Subsidies are a big part of the Biden administration's economic policy, with a variety of types available. Some go directly to producers, while others are in the form of tax credits for consumers on their purchases of goods. How much is being spent? For semiconductor subsidies, which as I understand it go to the producers, the White House says: "[t]he CHIPS and Science Act provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development."
As a small example of what they have in mind, in December the White House announced that "the U.S. Department of Commerce and BAE Systems Electronic Systems, a business unit of BAE Systems, Inc., have signed a non-binding preliminary memorandum of terms (PMT) to provide approximately $35 million in federal incentives under the CHIPS and Science Act to support the modernization of the company’s Microelectronics Center, a mature-node production facility in Nashua, New Hampshire. The project will replace aging tools and quadruple the production of chips necessary for critical defense programs including the F-35 fighter jet program."
Subsidies are not exactly new, with agriculture subsidies having been around for decades in various forms, and state/local location incentives and federal defense spending commonly used for certain manufacturing industries. But with more industries covered, and new forms of subsidies being offered, we are seeing an increase in U.S. government subsidies.
One thing I wonder about in relation to this rise is what U.S. subsidy supporters expect in terms of a foreign response. If goods benefitting from the subsidies are exported to countries with competing industries, I would think there is a strong possibility of CVD cases being brought against these exports. As a result, here are some questions I have: Do proponents of these subsidies worry about this? Do they think CVDs imposed by foreign governments are an appropriate response and they are fine with it? Or do they have plans to fight against it? Do they not anticipate an increase in exports? Or do they figure that most exports will go to places without a competing domestic industry so CVDs won't have much of an impact?
In the New Hampshire example noted above, Commerce Secretary Gina Raimondo said: "America invented semiconductors. We used to lead the world in manufacturing them. ... Producing those chips at home is fundamental to our national and economic security." It's clear that the Biden administration wants more chips, and more advanced chips, produced in the U.S. But what's not clear to me is whether they expect these chips to mostly just supply U.S. defense needs (Raimondo said: "I am excited to be here for our first CHIPS announcement, which highlights how central semiconductors are to our national defense"), or whether these subsidized chips will be sold around the world.
Currently, there appears to be a significant amount of U.S. chip exports. The Semiconductor Industry Association says that: "The United States exported $61.1 billion in semiconductors in 2022 and maintains a consistent trade surplus in semiconductors." Those exports don't seem to have triggered a trade remedy response so far. (The Commerce Department's page with a list of foreign trade remedies imposed on U.S. producers is here.) Could that change with $52.7 billion given to companies in the sector?