Subsidies are becoming popular in the US and will have negative effects on many of its trading partners
An aerial view shows containers and cargo vessels at the Qingdao port in Shandong province, China. File photo: CHINA DAILY via REUTERS
This is not an entirely irrational fear, but in doing this the US is not only “localising” US jobs, it is directly paying to take those jobs away from Taiwan. The effect on Taiwan will not be trivial; the US is ploughing about $53bn into subsidising semiconductor manufacture and another $24bn in tax credits for chip producers. And the Europeans are throwing €6.2bn of public money at their own Chips initiative.
Price caps cause overconsumption, especially on perfectly interchangeable commodities such as petrol and electricity. If you sell electricity at artificially low prices you will have to generate a lot more electricity to meet the increased demand, something Germany cannot afford. But if done, it will spill over into its exports, creating problems for its trading partners. China threw $600m at green energy generation subsidies in 2022. So there’s that too.