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Protectionism: Bipartisanship, for Better or for Worse

Photo: Joe Biden

When President Joe Biden took office in 2021, he immediately sought to undo much of his predecessor’s agenda. Indeed, President Biden’s victory over former President Trump can be largely attributed to a deep desire among many Americans to stop Trump Administration policies. One exception to that rule, however, has been trade policy. While Trump identified as conservative, he engaged in strict tariff policies, a clear break from traditional free-market fiscal conservatism. These tariffs, often specifically focused on China, became a hallmark of his “America First” initiative. As president, Biden has continued and in some cases expanded upon Trump-era protectionism. Just five days following his inauguration, President Biden signed an executive order strengthening the Federal Government’s commitment to “Buy American” and opted to renew many tariffs put in place by President Trump. As Professor Dan Drezner of Tufts University put it, Biden’s actions are “totally America First,” and certainly “not less” protectionist than Trump’s policies. Why has President Biden, who is generally diametrically opposed to President Trump, supported these tariff policies? An analysis reveals that political factors, rather than sound economic thinking, are likely driving the Biden Administration to continue Trump’s protectionist legacy.

If tariffs were clearly a successful strategy in terms of protecting domestic commercial interests, it would make sense for President Biden to keep his predecessor’s policies. However, there is general consensus amongst economists that on balance, tariffs result in economic harm to both American businesses and households. While President Trump claimed his tariffs would target the U.S.’s trade deficit with China and boost domestic industry, in practice tariffs generally result in higher prices for consumers and higher production costs for domestic firms that rely on imported materials. When foreign companies face tariffs, they will often increase their prices to protect their profit, thus transferring the impact of the tariff to the consumer. In fact, the Congressional Budget Office estimates that Trump’s tariffs cost the average American household $1,277 in real income in 2020 alone. As Forbes’s Stuart Anderson put it, “Tariffs are another word for taxes,” meaning that tariffs implemented by the government are paid for by citizens via higher prices. On the industrial side, it is true that tariffs on Chinese steel helped boost employment at some American steel manufacturing firms. However, Geoffrey Gertz at the Brookings Institute found that these gains were “more than offset by losses in industries that use imported inputs and face retaliation on their foreign exports.” Research from Harvard economist Lydia Cox and UC Davis economist Kadee Russ indicates that the tariffs may have created 1,000 jobs in steel production, but “increased cost of inputs” likely “resulted in 75,000 fewer manufacturing jobs in firms where steel or aluminum are an input into production.” Altogether, the data has led to a consensus among experts that tariffs are harmful to the overall economy.

If economics can’t justify protectionism, political factors may explain why the Biden Administration has left Trump-era tariffs intact. Professor Nina Tannenwald, former Director of the International Relations Program at Brown University’s Watson Institute, proposed three potential contributing factors to explain Biden’s protectionist policy: a crowded agenda, appeasement of the blue-collar demographic, and desire to appear tough on China. 

First, in what Professor Tannenwald described as a “sequencing bandwidth” issue, it is possible that the Biden Administration feels that addressing trade policy is not a top priority at this point in time. Thus, Trump-era tariffs remain in place because the Biden Administration would rather focus its attention on other issues, rather than crafting and pushing trade liberalization policy. Data suggests that 2020 election voters viewed issues such as COVID-19 and health care as more important than foreign policy. Additionally, President Biden has had to dedicate vast amounts of time to the chaotic U.S. withdrawal from Afghanistan. Presidents have limited political capital, and it is possible the Biden Administration has deemed trade policy as an issue best addressed after the COVID-19 and Afghanistan crises have been dealt with. However, President Biden has taken action on a number of non-crisis issues during his presidency, such as planning a minimum wage hike and rejoining the Paris Climate Accord, so a need to deal with COVID-19 and Afghanistan cannot entirely explain why Biden has chosen not to engage in trade liberalization.

Another possibility is that President Biden recognizes that there is support among many blue-collar workers in America for tariffs, who feel that protectionism will help protect their factories from being outsourced overseas. It was this brand of economic populism that drew many middle-class Americans, long a part of the Democratic voting bloc, to Trump. Perhaps President Biden hopes to reclaim support from this demographic by sticking with the tariffs. However, Biden has taken other actions that are contentious with many blue collar workers, such as mandating increased production of electric vehicles. Thus, blue-collar support alone cannot explain why Biden has chosen to stick with Trump-era protectionism.

Turning to the primary target of President Trump’s trade war may just reveal why President Biden has left the tariffs in place. As Ryan Hass of the Brookings Institute reports, in the past few decades “China has grown from an underdeveloped country into America’s foremost economic competitor.” The American people have become wary of this meteoric rise: 45% of Americans characterize China as the “greatest enemy” of the U.S., and 63% feel that the “economic power of China is a critical threat to the vital interests of the U.S..” After the 2016 election, 77% percent of Americans felt establishing tariffs to prevent companies moving abroad was somewhat or very important. President Trump tapped into this growing American anxiety with his “tough on China” rhetoric, and American political leaders across the political spectrum have also adopted apprehensive attitudes towards China. Republican Senator Marco Rubio has called for the U.S. to adopt “a more coordinated approach to directly counter this critical threat and ensure we better protect U.S. technology,” and Senate Democratic Leader Chuck Schumer praised then-President Trump’s actions on China as the “right thing” to do. Generally, Republicans support any move to combat Chinese dominance, and as economist Gary Hufbauer put it, Democrats tend to be “as hawkish, if not more hawkish, than Trump on China.” Combined, the wide range of support for “tough on China” policies put Biden in an extremely difficult political position. If he were to pursue trade liberalization, he would be chastised by the right as “weak on China,” and it is unlikely that he would receive much defense from his own party. As his approval ratings slide due to crises in Afghanistan and at the southern border, President Biden is unlikely to commit to an issue (like free trade) that has little support on either side of the aisle. 

Protectionist policies cause more harm than good economically, and it is likely the Biden Administration is aware of that. Yet President Biden has maintained and expanded upon Trump-era tariffs, likely due to political pressures that his administration faces. As Biden struggles with low approval ratings, he can’t risk being seen as “weak on China.” In a democracy, good policy can fall victim to political opportunism and the misguided desires of the masses. While potential benefits of free-trade are enormous, it is unlikely the United States will engage in trade liberalization until fears of the “Chinese threat” dissipate.

Photo: Image via Hinrich Foundation (Eric Haynes)