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Your guide to what the 2024 US election means for Washington and the world
Donald Trump has recently notched up an impressive roll of investment pledges from companies as he attempts to turn the US into a manufacturing powerhouse. Last week, the chief of semiconductor giant Nvidia hinted at ploughing “several hundred billion” dollars into the country over the next four years. Multinational carmaker Stellantis, Japanese brewer Asahi, and South Korea’s automaker Hyundai have all recently unveiled plans for new US production. The White House proudly claims that “the list of manufacturing wins is endless”.
The self-congratulation is premature. The Trump administration will find that there is a limit to how much investment it can attract, particularly if it persists with its central strategy of trying to prod businesses into the country with tariffs.
For starters, the lead time to build a factory is often several years long. That means the costly decision to shift production to the US depends partly on how long businesses reckon the current protectionist stance will last. But companies have no clarity on what Trump’s plans to implement reciprocal tariffs next week looks like, let alone what US policy will be in a few years. With Trump’s import duties affecting numerous raw materials, such as aluminium and steel, producers will also wonder if domestic supply chains will be strong enough to meet their demand.
Investors will be weighing up factors beyond tariffs too. The recent surge in US factory construction spending, which hit a half-century high in 2024, has largely been driven by financial incentives provided under the Biden administration. For instance, big investment pledges by semiconductor companies have been backed by subsidies from the Chips Act. But both that legislation and the Inflation Reduction Act — which offers tax credits for investments in renewable technologies — are in limbo under Trump, who has been deeply critical of them.
Access to labour is another consideration. Right now, there are mounting warnings from industry that the White House’s large-scale plans to deport undocumented workers will exacerbate worker shortages, particularly in the manufacturing and construction sectors. New factories could face building delays. As it is, many companies complain of cumbersome and complex permitting processes. Signs of a slowdown in the US economy will also weigh on investors’ minds. Consumers, businesses and the stock market are flinching at the prospect of Trump’s inflationary tariffs and the widespread uncertainty.
It will be tempting for the Trump administration to see recent pledges from manufacturers as proof that the threat of losing competitive access to the world’s richest consumer market is enough to attract investment. That will undoubtedly have played a role in some companies’ decisions. But broader factors are at play too. For instance, TSMC’s recent $100bn commitment included funds to boost research and development activities. Given the long timeframes to build factories, companies are also likely to be making decades-long decisions on the need to expand their US presence, regardless of tariffs.
Still, for most foreign companies the least risky, and most logical, option would be to wait and see how US tariff plans evolve. Others may even double down on investment projects elsewhere, where the policy environment is more predictable. Smaller businesses, with less resilient balance sheets, might also find that they need to reduce their US exposure. Indeed, given America’s relatively high labour costs, the inability to procure low-cost imports from abroad could make some operations in the country less viable.
There are bigger questions on why Trump believes a focus on manufacturing is the best path to greater US prosperity. But if the goal is to build more factories in the country, Trump is better off removing barriers to business, not raising them.
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