From tariffs to tax reform, the Trump presidency has had a large impact on the U.S. manufacturing sector over the past four years. Biden aims to run a vastly different administration than Trump.
This includes a return to trade deals, higher tax rates and large government projects. However, he does intend to continue some Trump administration policies for a limited time. With a Biden presidency on the horizon, this article will explore what to expect of Joe Biden's manufacturing plans.
China
Perhaps the biggest threat to American-based manufacturing is China. Between their blatant IP theft, cost undercutting, currency manipulation, forced technology transfers and anti-competitive dumping, China's policies had seriously hurt American manufacturing until the advent of Trump trade tariffs designed to level the playing field.
Biden's manufacturing plans will continue the trade tariffs for a limited time as part of a transition. Due to widespread unfavorable views of China by both businesses and governments, Biden plans to use the tariffs to extract concessions before soothing relations between the nations.
China will no longer be forced to inflate their economy to maintain the trade deficit that currently exists between our two countries. With this new plan, free trade will return along with multi-national agreements such as a modified version of the Trans-Pacific Partnership (TPP).
Tax Rate Changes
Despite desires to keep business in the United States, there may be motivation to shift operations to other countries based on expected corporate tax increases. The Biden Tax Plan is slated to increase corporate tax rates to 28%, reintroduce a minimum book tax of 15% and limit itemized deductions.
These moves are bound to have a discouraging effect on many manufacturers who are already reeling from the impact of COVID-19. Projections are forecasting that companies may see their percentage of GDP fall as low as 5% compared to the 7.4% that has been the average since 2010.
Incentives for Manufacturers
Recognizing that manufacturers will need extensive assistance to fully recover from COVID-19 impacts, Biden's manufacturing plans include establishing a capital facility for small and medium-sized businesses to modernize legacy machinery and factories at a low cost.
It is currently unknown whether this capital will be provided through existing institutions or if it will be through the federal government.
Biden also plans to incentivize certain sectors such as essential materials, biotechnology, artificial intelligence, automotive and medical supplies to continue building in the United States.
This will occur in conjunction with support for unions and a $400-billion plan known as Made In America. The plan will offset some of the anticipated negative effects of the higher tax rates on manufacturers, but it is not without stipulations.
or example, automotive support will be for manufacturers who build clean vehicles such as battery-powered electrics (BEVs). It does not appear that traditional fossil-fueled vehicles will be included in these incentives.
However, those manufacturers will be able to take advantage of broader incentives aimed at boosting union jobs and building in America.
Worker Education
With Biden's manufacturing plans, further assistance to industrial companies will come indirectly through the provision of high-quality training programs, union apprenticeships and other labor management programs.
This will help provide a pipeline of new and well-trained individuals to work in various industries, including manufacturing. Some of these courses may be a few weeks long while others can last up to 18 months.
Upon graduation, individuals will possess specialized training and knowledge for their specific field, giving manufacturers a ready-made pool of talent to pick from.
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