The Biden Administration’s International Trade Policies — Mostly Still Waiting

Six months into the Biden Administration and international trade has largely been out of the headlines. President Biden’s trade policies so far have been defined more by what he has not done (lift any of the tariffs imposed by President Trump) than what he has done. Although the handful of Biden’s trade policies stylistically reflect a more measured approach that has generated fewer shock waves, substantively they are in many ways just as protectionist as many of President Trump’s “America First” trade policies.

For example, President Biden’s first trade action was to issue an executive order for a “Buy American” initiative aimed at increasing government purchases of American-made goods. About 97 percent of U.S. federal government contracts are already granted to domestic firms, so the symbolic value of this executive order fighting for American jobs may be far greater than the actual dollar value impact this order will have for Americans firms seeking to win back government contract awards.

The Biden Administration also set up task forces to review vulnerabilities of American supply chains for key industries, including semiconductors, electric vehicle batteries, pharmaceuticals, and rare earth metals. These task forces will recommend actions aimed at increasing domestic production and reducing dependence on foreign supply. The Biden Administration also plans to implement a trade strike force to combat unfair trade practices of all countries, but probably will focus primarily on China.

The biggest trade issue coming into the Biden administration was whether he would lift the many Trump tariffs, most notably on all steel and aluminum imports and most Chinese imports. Lifting Trump’s tariffs would likely result in other countries lifting their retaliatory tariffs against U.S. exports. Trump’s tariffs are taxes on imports that have disrupted supply chains and increased costs to American companies and consumers. More than $460 billion worth of traded goods are impacted by the Trump tariffs and the retaliatory tariffs. Tariffs that remain on about two-thirds of all Chinese imports have cost American importers over $82 billion since they were imposed in 2018. The Trump tariffs are estimated to have cost U.S. households about $2000 per year in 2020. Getting rid of Trump’s tariffs along with the retaliatory tariffs would ease the inflationary pressure facing American business and consumers, and would most benefit lower- and middle-income households who bear a disproportionate share of these regressive taxes.

President Biden certainly has the authority to issue an executive order that would undo the Trump tariffs that were imposed by executive order. Though President Biden has used executive orders to reverse President Trump’s executive orders on a wide range of issues (lifted the immigration ban on Muslim countries, rejoined the Paris climate agreement, revoked the Keystone pipeline permit, expanded LGBTQ rights, overturned efforts to limit Obamacare and health care access), President Biden has not taken action to lift any of the numerous tariff actions decreed by President Trump. President Biden’s U.S. Trade Representative, Katherine Tai, noted that the administration plans a thorough review of the tariffs, but acknowledged that the tariffs provided the Biden Administration with “leverage” to be used in negotiating concessions from China and other countries.

Though the economic argument in favor of lifting the Trump tariffs is undeniably strong, the current political climate makes it unlikely President Biden will lift the tariffs any time soon, as favoring protectionist trade policies is one of the few issues that has bipartisan support. as American (and the world’s) views of China continue in a free fall decline. See China’s international image remains broadly negative as views of the U.S. rebound.

China hawks in both the Democrat and Republican parties bitterly oppose any concessions to China. In the 116th Congress (Jan 2019 – Aug 2020), at least 366 bills were introduced with some China-related angle. Though most of these bills never came close to being enacted, the significant increase in anti-China proposed legislation reflects a growing bipartisan consensus of the need to address a laundry list of China issues (e.g., China’s genocide of Muslim Uyghurs in Xinjiang province, trampling of democracy in Hong Kong, threats to Taiwan, and delisting Chinese companies on US stock exchanges). Trump’s China tariffs ostensibly were intended to address China’s intellectual property violations, but those tariffs certainly have not solved those problems.

Democrats have traditionally been supported by labor unions that have favored protectionist trade policies opposing trade agreements that caused American jobs to be outsourced to other countries. President Biden has promised a trade policy that will put workers first, incorporate stronger standards for labor, and focus on environmental and climate change and human rights. Progressive Democrats have long advocated for labor and environmental standards to be included in U.S. trade policies to benefit global citizens, not just Americans.

Republicans traditionally have promoted the benefits of free trade and open market, most notably by President Reagan. But under Trump, economic nationalists have gained control of Republican messaging and encouraged an “America first” protectionism that is hostile to globalists and multilateral international organizations, and sometimes slips over into xenophobia.  Trump’s trade policies, combined with anti-liberal demagoguery, also appealed to many blue-collar and hard hat workers that were most directly displaced by the effects of trade deals.

The never-ending battle to win political seats in Rust Belt states means both Democrat and Republican candidates will likely continue to campaign as tough on trade and willing to stand up and fight unfair trade, the decline of U.S. manufacturing, outsourcing, trade deficits, etc.

Though the China tariffs won’t be lifted soon, there is hope (and some indications) that Biden would be more willing to consider lifting some of the tariffs imposed against our closest allies in Canada, Mexico, and Europe. Trump’s claims that imports from these countries posed a national security threat hardly passed the laugh test, so hopefully Biden will prioritize correcting these tariffs. President Biden has promise to recommit the United States to seeking multilateral solutions through international cooperation on numerous non-trade issues (climate change, global health and pandemic control). Efforts to challenge China on trade and other issues will require multilateral coordination, as Trump’s unilateral efforts were not a winning strategy. The U.S. and Europe last month declared a truce to end the decades-long trade battle over Boeing/ Airbus government subsidies, giving hope that the tariffs on steel and aluminum from our allies are on track to be lifted sooner rather than later.