President Joe Biden’s administration has marked a significant shift in decades of U.S. trade policy by not only maintaining but also increasing tariffs on Chinese imports. This move, initially overshadowed by dramatic political events, signals a fundamental change in how Washington views international trade and its relationship with Beijing. Unlike his predecessors, including even the self-proclaimed “Tariff Man” Donald Trump, Biden has not pursued any major free trade agreements, instead doubling down on tariffs as a strategic tool. This raises a critical question: Why Did Biden Keep Tariffs and even expand them?
To understand this departure, it’s essential to look back at historical precedents. President John F. Kennedy, whom Biden admired, championed free trade as a way to counter Soviet influence during the Cold War. Kennedy believed that economic expansion through trade would strengthen the free world against communism. However, facing a new global rival in China, Biden has inverted this logic. His administration argues that trade protection, specifically through tariffs, is now necessary to compete with China and safeguard American interests.
The shift towards protectionism under Biden reflects a broader change in U.S. economic and political thinking. The era of hyperglobalization, characterized by rapidly expanding global trade and intricate supply chains, is waning. Protectionism is on the rise globally, with nations like the U.S. resorting to tariffs and industrial subsidies. The primary driver behind this shift is the escalating economic and military competition with China. Furthermore, there’s a growing sentiment that the traditional benefits of free trade, such as lower prices and increased competition, are outweighed by the downsides, including job losses in manufacturing, dependence on rivals, and political instability. This neo-protectionist wave, initiated during the Trump administration, has been solidified and deepened under Biden.
The Evolution of Biden’s Trade Stance: From Skepticism to Tariffs
The decision of why Biden kept tariffs wasn’t made in a vacuum. It was the culmination of evolving perspectives within his administration, driven by both strategic and economic considerations. Key figures like Treasury Secretary Janet Yellen and National Security Advisor Jake Sullivan, who previously advocated for free trade, have come to embrace protectionist measures. This transformation is rooted in the lessons learned from the 2016 election and a reassessment of the benefits of free trade for American workers.
The Influence of the 2016 Election and Shifting Ideologies
The 2016 election served as a wake-up call for many Democrats, highlighting the economic anxieties of the American Midwest and the perceived failures of traditional free trade policies to benefit all Americans. Sullivan, reflecting on this shift, acknowledged that the Democratic party had overlooked the concerns of the working class regarding trade. This realization prompted a re-evaluation of trade policy, moving away from the conventional focus on opening markets for multinational corporations to prioritizing the interests of domestic workers and industries.
In a 2020 Foreign Policy article, Sullivan, along with Jennifer Harris, questioned the prioritization of opening China’s financial system for Wall Street firms in trade negotiations, signaling a move towards a more worker-centric trade policy. This ideological shift paved the way for the acceptance and implementation of tariffs as a tool to protect American jobs and industries.
Internal Debates and the Inflation Factor
Despite the growing consensus on the need for a tougher stance on China, internal debates within the Biden administration played a crucial role in shaping the final trade policy. Initially, there was pressure, particularly from the Treasury Department led by Yellen, to remove the tariffs inherited from the Trump administration. This push was largely driven by concerns about rising inflation in 2022. Proponents of tariff reduction argued that it could help alleviate inflationary pressures by lowering import costs. The Peterson Institute for International Economics even suggested that removing Trump’s tariffs could reduce inflation by over one percentage point.
However, this push for tariff reduction faced strong headwinds. Administration economists challenged the projected impact on inflation, arguing that the actual effect would be minimal. Furthermore, the political context was unfavorable. Removing tariffs would have been perceived as weakness towards China by Republicans and even some Democrats, without guaranteeing any reciprocal concessions from Beijing. China’s reluctance to remove its retaliatory tariffs and escalating tensions over issues like Taiwan further solidified the decision to maintain tariffs.
Strategic Competition with China: The Decisive Factor
Ultimately, the strategic imperative of competing with China proved to be the most compelling reason why Biden kept tariffs and expanded them. The administration increasingly viewed tariffs not just as an economic tool, but as a vital component of a broader strategy to counter China’s economic and technological rise. This strategic approach is evident in the Biden administration’s policies aimed at blocking exports of advanced technology to China and simultaneously boosting domestic manufacturing through substantial subsidies.
Tariffs as a Tool for National Security and Economic Resilience
The Biden administration’s trade policy is deeply intertwined with national security considerations. Tariffs are seen as a way to reduce dependence on Chinese imports in critical sectors like semiconductors, electric vehicles, and renewable energy. By imposing tariffs on these sectors, the U.S. aims to incentivize domestic production, strengthen supply chains, and reduce vulnerabilities to geopolitical risks associated with over-reliance on China.
The decision to quadruple tariffs on Chinese electric vehicles to 100% exemplifies this strategic approach. The administration fears that without such measures, heavily subsidized Chinese EVs could flood the U.S. market, undermining domestic automakers and hindering the growth of the American EV industry. Similar logic applies to tariffs on semiconductors, solar cells, and EV batteries, all sectors deemed crucial for U.S. economic and national security.
Subsidies and Tariffs: A Two-Pronged Approach
Biden’s trade strategy is not solely reliant on tariffs. It’s a two-pronged approach that combines tariffs with massive domestic subsidies. The administration has secured congressional approval for hundreds of billions of dollars in subsidies aimed at incentivizing companies to build factories in the U.S. and produce semiconductors, EVs, batteries, and other green technologies.
These subsidies are intended to level the playing field and counteract China’s extensive state support for its industries. However, even with these subsidies, the administration recognizes that tariffs are necessary to protect these nascent domestic industries from being overwhelmed by cheaper Chinese imports, particularly given the scale of Chinese industrial subsidies. China’s massive investments in subsidies, far exceeding those of the U.S. as a percentage of GDP, necessitate a robust protectionist response, including tariffs, to ensure the viability of American industries in strategic sectors.
The Future of US Trade Policy: Protectionism as the New Norm?
The Biden administration’s decision to maintain and expand tariffs on China suggests a long-term shift towards a more protectionist U.S. trade policy. This trend is unlikely to be reversed regardless of who wins the presidency in the future. Both Donald Trump and Kamala Harris, the potential successors, signal a continued commitment to protectionist measures, albeit with potentially different approaches.
Trump’s “Steeper” Tariffs and Harris’s “Targeted” Approach
Donald Trump has pledged to escalate trade tensions further, proposing tariffs even steeper than those seen during the Smoot-Hawley era. This would represent a significant intensification of protectionist policies, potentially leading to broader trade conflicts and economic disruptions.
While Kamala Harris has criticized Trump’s approach of across-the-board tariffs, she also supports “targeted and strategic tariffs” to protect American workers and hold adversaries accountable. Her voting record and personnel choices indicate a leaning towards protectionism, particularly in sectors related to green technology and strategic industries. This suggests that even under a Harris administration, tariffs on China are likely to remain a key feature of U.S. trade policy.
A World of Managed Trade and Geopolitical Competition
The shift towards protectionism in the U.S., exemplified by why Biden kept tariffs, reflects a broader global trend away from free trade and towards managed trade. In a world characterized by intensifying geopolitical competition and the rise of state capitalism, particularly in China, traditional free trade principles are being re-evaluated. Nations are increasingly prioritizing national security, economic resilience, and domestic job creation over pure efficiency gains from global trade. This new era of trade policy is likely to be defined by strategic tariffs, industrial subsidies, and a greater emphasis on domestic production, marking a significant departure from the hyperglobalization of the past decades.
In conclusion, why did Biden keep tariffs? The answer is multifaceted, encompassing strategic competition with China, evolving economic ideologies, and domestic political considerations. While initially debated within his administration, tariffs have become a cornerstone of Biden’s trade policy, reflecting a fundamental shift towards protectionism as the new norm in U.S. trade relations. This approach, driven by the perceived challenges posed by China, is likely to persist and shape the future of global trade for years to come.
