Trade Policy Under the Biden Administration: Five Big Issues We’re Watching
Written by Lydia Pardini | Deanna Tanner Okun
Time to read: 3 minutes
With one day until President-Elect Biden takes office, major questions remain about how the incoming Administration will approach ongoing trade conflicts and duties imposed by the Trump Administration. Five issues we’re keeping our eye on right now:
- China: Several thorny issues confront the new Administration. China remains behind in its Phase One commitments. The vast majority of the China Section 301 duty exclusions granted under the Trump Administration have expired, with the exception of certain COVID-19-related goods and certain List 1 exclusions (expiring in March and April 2021). Biden has stated his intent to “conduct a full review of the existing agreement with China and consult with our traditional allies in Asia and Europe” before taking any action regarding the Section 301 tariffs. Meanwhile, litigation challenging China Section 301 Lists 3 and 4A tariffs continues, with the possibility those tariffs could be invalidated by the Court regardless of the approach the Biden Administration determines to take after reviewing the Phase One agreement.
At the same time, democratic and human rights concerns continue to worsen. The Trump Administration has continued to eliminate provisions of Hong Kong’s separate status following continued crackdowns by China on the island’s democratic processes, with Commerce recently removing Hong Kong as a separate destination under the Export Administration Regulations. Biden’s nominee for Secretary of State has vowed the Administration “will stand with the people of Hong Kong and against Beijing’s crackdown on democracy. U.S. Customs and Border Protection has taken a strict stance on imported products produced using state-sponsored forced labor in the Xinjiang Uyghur Autonomous Region. Biden has promised to give human rights greater weight in U.S. foreign policy, but has not announced whether he intends to continue to use trade tools to react to democratic and human rights concerns in the country.
- Section 232: The Trump Administration’s revival of this Cold War-era statute to boost domestic production in certain industries through the imposition of tariffs on certain imports has prompted a mixed reaction from politicians and manufacturers, with ire drawn in part by the duty exclusion process in place for certain steel and aluminum imports. The tariffs have been a point of friction with certain U.S. allies, including the European Union (EU). Biden has not made any commitments as to whether he will retain or eliminate the tariffs or alter the exclusion process, telling the United Steelworkers last May only that he will “review” the steel and aluminum tariffs.
The Biden Administration will also inherit several other ongoing Section 232 actions. The U.S. Department of Commerce’s final report regarding automobiles and automotive parts, still unreleased, could be used for leverage or released to assist repairing relationships with allies. Working groups established following the Commerce Department’s now-concluded investigations into uranium ore and titanium sponge continue discussions to address imports and ensure secure supply chains, and the Biden Administration will be tasked with implementing or revising policy recommendations issued by those working groups. And in spring 2020, Commerce initiated three additional investigations. Of those, two remain ongoing. Mexico has agreed to set up a monitoring system for grain-oriented electrical steel and USTR has committed to exempting the country from any tariffs that result from the investigation—but whether duties will be imposed on imports from other countries will likely be determined by the Biden Administration. The vanadium investigation remains pending, with Commerce having now requested and received two rounds of public comments.
- US-EU Relationship: In addition to strains caused by the imposition of Section 232 tariffs against steel and aluminum imports, including European product, the U.S. is currently juggling several investigations that have or could result in the imposition of duties against EU member countries.
As part of the the long-running large civil aircraft disputes, the US has imposed tariffs on $7.5 billion worth of EU goods—including 15 percent tariffs on Airbus aircraft and 25 percent duties on a variety of food, beverages and other products from Europe—and recently expanded the products subject to those duties. In addition, USTR under the Trump Administration initiated a number of Section 301 investigations pertaining to various countries digital services taxes which are now coming to fruition or will during the Biden Administration. In July 2020, Trump U. S. Trade Representative Robert Lighthizer announced the imposition of 25 percent Section 301 tariffs on $1.3 billion worth of French goods in retaliation against France's new digital services tax. However, imposition of those duties has been further delayed while USTR completes investigations into digital service taxes adopted by the EU and nine other countries, including EU member countries Austria, Italy, and Spain. Recent affirmative determinations on all three countries leave the door open to imposition of tariffs under the Biden Administration. Biden has emphasized repairing relationships with U.S. allies including the E.U.; it’s unclear how those efforts may impact the determinations made in these investigations and duties imposed following the investigations’ conclusion.
- US-UK Relationship: Also in question is a trade agreement with the United Kingdom (UK), which has been a particular focus of Trump’s USTR but will not be concluded before the change in administrations. With fast-track trade authority likely to expire this summer and other priority issues on which it will want Congress to focus, the Biden Administration may prioritize repairing relationships with the EU over a US-UK trade agreement. However, USTR’s recent determination that the UK’s digital service tax is unreasonable or discriminatory and burdens or restricts U.S. commerce could prompt additional discussions on at least that issue.
- Vietnam: In addition to the Section 301 addressing China and various countries’ digital taxes, the incoming Biden Administration will inherit two ongoing Section 301 investigations pertaining to Vietnam’s currency valuation and import and use of illegally-harvested timber. Last week, USTR issued a report declaring that Vietnam had undervalued its currency since 2016 to the detriment of the United States—but refrained from taking any action, such as imposing retaliatory duties. USTR instead left it to the Biden Administration to determine whether and how to address the issue. The incoming Administration has not signaled how it may approach these investigations.
January 19, 2021