Trade Cases

Leibowitz: Where is Bidenomics taking us?

Written by Lewis Leibowitz

I can’t really define “Bidenomics” because it is so filled with contradictions. It seems to aim to increase manufacturing output in the United States. But not all increases are created equal.

Government has a few tools to increase domestic manufacturing. But they generally boil down to two: subsidies and taxes. Government and non-government organizations (NGOs) employ or advocate, respectively, a combination of these tools. Let’s look at a few examples.


Semiconductors are a major target of US government subsidies. The Inflation Reduction Act (IRA) authorizes major investments to attract new semiconductor manufacturing to these shores almost entirely through subsidization. The US Secretary of Commerce reported that companies in the industry have already asked for $70 billion in support, which is far more than the available funding. But several times that amount is required to jump-start American production of sophisticated semiconductors. 

Currently, the US produces about 30% of the world’s semiconductors and zero percent of the world’s most advanced chips. Commerce Secretary Gina Raimondo set a goal of 20% of global production of advanced chips by 2030. Taiwan produces most of those. TSMC, a leading Taiwanese producer, has announced new production plants in the US, but they are proceeding more slowly than planned. It is far from clear whether government support can accomplish what is a very ambitious goal, especially at current levels. 


Electric vehicles are the next big thing. But when they will supplant vehicles with internal combustion engines is still up in the air. The Biden administration is trying to reduce consumers’ enthusiasm for internal combustion engines, but consumers aren’t buying it yet.

And another threat is looming: foreign producers—especially in China—may capture the market with low-cost EVs. China’s BYD, perhaps the largest little-known company in the world today, is offering EVs at a starting price of a bit over $10,000. The average price of US-produced EVs is more than $50,000. I previously noted that BYD is contemplating a factory in Mexico to avoid the 25% Section 301 tariffs imposed on imported vehicles from China.

Proposals abound to increase tariffs to 100% on EVs made by Chinese companies anywhere in the world. Avoiding such tariffs could become an important service industry. While any company in China probably has benefited from government subsidies, a US consulting firm suggests that subsidies are not the sole reason for the vast price difference. Europe and the US are worried.

EVs in the US benefit from both subsidies and taxes. The Section 301 tariff on China is one factor. But as noted above, the Chinese are already at work to limit that tax. The IRA tax credit for EVs produced in the US is another tool. But so far it does not seem to be effective. Government support must solve two essentially different problems: (1) leading consumers away from internal combustion engines and (2) leading them away from foreign-produced EVs. So far, neither goal looks achievable with the current tools.


Then there’s steel. The Nippon Steel/US Steel merger is increasingly in the news. Different interest groups, the Biden administration, and members of Congress openly worry about a foreign steel company from a leading US friend and ally being willing to invest in a US steelmaker. 

What’s the danger of the acquisition in the minds of its critics?  Below is a brief list.

  • The United Steelworkers (USW) worry that Nippon, upon its takeover, will violate the existing collective bargaining agreement (Nippon vehemently denies this), and lay off union workers. If this would benefit Nippon Steel, I have yet to see an explanation.
  • Antitrust critics have pointed to the fact that Nippon is a joint venture partner with ArcelorMittal, another foreign steel producer, in a downstream rolling mill in Calvert, Ala. The worry is that Nippon could have increased market power in the steel sheet market, especially in automotive sheet. But U.S. Steel and Cleveland-Cliffs, the only other producer of steel made in blast furnaces, control most of that market. If Cliffs scooped up U.S. Steel in the wake of the failure of the Nippon acquisition, the market concentration in automotive sheet would approach 90%. 
  • Environmentalists decry Nippon Steel’s acquisition of U.S. Steel because, they say, the companies have not done enough to reduce greenhouse-gas emissions. The environmental criticisms suggest that blast furnace steel production should decline if it doesn’t clean itself up. But reducing blast furnace steel production means losing jobs, especially union jobs, because most EAF production is non-union. It is possible to modernize blast furnace production—replacing coal with hydrogen, for example. But this is expensive, and Nippon has money. Where would the money come from if Nippon Steel doesn’t provide it? Where is this all going? 

In general, government has limited control over the development or stemming the decline of industries. Their basic tools are to subsidize industries or to tax unfriendly or unfair competition. In the three industries I’ve selected today, those strategies are not working effectively, and expose serious contradictions. Subsidizing semiconductors could be effective, because it will supplement strong private investment in an industry that is growing. On EVs, the prognosis is less rosy. EVs will probably be a growth industry someday. But other countries, especially China, are producing EVs right now. The government has only made it harder to make and sell traditional vehicles (look at what California is doing). But there is little to foster cost-efficient EV production in the US. 

For steel, so far, the US has protected domestic steel through tariffs and import quotas—Section 232, antidumping, and countervailing duties—but has not injected subsidies. Are subsidies next?

Editor’s note: This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at

Lewis Leibowitz, SMU Contributor

Lewis Leibowitz

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