Biden moves cautiously around Trump’s combative trade policy

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In the end, by most accounts, Trump’s tariffs achieved very little – and succeeded in antagonizing some of America’s closest trading partners.

Yet for now, the Biden administration seems determined to approach trade with caution and deliberation. Most striking, perhaps, is what Biden didn’t do: He didn’t call off Trump’s trade war with China. It has not promised to cut or cancel its tariffs on imported metals or end a stalemate that has left the World Trade Organization unable to function as an arbiter in global trade disputes.

Instead, policymakers in the administration are focused on other unrelated priorities — getting COVID-19 vaccines out as quickly as possible and delivering far more aid to a pandemic-stricken economy that’s not going anywhere. has yet to recover nearly 10 million jobs lost since February.

“He’s going to take his time,” said Mary Lovely, an economist at Syracuse University and senior fellow at the Peterson Institute for International Economics. “Biden has said repeatedly that he needs America to be stronger before he tackles a lot of these trade issues.”

One factor could be that reversing all of Trump’s policies could heighten the risks for a pro-union Democrat unhappy with the pre-Trump U.S. consensus on free trade. Politically, Biden depends on support from manufacturing towns and cities across the Midwest. These regions have suffered from cheap imports from China, Mexico and elsewhere.

“There is a competition for voters in the swing state who favor (trade) protection,” said Daniel Ikenson, director of trade policy studies at the libertarian Cato Institute.

Democrats are still stung by Trump’s surprise victory in 2016 and some of the trade-related factors behind it. Trump has abandoned modern Republican Party support for free trade deals favored by American corporations with deep ties overseas. Instead, Trump cast himself as a populist defender of long-suffering industrial workers — an “America First” champion who would eliminate unfair trade practices and restore jobs in American factories. .

For Democrats, Trump’s victory in 2016, due in large part to blue-collar voters, provided “a harsh lesson in the dangers of a trade policy that thinks not of workers but (for the benefit of) finance and agribusiness,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

Realizing this lesson, the Biden team, led by a president who rarely tires of asserting his longstanding ties to America’s working class, has promised a trade policy that will create or protect jobs in the United States.

“We will use trade, in coordination with international and domestic economic tools, to create more inclusive prosperity for America and Americans,” said Katherine Tai, Biden’s choice to be the U.S. Trade Representative. in a speech last month to the National Foreign Office. Trade Council.

Biden’s vision, she said, “is to implement a worker-centered trade policy.”

The new president has promised at least one meaningful shift from Trump’s America-first trade stance: Biden wants to mend relations with key US allies, such as the European Union and Canada, that have been baffled and exasperated by Trump’s mercurial and belligerent rhetoric. and acts.

Finally, anyway.

“The mantra has been: no sudden moves” on trade – and focus instead on fighting the pandemic and delivering more economic relief, said William Reinsch, a former US trade official now at the Center for Strategic and International Studies.

Consider Trump’s tariffs on foreign steel and aluminum, which he imposed in 2018. Reducing or removing these taxes would seem like an easy way to heal the wounds.

America’s allies have been particularly angered by Trump’s dubious justification for the sanctions: dusting off a little-used trade policy tool – Section 232 of the Trade Expansion Act of 1962 – he said their aluminum and steel constituted a threat to the national security of the United States. It was a scathing insult to close allies like Canada who have fought alongside the United States in conflicts ranging from World War I to Afghanistan.

Still, the Biden administration has shown itself reluctant to act quickly on the issue. During her confirmation hearing, new Commerce Secretary Gina Raimondo dodged a question about metal tariffs. She told Sen. Roy Blunt, R-Mo., Only that she would consider his argument that Missouri manufacturers were harmed by the tariffs and would “consider their needs.”

Exerting political pressure from the other side, a coalition of steel companies and workers wants to preserve tariffs. They sent a letter to Biden last month saying they needed urgent help in a COVID-weakened economy.

“Imposing tariffs is always easier than lifting them,” said Wendy Cutler, a former US trade negotiator who is now vice president of the Asia Society Policy Institute.

Biden even chose last week to reinstate aluminum tariffs in the United Arab Emirates that Trump lifted when he left office. Trump, apparently rewarding the UAE for its decision to diplomatically recognize Israel, had replaced tariffs with quotas on UAE aluminum.

“Imports from the United Arab Emirates,” the White House said in a statement, “could further displace domestic production and thereby threaten to undermine our national security.”

If the administration ultimately decides to reduce or end tariffs on metals, it could offset the impact by adopting a public works program that requires a lot of steel and aluminum. Or he could tout the benefits of a Biden-announced Buy American push, the goal of which is to channel more federal dollars to support American industries.

Then again, far from abandoning the contentious national security tariffs, the administration could simply consider using them itself — but in a different way: to fight climate change.

In August, Peter Harrell, the new international economic adviser to Biden’s National Security Council, argued that if Congress did not act on the issue, the president could use Section 232 to impose tariffs on products and countries that pollute the air or to block investment. in projects that pollute the environment.

Trump’s use of tariffs “created a clear opening for a future Democratic president to impose far-reaching tariffs and sanctions to combat climate change,” Harrell wrote in the journal Foreign Policy.

Team Biden will also have to decide to rethink Trump’s divisive approach to the WTO, the Geneva-based organization that sets and enforces rules for global trade. By blocking replacements at the WTO’s highest tribunal, the Appellate Body, Trump has rendered it powerless to resolve disputes.

Biden could use the issue as leverage to persuade the WTO to adopt the changes the United States has been pushing for for years. These include making it easier for Washington to sue other countries for unfairly subsidizing their businesses or selling products in export markets at artificially low prices.

“You can get something the United States has been looking for for a long time: reforms,” Lovely said.

Likewise, Biden’s team is unlikely to be in a rush to lift tariffs Trump has imposed on $360 billion in Chinese imports in a dispute over the widespread belief that Beijing is using predatory tactics, including cyber theft. , in its desire to overcome the technological domination of the United States. American policymakers from all walks of life are frustrated with what they see as China’s illicit business practices, crackdown on the Uyghur minority, crackdown on dissent in Hong Kong and aggressive territorial claims in the South China Sea. southern. The Biden administration is unlikely to relax.

Nathan Sheets, who served as Treasury undersecretary for international affairs in the Obama administration and is now chief economist at PGIM Fixed Income, said he thinks before Biden’s trade team agrees to cut or cancel Trump’s tariffs, it will likely require sweeping changes in China policy. – changes that could take years, if they happen at all.

“It’s not like (tariffs are) a short-term bargaining chip: ‘You give us x, and we’ll give you y,'” Sheets said. “They want to keep the pressure on China.”

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