US Treasury Secretary Janet Yellen travelled to China on the weekend to deliver a message that China must halt subsidies in industries like autos and green energy.
Just after touching down from returning, the US announced $6.6 billion in grants for three TSMC chip plants in the US, along with $5 billion in loans. That’s just part of the $39 billion in grants handed out in the CHIPS Act.
The Treasury Secretary also spoke with CNBC and criticized Chinese auto subsidies while the US continues to offer US consumers huge subsidies for EVs and throws up roadblocks on imports, including from the EU in moves that almost certainly fall outside of WTO rules. The Treasury is also fighting a takeover of US Steel by Japan’s Nippon Steel.
Now I’m not here to point out hypocrisy in politics, that doesn’t make money in markets.
What does is understanding the game. What’s increasingly clear (despite Yellen’s rhetoric) is that we’re in a new and increasingly-mercantile era. The west tried to change China but instead it’s China that has changed the west. I suspect this pendulum has just begun swinging and the winners I think will be struggling domestic producers who can be shielded from foreign protection. The losers will be multi-national exporters, particularly those without technological moats.
In the bigger picture, this will continue to swell government deficits and will invariably slow global growth.