“Homeland economics” will make the world poorer
Promises of money today create expectations of more money tomorrow As in the 1990s, government attempts to boost their chip industries are running into trouble. Morris Chang, the founder of tsmc, a big Taiwanese producer, told Nancy Pelosi, a senior Democrat, that American efforts to rebuild chip manufacturing at home were doomed. The firm says that production at its first plant in Arizona will be delayed until 2025 due to a shortage of specialist workers.
Economic costs are emerging from another direction: as a result of retaliation. Some of the most aggressive measures have come from China. It recently imposed export controls on gallium and germanium.
China produces 98% of the world’s raw gallium, a key ingredient in advanced military technology. In February China placed Lockheed Martin and a unit of Raytheon, two American arms-makers, on an unreliable-entities list after shipping weapons to Taiwan (which China regards as part of its territory). The companies were blocked from making new investments in China and from trade activity, among other restrictions.
Governments are also finding that their promises of money today create expectations of more money tomorrow. In May Stellantis, a carmaker, paused construction at an electric-vehicle battery plant in Canada amid talks with the federal government about its support for the factory. (Stellantis’s largest shareholder, Exor, part-owns The Economist’s parent company.) Intel is probably going to get higher subsidies for a project in Germany after complaining about rising energy and construction costs.
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