Biden’s massive American infra plan has a China problem

US President Joe Biden (AFP)

US President Joe Biden announced the much-awaited infrastructure plan on Thursday. The $2.3 trillion proposal includes funding for roads, bridges, ports, as well as aims to fight climate change. To pay for this program, corporate taxes would be raised from 21% to 28%.

Given the scale of this plan, experts say, it is fraught with implementation challenges. They feel, getting the Republicans on board with this plan, would be a tall order.

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“If we look at the spending items in the American Jobs Plan, which go far beyond what Republicans consider ‘infrastructure’, and the financing of the plan, through higher corporate taxes, it is not likely that this plan will get Republican support in the Senate,” analysts at Rabo Bank said in a report on 1 April.

Even if both Democrats and Republicans were to find a common ground on this, some analysts caution of an external hurdle.

“One of the biggest challenges with President Biden’s new infrastructure plan is that the prices of many of the materials needed to implement the plan (concrete, steel, copper, etc.) have risen significantly over the past year, partially due to stockpiling by China, which is already investing in its own infrastructure,” Randy Frederick, vice president of trading and derivatives, Schwab Center for Financial Research, said in his latest blog.

“Other materials (lithium, cobalt, nickel, etc.) are either produced or processed almost exclusively by China. All of this makes maintaining positive trade relationships with China a critical, but challenging component of the plan,” he added.

Ever since former President Donald Trump imposed trade restrictions on China, the relationship between US and China has been stretched, to say the least. So far, not much has changed on that front under Biden’s presidency. Although, media reports state that Biden administration is still working out its overall China strategy.

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