Looking at the Biden Trade Policy

A version of this article originally appeared in the Second Quarter 2021 issue of the Virginia Economic Review, a publication of the Virginia Economic Development Partnership.

While it’s too early in the Biden administration to be certain about his trade policy, we have already observed some trends and can make some predictions. Gone is former president Donald Trump’s “America First” approach, but we won’t return to the trade policy of previous presidents. President Joe Biden wants a policy that will ensure trade more equitably distributes benefits to and among workers, but it will take some time to decide exactly what that means.

Biden is a multilateralist who believes in coalitions and cooperation. We should see renewed U.S. engagement with international organizations, including an effort settle to the disputes that have paralyzed the World Trade Organization. Here, as elsewhere, the difference with Trump will be over tactics rather than goals.

In China, Biden faces similar challenges on subsidies, support for state-owned enterprises, and forced technology transfer. He will try to resolve them by aligning countries through coalition-driven diplomacy rather than unilateral tariffs. Currently, Biden has limited maneuvering room because of strong anti-China sentiments in the public and in Congress. National security-related restrictions will remain, but tariffs may be eventually removed if the Chinese make concessions. Meanwhile, decoupling will proceed, driven not by Biden, but by China’s go-it-alone policies and growing discomfort with Chinese leader Xi Jinping’s repressive policies in Hong Kong and human rights concerns in Xinjiang.

Second, Biden wants to rebuild the transatlantic relationship after four years of damage. The European Union has invited a dialogue on trade, and the reality is Biden can’t build a coalition on China without Europe. The European Union must decide what its new fashionable term, “strategic autonomy,” means and whether it wants to work alongside the United States against China or be a “third force” perched somewhere in between. The U.S. position echoes Benjamin Franklin: “We must all hang together or we will all hang separately.”

Third, two big climate and trade issues are carbon border adjustment measures and subsidies for green initiatives. On border measures, the challenge will be finding a common approach among large economies. On subsidies, Congress will debate eliminating “bad” fossil fuel subsidies and supporting “good” subsidies on green tech.

Biden’s top priority is dealing with the Covid-19 pandemic and investing in the United States’ infrastructure and innovation capabilities. We won’t see new trade agreements, but policies will be shaped by deteriorating U.S. attitudes toward China, and by traditional trade skeptics refocusing the debate toward their goals. A good example is AFL-CIO president Richard Trumka, who worked with House Democrats to include enforcement provisions on worker rights in the United States-Mexico-Canada Agreement. His goals were specific and attainable, and ultimately, he supported the agreement. This will be a good template for the future.

These trends force discussions over how trade policy can reduce inequality and support U.S. workers. Reshoring will be the biggest debate. Biden’s Build Back Better proposals recommend tax carrots for companies that return to the United States and sticks for those that do not. Biden’s intentions are to increase domestic content and return manufacturing jobs to the United States. Although too soon to predict the outcome, if they succeed, that could force significant adjustments in global supply chains and changes in the way the United States does business.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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