Some Fear Factory Boom Could Suffer Under Trump
Former president disparages U.S. clean energy, chip laws credited with fueling investment in manufacturing
WASHINGTON—In the past few years, the U.S. has experienced an epic factory building boom. That could be at risk, some analysts and Democrats say. The reason: former President Donald Trump’s opposition to the laws that helped make it possible.
Private fixed investment in manufacturing structures reached an annual pace of $236 billion in the third quarter, more than double the rate at the height of Trump’s presidency after accounting for inflation. The last period in which factory investment grew this fast was at the height of the space race in the 1960s.
Some of that boom appears to be linked to the Chips and Science Act, funneling $53 billion in subsidies and tax credits toward semiconductor manufacturing facilities, and the Inflation Reduction Act, authorizing hundreds of billion dollars in tax credits and loans toward low-carbon technologies. President Biden signed both into law in 2022.
“The charts for this metric are kind of crazy when you look at them,” said Oren Cass, founder of American Compass, a think tank that advocates for Republicans to take up populist economic policies. He said this shows industrial policy, whereby the government encourages strategic or favored economic sectors, can boost the supply side of the economy.
“The IRA and the Chips Act have been wildly successful, I think beyond even the Biden administration’s initial expectations,” said Ernie Tedeschi, an economist at the Yale Budget Lab who served as chief economist on Biden’s Council of Economic Advisers.
The Chips law aims to expand the U.S. base for producing semiconductors vital to countless products from cars to artificial intelligence systems and military hardware while reducing dependence on geopolitically sensitive Taiwan, South Korea and China. The IRA is meant to hasten the transition to low-carbon energy while bolstering domestic manufacturing of the supporting equipment such as electric vehicles and batteries.
But Trump has criticized the laws as giveaways.
“We put up billions of dollars for rich companies to come in and borrow the money and build chip companies here, and they’re not going to give us the good companies anyway,” Trump said on Joe Rogan’s podcast on Oct. 26. “When I see us paying a lot of money to have people build chips, that’s not the way…You could have done it with a series of tariffs.”
In a September speech to the Economic Club of New York, he vowed to “rescind all unspent funds under the misnamed Inflation Reduction Act.” In a recent interview, John Paulson, a potential candidate for Treasury secretary in a Trump administration, said he would work with Elon Musk to scrap the IRA’s green-energy subsidies.
Trump has promised to deliver his own “manufacturing renaissance,” via lower taxes, regulations, and most of all, tariffs of 60% on imports from China and 10% to 20% on imports from everywhere else.
But economists surveyed by The Wall Street Journal predicted that if he is elected, Trump’s policies would lead to lower manufacturing employment than otherwise.
Democrats say Trump is putting manufacturing at risk. “Donald Trump is threatening to defund and dismantle thousands of manufacturing jobs across the country,” said Matt Corridoni, a spokesman for the Harris campaign.
A spokeswoman for the Trump campaign didn’t respond to a request for comment.
Whether Trump could or would cut funding is unclear. It is unlikely a future Trump administration could claw back grants or loans already paid out. Denying IRA tax credits would require a change to the law that could be difficult for Trump to secure even if Republicans control both Senate and the House of Representatives.
Industry leaders note the Chips Act received bipartisan support, while the IRA has led to so many projects in red states that 18 House Republicans signed a letter to Speaker Mike Johnson (R., La.) urging him not to repeal it. Cass said a future Trump administration is more likely to curb IRA spending than Chips grants, given the latter’s bipartisan support.
Johnson on Friday told a reporter that Republicans “probably will” try to repeal the Chips Act if they control Congress and the White House, in a video the Harris campaign promptly shared. He later clarified that the Chips Act was “not on the agenda for repeal” but that Republicans might seek to “further streamline and improve the primary purpose” of the legislation by eliminating regulatory and environmental provisions.
But Trump could potentially stop or delay money that has yet to be disbursed, Tedeschi said. Some administration officials and the Harris campaign warn this could disrupt planned projects.
The Commerce Department has announced preliminary terms totaling $36 billion toward chip facilities being built by companies including Samsung, Intel, Taiwan Semiconductor Manufacturing Co., GlobalFoundries, and Micron Technology. Only $123 million has reached the step of being awarded—a grant to Polar Semiconductor last month. Disbursement of funds is contingent on the recipients meeting certain benchmarks.
Intel Chief Executive Pat Gelsinger on Thursday expressed disappointment with the pace of negotiations to obtain billions of dollars Commerce has pledged to the chip maker’s factories. “We’ve taken that out of our financials this year” as a result, he said. “We’re anxious for that to be finished.”
The Biden administration didn’t provide a figure on how much had been spent under the IRA.
At the Thursday announcement of a new Chips-funded R&D center at the Albany Nanotech Complex in New York’s capital region, Senate Majority Leader Chuck Schumer (D., N.Y.), said the contract for the money “will be signed before December 31st. So, it’ll be done before whomever becomes president.”
At the same event New York’s Democratic Gov. Kathy Hochul, said, “This is important to our national security.” Undoing Chips is “basically saying, I want this to be done by our foreign adversaries. So, I believe that [Trump] will be persuaded that the right thing to do is to keep this in place.”
James Lewis, a technology expert at the Center for Strategic and International Studies, said Trump may not be able to undo the Chips Act, but could stop a hoped-for second round of funding. “That would be really damaging,” Lewis said, citing other countries’ competing incentives for semiconductor plants. “If we stop now, it’s a one-off and it won’t have a long-term effect.”
While Trump’s planned tariffs may help some domestic manufacturers compete against imports, economists say they will also drive up the cost of inputs that U.S. factories need to manufacture finished products, and spark retaliation from trading partners.
One such input is the advanced chip-making machines that the U.S. imports from Netherlands’ ASML Holding, considered essential to making the most advanced chips.
“A 20% tariff on that is definitely going to be noticeable to the semiconductor fab that wants to get up and running,” said Peter Harrell, a nonresident fellow at the Carnegie Endowment for International Peace who served in the White House in 2021 and 2022.