Union workers listen to U.S. President Joe Biden speak during a visit to Wolfspeed, a semiconductor manufacturer, as he kicks off his Investing in America Tour in Durham, N.C., on March 28.Melissa Sue Gerrits/Getty Images North America
American manufacturers are building factories at a frenzied pace in the wake of Washington’s most aggressive industrial policy measures in decades, and that is setting a high bar for the Trudeau government’s own ambitions in the sector.
The amount spent on the construction of manufacturing facilities in the United States in May jumped 73 per cent to a record US$15.6-billion from the year before, according to the U.S. Census Bureau.
The surge follows two key measures passed by Congress last year: the CHIPS and Science Act, which aims to counter China by funneling US$52-billion in aid to the domestic semiconductor industry, and the Inflation Reduction Act and its billions in support for electric vehicle makers and other clean energy manufacturers.
Canada’s federal budget this spring aimed to be Ottawa’s response to Washington’s economic activism, with $12-billion in tax credits and incentives for cleantech manufacturing, among other measures.
But new data on factory construction investment from Statistics Canada this week shows just how far manufacturers in this country have to go to catch up.
Investment in construction in Canada’s manufacturing sector has jumped this year, thanks in part to the start of work on an EV battery plant in Bécancour, Que., Statscan said in its April report. Meanwhile Volkswagen AG is set to begin construction on its battery plant in St. Thomas, Ont., next year after pocketing $13-billion in subsidies from the federal government.
Even so, once inflation is taken into account, Canadian companies are investing 8.5 per cent less to build manufacturing facilities than they were a decade ago, while real (inflation-adjusted) factory building in the U.S. has nearly doubled since 2021.
Canada’s low-carbon industrial strategy laid out in the spring budget is still in its early days, but the rapidly widening gap in factory construction with the U.S. is likely to add to fears that investment risks being lured south of the border.
Editor’s note: An earlier version of this story said real spending on factory construction in Canada was 20 per cent lower than a decade ago. That was the case as of March 2023; the 10-year decline has since shrunk to 8.5 per cent.
Decoder is a weekly feature that unpacks an important economic chart.