How U.S. Inflation Reduction Act Impacts Global Firms

Introduction

According to the chairman of Chinese battery maker Gotion High Tech, measures like the U.S. Inflation Reduction Act (IRA) are unlikely to deter companies from expanding internationally. He believes that businesses thrive through competition rather than relying on regulations or subsidies.

The Impact of the U.S. IRA

The U.S. IRA, introduced last year, is a massive anti-inflation measure that offers tax breaks with the condition that products have U.S.-manufactured content. While it has been praised for promoting clean energy projects, it has faced criticism in Asia and Europe for its protectionist tendencies.

Commitment to Globalization

Speaking at the Bloomberg New Economy Forum, Li Zhen expressed his confidence that U.S. firms, including Gotion, will still pursue international expansion despite the IRA. Gotion itself is dedicated to globalization, having planned or already constructed plants in the United States, Germany, and Morocco.

Competition as the Driving Force

Li Zhen emphasized that companies succeed through competition rather than relying on regulations or subsidies. He stated, “I don’t think the IRA policy can completely stop companies from going global or to the international market, because companies thrive through competition, not through regulations or subsidies. We have the market to decide on the winner.”

He also expressed optimism for the future, highlighting the importance of effort and having the right product in overcoming short-term protectionism.

Opportunities for EV Battery Makers and Automakers

The implementation of the IRA has led global electric vehicle (EV) battery makers and automakers to consider the North American market for establishing new manufacturing plants. These companies aim to diversify their supply chains and take advantage of the incentives provided by the act.

Gotion’s Confidence

Although the U.S. government has not clearly defined which foreign entities will be excluded from receiving government funds, Li Zhen expressed his confidence that Gotion, as a Chinese company, will not fall under that category. He stated, “I am very confident.” This assurance indicates Gotion’s belief in its ability to navigate the regulatory landscape.

About the Author

Reporting by Brenda Goh
Editing by Shri Navaratnam and Lincoln Feast.

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Read More of this Story at www.reuters.com – 2023-11-10 18:09:46

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