Biden’s top adviser warns of ‘chaos’ if Trump raises taxes and guts IRAs

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The White House’s top economic adviser says Donald Trump will cause a “period of chaos” and sharp price increases if he rescinds Joe Biden’s manufacturing tax credits and raises taxes as planned.

Lael Brainard, director of the National Economic Council, told the Financial Times that Trump’s plan is aimed at cuts Inflation Reduction Act and the Science and Chips Act — President Biden’s signature legislation — would harm U.S. manufacturing capacity.

“What would be very troubling is if you saw widespread tariffs,” Brainard said in an interview. “We want to strengthen our manufacturers through [the] protect the credits in the historic investment legislation enacted by this administration and do not push us back to an era of chaos and price increases.”

Brainard, who served as vice president of Federal Reserve before joining Biden’s White House, warned against Trump’s protectionist plans for blanket tariffs on imports.

The president-elect’s plan for universal tariffs – which he said could reach 20% – is “important to avoid”, she said.

“A lot of our top producers have some inputs that are imported, and so the tariffs need to be very carefully designed to make sure that they are strengthening and not weakening,” Brainard said. Weakening American manufacturers and American jobs.

Her warnings came as Trump choose his economic team before he returns to the Oval Office in January. Besides tariffs, he also vowed to institute mass deportations of immigrants and deselect the IRA and the Chips Act, central components of Biden’s industrial policy.

The two bills include more than $400 billion in federal incentives designed to break China’s control of critical supply chains – and have made the US an attractive destination to invest in. clean technology and semiconductor manufacturing capacity.

The FT estimates that investors have committed nearly $400 billion to large-scale manufacturing projects since the two laws were passed.

“Communities that were left behind are now benefiting from new businesses and new jobs,” Brainard said in his interview. “There’s a constituency there that really supports continuing this ongoing manufacturing renaissance.”

Trump has vowed to “terminate” the IRA, saying tariffs are a better alternative to protect American businesses and workers.

“That chip deal was terrible,” Trump said on the Joe Rogan podcast in October. “We invested billions of dollars in rich companies that were involved. . . All you have to do is charge them taxes.”

Economists and manufacturers have also expressed concerns about Trump’s tariff plan, saying the additional taxes would increase prices and slow economic growth.

“As a manufacturer, it’s important to know what to do,” said Suvi Sharma, chief executive officer of Solarcycle, a solar panel recycler that is building a $406 million project in Georgia with support from the IRA. That really complicates your life.” “Tariffs and tariffs can have a really positive impact. . . if done more methodically than carte blanche.”

Biden kept Trump’s $300 billion in 2018 intact tariffs against China and increase them in specific Chinese cleantech industries in May. Trump has promised to impose 60% tariffs on goods from the country.

Economists say Trump’s plan paints a mixed economic outlook.

“One path holds that tax cuts and deregulation will unleash animal spirits, thereby boosting productivity growth and GDP outcomes,” said Michael Feroli, chief US economist at JPMorgan. while still controlling inflation well.” “The other path predicts policy uncertainty will hamper growth, while trade and immigration restrictions will create stagflation.”

US stock markets rose to new highs following Trump’s election victory this month, which also saw Republicans gain control of Congress.

But many analysts say it will be difficult for him to destroy the IRA even with congressional control. Republican districts got it more than 80 percent The FT found that investments in manufacturing since the law passed and some Republican lawmakers have argued against a full repeal as a “worst-case scenario.”

“I think there is risk, but I want to think about it,” said Gary Park, chief executive of Absolics, which received a preliminary $75 million award from the Chips Act for its Georgia plant. logic”. “Semiconductors are [a] a key industry for the future, and there is no reason for them to bring this industry back to Korea.”

Some cleantech manufacturers are delaying projects until there is more clarity. The FT tracks that at least half a dozen projects have been slowed due to policy uncertainty.

“There are so many unknowns. It’s hard to move,” said Chao Yan, founder of battery components manufacturer Princeton NuEnergy. “Raising taxes will increase inflation on everything we buy from outside.”