Increased bureaucracy. More industrial policy. Perhaps more tariffs.
President Joe Biden’s trade policy is sounding more and more like an extension of the mess that former President Donald Trump made—and even the White House top trade officials are now admitting as much.
U.S. Trade Representative Katherine Tai gave a Monday morning speech that White House officials were touting to be a key signal about the Biden Administration’s shift in strategy regarding the trade war against China. The speech basically doubled down on Trump’s four-year promise that both big government in the USA and foreign trade restrictions would help the U.S. to grow and prosper and will benefit American workers.
Although there is plenty of evidence that Trump’s strategy failed, Tai described a more subtle shift in the style and substance of his approach. Rather than all-caps tweets about China stealing jobs, the Biden administration is pushing what Tai described as “a worker-centric trade policy” that will include “smart domestic investments”—Washington-speak for giving unions more influence over policy and for lots of new industrial subsidies.
Tai’s comments are tightly tied to the agenda of the former president. They include a promise to “discuss with China” its failure to deliver on promises made in the so-called “Phase One” trade deal inked in 2020, and a rejiggering of the flawed tariff exclusion process—one that allows federal bureaucrats to decide which American businesses have to pay tariffs and which do not—set up by the Trump administration. These agenda items are not intended to chart a new path, but they merely strengthen and reinforce the protectionist impulses that Biden had previously pursued.
This is the obvious aspect. More than half of the goods traded between the world’s two largest economies are now subject to tariffs, according to data from the Peterson Institute of International Economics—up from less than 1 percent before the trade war began. There should be no doubt that American consumers and businesses are the ones paying most of these added costs. Moody’s Investment Service recently found that less than 8 percent of China’s tariffs fall on China. Trump claimed that tariffs would drive foreign investment away from China. However, the tariffs are not driving international investment away.
All of this will not be fixed by reforming the tariff exclusion procedure. Tai, however, said that Monday’s tariff exclusion process reform will not fix any of this. Interview with PoliticoTai made it clearer last week that she considers Trump’s China Tarifs “something to be built on” and “something to use in terms defending the American economy, American workers and American businesses as well as our farmers.”
It’s quite a distance from Biden’s sharp criticisms in last year’s election about how Trump’s tariffs failed to meet their goals.
Similar contradictions are evident in what Tai described Monday.
She stated that American “boosting American competiveness becomes even more important” given the competition from China. But there is a tension between this and the Biden administration’s attempts to increase tax burdens on American business. It is impossible to expect American businesses to be more competitive when they tax their import inputs, then raise taxes on any profits that they still make.
Tai also stated that it was crucial for the U.S. and its allies “critically important” to collaborate with China to form trade policy. It will become more complicated if the Biden government continues to trumpet the unilateral Phase One deal. What’s the reason? Why? Because China cancelled purchase agreements with certain U.S. allies last year, including Australia, to comply with the agreement’s obligations. Because global trade is an interconnected network and not a one-sided game, what happens between two countries may have unintended implications elsewhere.
Tai made this point clearer than any other time she spoke. She was correcting William Allen Reinsch (a senior advisor at Center for Strategic and International Studies in D.C.), for asking Tai a post-speech query around Trump’s trade policy failures. I believe most people would accept that answer.
Tai stated, “It’s not fair to say I have characterized previous administrations’ efforts as failing.” It hasn’t taken us where we want.
That would be considered failure by most people.
Regardless of what Washington word salads might be used to justify it all, the Biden administration is trying to repackage Trumponomics into a kinder, gentler protectionism—one that gives bureaucrats even greater control over who pays and who benefits.