The economic effects are important but secondary to the national security effects of having TSMC chip manufacturing on US soil.
But Taiwan isn't an adversary of the USA so why would tariffs be "another approach"?
That’s the problem we are trying to solve: Too many important chips are made there.
[1] https://www.wto.org/english/tratop_e/dtt_e/dtt-ita_e.htm
It’s much more cleanly done with loans.
The reason as always is politics.
For example, the Federal civil service ("general service") pay scale tops out around $160k. This really doesn't make sense and costs the government multiples of market wages for hiring for roles where market pay is higher than this. One route is to hire that person via a contracting firm with a huge (double or triple) markup.
And of course the reason we don't just revamp the pay scales and pay market wages is because it's political suicide to pay people half a million or more at market rates.
The American people, on average, don't like the level of wage inequality in society. For any particular issue where you shove it in their faces (like proposing to pay the project lead "competitive salary"), you will get shouted down.
That's also why we get strange arrangements like Congress members making around $170k a year with legal insider trading. The insider trading money they make looks like "free" and isn't easily quantified.
My broader point here about self fulfilling prophecy is reflected in your comment: it has been this way, therefore must always be this way. That’s not true.
Medicare for example is much more efficient than private health insurance.
The motivation for government employees is "because they care about doing the right thing". You should try it some time.
[1]: https://www.regjeringen.no/en/topics/business-and-industry/s...
[2]: https://en.wikipedia.org/wiki/Statkraft
[3]: https://www.nrk.no/norge/statkraft-oker-inntekter-og-bonuser...
[4]: https://www.dn.no/energi/narings-og-fiskeridepartementet/lo-...
[5]: https://www.mesta.no/wp-content/uploads/2023/03/Mesta_Vedleg... (page 2)
I would hazard to guess that most employed people do not have stock options or get bonuses (only salary), but are still "effective" because they consider that doing a job well is its own reward: i.e., they have intrinsic motivation (rather than extrinsic).
I have worked in private sector, and in government (including academia/research), and most folks want to do a job well because they like the satisfaction of being able to know they did the job well.
[0] https://asiatimes.com/2024/03/america-has-no-ukraine-plan-b-...
The Chip Wars book is an excellent read and tells you us the supply chain is globally integrated. If we were to draw a country graph of technology dependence to create semiconductor technology T (tools, chips, etc) - well, there is no DAG. The defense department is not so happy to see all this free market sharing of essential technology going on as it benefits non-friendly nation(s).
The book also illustrated how behind Russia was/is with weapons technology and semiconductors in general (compared to the US).
Immigration.
A good question is whether or not this will work. A big building is not the same as a working best-in-class fab.
The US wants on shore chips facilities with trained US staff so that if we end up in a shooting war with China we won't lose our supply of chips.
That's the whole thing.
I mean yes, ultimately, but it's also about supply chain disruption that we just experienced with COVID. The US economy (and subsequently the Western economy) would probably get hit pretty hard with a chip cutoff and 5 years to onshore it. The economy is also about war; without a strong economy, we can't stockpile all our murder toys. It's also about leverage with China. With China on an aggressive footing and Taiwan so vulnerable, they have a leverage point we're now addressing.
We got this way because we thought if we brought China into the modern economy they would democratize. I think we came to the conclusion that it's not working out that way so we're adjusting and divesting from China. COVID was a wake up call in regard to having a single country be the world's production of goods. It ups the bet when that single country is becoming more of an adversary than a competitive partner.
Having 90% of the most important semiconductors in the world made on an island 90 miles from China, which China wants to take back, is a bit of a problem.
What happens in a protracted skirmish that lasts a year, for example, where we can’t get any of those semiconductors.
That's Beijing rhetoric.
They can't take it back because it's never been theirs. It would be more accurate to say they want to conquer the last remaining territory from the legitimate government of China and wipe out the main alternative to their hegemony.
IMO the government should do a lot more subsidizing of important businesses. It would grow the economy faster in useful ways.
> This is however not the case and subsidies are, with a few exceptions, mostly assessed or controlled using multilateral rules and free trade agreements.
I haven't read the full thing because I'm no economist, but it seems to be above board. For comparison, Intel is getting $8.5 billion from the CHIPS Act (https://www.intel.com/content/www/us/en/newsroom/news/us-chi... I can't find other US based chip companies like NVidia or AMD getting any from that pot of money though, which is weird. Although NVidia doesn't need it, given how their stock price and valuation rocketed up.
Intel and TSMC are investing in swing states. It matters to Biden when it comes to the election.
The second is that the US genuinely wants chip fabs in US in case war breaks out.
It's most definitely inefficient use of dollars for mega corporations.
As I understand it, the gift is, for the most part, what we'd call 'funny money' - no one's really handing over the proverbial briefcase of USD$11B in return for them building out a fab plant on US soil.
While the figures are referred to as loans, I suspect in practice they manifest quite differently.
Forgone taxes are REAL money.
Libertarian types love to make models of the world that are so simplified they are totally incorrect. But hey, you'll be able to save on taxes in the good times, and starve in the streets during the bad.
Your personal taxes are a different matter - the nation state is not trying to court you into operating within its borders with some tempting on-paper discounts.
We spend lots of money on schools in the US and generally get pretty good outcomes. Our math scores leave something to be desired, but average reading scores are better than peer countries. There are plenty of exceptions, especially in poor neighborhoods, and chronic absenteeism is a real problem, but it's worth keeping sight of the fact that the vast majority of American schools are quite good.
Some examples:
* PISA scores: https://www.oecd.org/pisa/OECD_2022_PISA_Results_Comparing%2...
* PIRLS/TIMMS scores: https://nces.ed.gov/fastfacts/display.asp?id=1
They need immigration to restore the values around education and work ethic. I hope we stay at it long enough to make these places great again.
I'm not saying that's a good thing. We're a very rich country and we should do better.
But the US also has a lot of systematic problems that peer countries don't, like child poverty, that are likely a bigger cause of subpar test scores than bad schools.
Merely focusing on "below average" without acknowledging the trend -- declining -- seems to be disingenuous.
There's also the matter of picking a definition for third world.
The US spends more on defense than both put together. A lot more.
The whole CHIPS act thing seems backwards and short-sighted.
As the US education system is backsliding into literally worse-than-third-world outcomes, can we expect that companies like TSMC will even be able to find enough US workers to staff these facilities at a scale which will be large enough to move the economic needle?