Predictions suggest that if former U.S. President Donald Trump wins the upcoming November election, the U.S. government will actively invest subsidies in strategic industries such as artificial intelligence (AI) and biotechnology. If Trump’s second administration becomes a reality, it is anticipated that it will bolster strategic decoupling from China further, viewing it as a competitor and an adversary.
According to the Ministry of Strategy and Finance on the 8th, Yeon Won Ho, the head of the Economic Security Team at the Korea Institute for International Economic Policy, recently predicted this in a report titled ‘U.S.-China Strategic Competition and Economic Security.’
In a call with Seoul Economic Newspaper, Yeon said, “If Trump takes office, there is a high possibility of preparing a second and third ‘Semiconductor Support Act (CHIPS Act)'” and “He will willingly use subsidies if necessary to ensure fairness and success in strategic sectors.” The Semiconductor Support Act, established by the U.S. Department of Commerce in August 2022, entails spending $52.7 billion over five years to foster the domestic semiconductor industry.
Yeon pointed out AI and biotechnology as the following subsidy targets. This is because AI and biotechnology are included in the U.S. Government National Standards Strategy for Critical and Emerging Technology (CET), a report released by the U.S. government last year. He emphasized that “Trump’s personnel have shown their readiness to utilize subsidies upon taking office,” and “Among the areas designated as core technologies by the U.S. government, AI and biotechnology are areas where focused fostering policies have not yet been issued, thus indicating a high possibility of actively investing subsidies.” Canada also announced on the 7th (local time) that it will invest a 2.4 billion Canadian dollar budget to foster the AI industry.
Yeon predicted the second Trump administration could impose super-high tariffs exceeding 60% on Chinese products to strengthen the decoupling effort. Additionally, a uniform imposition of a 10% basic tariff on all goods imported into the U.S. from countries other than China could be uniform. These measures aim to address the trade deficit by employing a comprehensive policy approach.” Yeon said, “Trump perceives that China is taking away American workers’ jobs with unfair trade and achieving a trade surplus, and then investing the money back into the U.S. to take over American companies and assets,” and explained, “China is no longer a competitor but an adversary to the U.S.” He added, “It’s impossible to depend even a little on the enemy,” and “Under the principle that the enemy’s pursuit always exists, ‘win-win’ between the U.S. and China is unrealistic.” This implies that the trend toward trade in goods and foreign direct investment (FDI) occurring exclusively within the same economic bloc will accelerate.
Experts agree that South Korea should also provide subsidies to break away from China’s pursuit and widen the technology gap. This is because there are predictions that the sectors receiving subsidies in the U.S. could expand. A former government official said, “We should not become complacent simply because there is a technology gap now” and pointed out, “We should capitalize on the growing trend of subsidy disbursement.”
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