States has passed multiple bills in the hopes of increasing domestic production and moving overseas manufacturing back to American soils. However, the United States government was hit with a reality check. For us to truly understand what happened, we must first look into the bills that were passed recently.

When the pandemic broke out globally in 2020, the economy of the United States took a heavy toll. As such, the United States government passed the American Rescue Plan Act of 2021 that was signed by president Biden on March 11th, 2021 (The White House, 2022). This act was carried out in support of domestic industries and infrastructure, which indirectly promoted nearshoring. 

On the 9th of August 2022, President Biden signed the CHIPS and Science Act 2022 . This act was signed to reduce its reliance on foreign semiconductor suppliers (The White House, 2022). A total of a $40 billion investment plan was announced in the act which was estimated to create up to 40,000 new jobs. Not long after, the White House also signed the Inflation Reduction Act 2022. This act incentivizes clean energy manufacturing and tech development. This promotes manufacturers to produce their goods and services domestically (Griswold, C., 2024).

Fast forward to two years later, Intel, one of the biggest beneficiaries from the CHIPS and Science Act 2022, announced an unexpected news on the 1st of August 2024. In what was supposed to create 40,000 new jobs, Intel instead decided to lay off 15,000 employees, which was more than 15% of the workforce Intel had (Zeff, M., 2024). On top of that, an estimated 40% of manufacturing projects have been delayed according to a report from Financial Times (TrendForce News, n.d.).

To make things worse, these bills were aimed to increase domestic production, but it ultimately benefited its neighbor country, Brazil. The Brazil-China Economic Cooperation Industrial Park had a surge in manufacturers from China. This was due to China manufacturers hoping to evade tariffs imposed by the American government while also maintaining a low cost of production by capitalizing on the cheap labor offered by Brazil. According to Reuters, China automaker BYD claims to invest a total of $620 million in the industrial zone to offer more competitive prices (Reuters, 2023). 

Many factors come into play when economic decisions are made. From geopolitical landscape to economic factors, what was intended by policy makers may not be the outcome that is achieved. It is crucial to look into every nook and cranny before deciding upon making policies in the future as even the smallest miscalculations or omission of factors within the economy can lead to a very different result.                  

Written by:

Lee Yuan Jun

1st Year Student at Taylor's University,

Bachelor of Business (Honours) in Finance and Economics

References: 

Federal Transit Administration. (n.d.). American Rescue Plan Act of 2021 | FTA. [online] Available at: https://www.transit.dot.gov/funding/american-rescue-plan-act-2021[Accessed 24 Dec. 2024].

The White House (2022). Fact Sheet: CHIPS and Science Act Will Lower Costs, Create Jobs, Strengthen Supply Chains, and Counter China. [online] The White House. Available at: https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/ [Accessed 24 Dec. 2024].

The White House (2022). Inflation Reduction Act Guidebook. [online] The White House. Available at: https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/ [Accessed 24 Dec. 2024]

Griswold, C. (2024). Chipping Away - American Compass. [online] American Compass. Available at: https://americancompass.org/chipping-away/  [Accessed 24 Dec. 2024].

Zeff, M. (2024). Intel to lay off 15,000 employees | TechCrunch. [online] TechCrunch. Available at: https://techcrunch.com/2024/08/01/intel-to-lay-off-15000-employees/ [Accessed 24 Dec. 2024]

TrendForce News. (n.d.). Nearly 40% of Major Manufacturing Projects Reportedly Face Delays under U.S. IRA and CHIPS Act. [online] Available at: https://www.trendforce.com/news/2024/08/13/news-nearly-40-of-major-manufacturing-projects-reportedly-face-delays-under-u-s-ira-and-chips-act/  [Accessed 24 Dec. 2024].

Reuters (2023). China automaker BYD to invest $620 million in Brazil industrial complex. Reuters. [online] Available at: https://www.reuters.com/business/autos-transportation/china-automaker-byd-invest-620-million-brazil-industrial-complex-2023-07-04/ [Accessed 24 Dec. 2024].