Mr. Trump makes the flow of hundreds of billions of dollars into the US nervous

Pouring hundreds of billions of dollars into the US under the Biden administration's incentives, Asian manufacturers worry that Trump may cancel subsidies if he wins the election.

Companies like Toyota, Hyundai, TSMC, and Samsung have been increasing their presence in the US to take advantage of the Biden administration’s incentives and opportunities in the world’s largest economy. According to a report at the United Nations Conference on Trade and Development, more than $110 billion in new greenfield investment will be poured into the US each year since 2021.

Leading the inflows were developed East Asian economies such as Japan, South Korea and Taiwan, China, which poured in a combined $147 billion over the past three years. Now the election is weighing on their plans, as Mr Trump has called the Inflation Reduction Act (IRA) – which provides subsidies for electric vehicles, renewable energy, sustainable aviation fuel and hydrogen – a “green swindle”.

Meanwhile, the Biden administration's CHIPS and Science Act of 2022, which offers incentives to attract advanced semiconductor manufacturing to the US, has been called a "bad deal" by the Republican candidate. Trump said the act was "so bad" and that Taiwan (China) had "stolen" the US chip industry. He also said that imposing high tariffs would be an effective way to force companies to build factories in the US.

“My plan is to terminate the Green New Deal and recover unspent funds under the misnamed IRA,” Trump revealed his economic policy platform in a speech in September.

Former US President Donald Trump speaks behind bulletproof glass in Lititz, Pennsylvania, on November 3. Photo: AP

Trump campaign senior adviser Brian Hughes told Reuters that the IRA contributed to inflation and the growing federal budget deficit, but he did not provide details on how the presidential candidate would deal with the IRA if he returned to the White House.

Many electric vehicle subsidies could be cut if Trump wins, observers say, especially if Republicans control Congress. Fuel economy and emissions regulations are almost certain to be revised, and the $7,500 tax credit for electric vehicles could be eliminated, according to Corey Cantor, an analyst at BNEF.

Bill Reinsch, a former Commerce Department official in the Clinton administration and now a senior adviser at the Washington-based Center for Strategic and International Studies, said "Trump is a master of unpredictability" and that sudden actions could occur if he takes office.

"Regulatory rollbacks are always a possibility, although I think he'll be selective, focusing on renewable energy tax credits. He can't eliminate them on his own, but he can change the regulations and make them harder to access," said Bill Reinsch.

LG Energy Solution (LGES) said it sees risks to its U.S. plans due to lower-than-expected electric vehicle sales and the possibility of the Trump administration rolling back policies. LGES reported a 40% drop in third-quarter operating profit to $332.27 million, still above analysts’ estimates.

However, the South Korean manufacturer warned that it would record a loss of 18 billion won ($13.1 million) if it does not receive tax incentives from the IRA. A survey by the Korea Chamber of Commerce and Industry found that two-thirds of the country's manufacturers expect increased trade protectionism next year.

Earlier in July, Taiwan's economic affairs minister Kuo Jyh-huei asserted that the island "did not steal the US chip industry and that Mr. Trump misunderstood." He said Taiwan helps supplement the US chip industry.

Mr. Kuo was a senior executive at Topco Scientific, a supplier to TSMC. In the United States, TSMC is spending $65 billion to build three factories in Arizona. The factories are a key part of the Biden administration’s efforts to boost the chip supply chain and ensure the United States is less dependent on foreign manufacturing.

Until there is clarity on the industrial and trade policies of the world’s largest economy, Asian companies may delay investment plans or make new ones, experts say. The elimination of IRA allowances “may cause some companies to reconsider investments,” said David Boling, Japan and Asia trading director at Eurasia Group.

On Trump’s side, investors and businesses expect his tough campaign rhetoric to be tempered and more realistic if he wins. Eighteen Republican representatives from IRA-related investment-attracting districts sent a letter to House Speaker Mike Johnson in August, urging him not to revoke all IRA incentives if the party wins control of the House and Senate.

The White House says the IRA has created more than 330,000 jobs and eliminating it would hurt investments in Republican states. Jeremy Harrell, CEO of the conservative Washington-based clean energy group ClearPath, said the companies they work with want predictability in policy. “They’re investing hundreds of millions through the IRA,” she said.

Frank Wolak, president of the Battery and Hydrogen Energy Association, said Congress needs to protect the tax benefits if Trump wins. “We need to work closely with our congressional allies on the IRA,” he said.

Another reason Mr. Trump may not be too tough on IRA and CHIPS is that many of his allies are benefiting from the massive investments in solar, electric vehicles, hydrogen and other clean energy technologies that these laws have made.

Reuters found that at least seven close Trump allies, fundraisers or companies they run hold hundreds of millions of dollars worth of stakes in businesses that benefit significantly from tax breaks in IRAs.

They include Trump’s son-in-law Jared Kushner, his former ambassador to China, and his ally Terry Branstad. They also include companies run by oil tycoons Harold Hamm and Howard Lutnick. Tesla and oil majors Occidental Petroleum and Energy Transfer, which have funded Trump, also hold large investments in projects that are only viable if they are tax-advantaged under IRAs.

According to Reuters , these people and companies hold billions of dollars in investments that qualify for IRA benefits and stand to lose big if Trump repeals the law. So it’s possible that some allies will persuade Trump to keep some of the IRA benefits if he becomes president.