Despite the combative rhetoric over President Trump’s use of tariffs and his trade war with China, the two contenders for the White House share a basic apprehension about returning to a traditional free trade policy. The next four years, regardless of the electoral outcome, will be characterized by continued trade tensions with China.
Vice President Biden has not declared a unilateral commitment to rescind tariffs and barriers introduced by the Trump administration but has emphasized the importance of working with allied nations to reform international trade rules and take on China. President Trump would likely continue with his unilateral approach, extracting concessions by wielding U.S. economic power aggressively.
Buy American rules, reshoring and supply chain resilience will be a key focus for the next administration against the backdrop of COVID-19 recovery. Vice President Biden has promised extended federal procurement coupled with more stringent application of current Buy American legislation. President Trump has emphasized supply chain security and taken action against mainly Chinese companies in multiple sectors.

A New Consensus
The global context against which the 2020 election is set differs radically from prior elections in 2008 or 2016. When Joe Biden rose to the office of the Vice Presidency and became instrumental in shaping the Obama administration’s foreign policy, the United States had no peers as a superpower. President Trump’s campaign against Secretary Clinton positioned him as the antithesis to the broad consensus around U.S. strategic interests abroad, promising instead to reverse the global trends he viewed as hurting the average American.

Global economic upheaval from COVID-19, an emboldened China, democratic decline and a faltering international system of institutions stand to accelerate the trends challenging American prosperity at home and influence abroad. But despite their fundamentally different approaches and world views, the two candidates make remarkably similar diagnoses of what historical issues must be addressed. Their proposed solutions are, however, starkly different.

Essentially, the proclaimed America First philosophy for which President Trump has been a standard bearer has much in common with the current Democratic understanding of what is wrong in the current international economic system. Both parties have mostly abandoned the economic orthodoxy of promoting free trade, in favor of “Fair Trade.” Protecting American jobs in manufacturing and bringing back opportunities outsourced to low-wage economies will take priority over championing international commerce. Former Vice President Biden has pledged to not enter into any new FTA “until we have invested in Americans and equipped them to succeed in the global economy” and the President continues to champion bilateral negotiations over multilateral agreements and institutions. Domestic economic policy likely will receive an overwhelming share of attention.

The Trump Platform
The toolbox favored by a Trump or Biden administration will likely be significantly different, however. The past four years have been a significant break from traditional U.S. trade policy. Under Robert Lighthizer, the Office of the USTR has made aggressive use of Section 301 investigations to gain leverage in FTA renegotiations and punish what it deemed as unfair trade practices.

The President has also thrown U.S. economic might against allies and competitors alike, imposing Section 232 tariffs on steel and aluminum, expanding sanctions against foreign adversaries such as Russia and Iran, leaving some companies in a difficult regulatory landscape between EU and U.S. markets. CFIUS rules on various technology and industry assets have been significantly expanded and by blocking appointments to the WTO Appellate Body, the administration has effectively upended the international dispute resolution system.

The President recently made the promise to his supporters that a second term in the White House would include accelerated efforts to re-shore supply lines deemed critical, including electronics, pharmaceuticals, machine tools, shipping, aerospace, autos, iron and steel. How this is to be accomplished is not known but considering the administration’s record it would likely involve a mix of domestic tax reforms and tariffs on related imports. Another likely focus will be to revive U.S. energy exports, an industry enjoying support with his political base and a key part of a broader Trump energy strategy.

Yet rhetoric has often been more radical than actions, restrained by more pro-trade advisors and Republicans in Congress. The USMCA, touted as a Trump-era model trade deal, won broad support on Capitol Hill. A second Trump administration could continue the balancing act of pleasing both the President’s protectionist impulses and Republican moderates or take renewed focus on more extreme policies such as a “broad reset” or even exiting the WTO and picking more fights with allies. The recent WTO ruling against U.S. tariffs on China is not likely to soften the President’s views. One determinant factor will be what advisors are left to restrain such policy initiatives as a number have left the administration, allowing officials supportive of such impulses to be elevated to more influential positions.

The Biden Platform
Since 2016 the U.S. has largely gone at it alone when it comes to foreign and trade policy, a trend the former Vice President has vowed to break. Bridging conflicts with allies in Europe, North America, Japan and South Korea will be key to forming the coalition of countries he envisions to bring about to take on China and reform international institutions. Renewing American efforts to enforce existing trade rules and creating new ones for areas of contention such as digital and biotechnologies is envisioned as a break from what Democrats view as President Trump’s perceived abdication of international leadership. At the same time, a new trade landscape has forced the former Vice President to reconsider his past positions.

For U.S. trade relations and, to the extent a Biden administration would negotiate FTAs, focus would likely shift more towards promoting environmental and workers’ rights at home and abroad. Having proposed a federal carbon border adjustment fee to punish imports from polluting countries and stronger enforcement of existing labor provisions, a Biden Administration’s priorities for current and future economic relationships will most likely shift away from the transactional approach of President Trump. A Biden administration likely will see to use tax reform to punish offshoring of jobs and claw back federal investments from firms that outsource American jobs, making for a more protectionist trade policy than that of the Obama administration.

The former Vice President’s platform also underscores that U.S. domestic growth must be a priority, promising expanded “Buy American” requirements baked into the enormous spending packages proposed as part of his economic and environmental plans. Those plans envision $400 billion in government additional procurement in support of “Made in America” goods, as well as investments spanning Vice President Biden’s ambitions on energy decarbonization, infrastructure and R&D. Former Vice President Biden has also declared his intention to close loopholes in the rules used to designate what goods are eligible for government purchase, reduce the issuance of waivers to federal agencies, and update international trade rules to allow for domestic investments. This could include certain subsidies or requirements for the federal government to purchase American-made goods.

The strategies to be followed by Vice President Biden to build a renewed partnership with countries representing over half of the world’s GDP remains unclear. In particular, currently there appears to be little room for making concessions to potential allies. Allies could expect renewed efforts in Washington to reopen trade negotiations on deals frozen by the current administration, but the timing remains murky as it depends on when a President Biden would deem the American economy sufficiently competitive.

Although it is unlikely that tariffs will be imposed as liberally as under President Trump, senior advisors to Vice President Biden have said that his Administration would use tariffs as needed and backed by a strategy to address violations of trade rules. Senior advisors to the former Vice President have also signaled support for WTO reform and on improving trans-Atlantic relations, including ending ongoing trade wars and resolving the decades-long WTO dispute over aircraft subsidies.

A U.S. leadership less prone to throw its economic weight around would ease transatlantic tensions and more restrained use of Section 232 tariffs would be a relief amongst Americas’ trade partners. Especially developing countries could expect more stable relations under a Democratic President less keen to use economic coercion to force cooperation on foreign policy priorities. President Trump’s curtailment of programs like the Generalized System of Preferences towards India and Thailand may be rolled back, again alleviating tariffs on import from designated developing countries.

Converging on China
A significant point of agreement, beyond a shared preference for “Fair Trade,” is China. Both President Trump and Vice President Biden share a hawkish outlook on the U.S. relationship with its main strategic competitor which they view as authoritarian, an unreliable trade partner and increasingly a threat to U.S. interests in Asia. Pushing back on Chinese economic practices such as forced technology transfers, cyber espionage, market access limitations and state support for businesses are at the top of both campaigns’ trade agenda. Bipartisan action has been clear even when not naming China, for example through the Foreign Investment Risk Review Modernization Act (FIRRMA), which strengthened the CFIUS review process, and the Export Control Reform Act (ECRA).

The Trump administration has made a frontal assault on Chinese exports, imposing tariffs of up to 25 percent on $370 billion of goods under Section 301 in response to unfair trade practices. In January, the parties signed a Phase One trade deal, extracting some written concessions from China, including promises of strengthened IP protections and significant future purchases of American goods. While Vice President Biden has criticized both the tariffs and the deal as dangerous and empty, he has not pledged to remove the tariffs. Instead, he has said that he “will review tariffs that have been put in place to ensure our trade policies achieve the goal of supporting workers and growing our middle class,” while also expressing concern over the same Chinese economic practices as the Trump administration has targeted.

With both parties wary of looking weak toward China, the underlying policy goals are unlikely to change, even if the measures to achieve them will. A second Trump administration could continue to hold current tariffs over Beijing to extract further concessions in a Phase Two deal. Vice President Biden has pledged to bring together a coalition to multiply economic pressure for change, whilst simultaneously cooperating with China on areas such as climate change and global health—likely to be a difficult balancing act against the growing concern over Beijing’s human rights record in Hong Kong, Xinjiang and Tibet. Regardless of who wins the White House, Congress will likely push for action on these areas, as well.

International Supply Chains
With the two candidates brandishing their own styles of economic nationalism, international supply chains are at risk. Already, the actions of President Trump have brought significant disruptions to numerous industries dependent on inputs from China as a result of the Administration’s Section 301 tariffs and Chinese countermeasures. Further actions targeting supply chain risks from foreign countries primarily concentrating on technology, telecommunications and government contractors have made modern commerce more difficult. COVID-19 will likely accelerate the political imperative to drive pharmaceutical and health care-related industries to consolidate production domestically. The President has invoked multiple Executive Orders to enforce such moves, with differing effects. This trend is unlikely to be reversed if the Former Vice President wins the election.

The Biden plan on supply chain resilience calls for a 100-day review to start early in a new administration to inquire about what national security risks current dependencies represent. The stated goal is to build a broad resilience against the disruptions experienced during the COVID-19 pandemic, explicitly targeting the pharmaceutical and medical industry for increasing U.S. self-sufficiency as well as sectors of national security interest more broadly. These may include energy and grid technologies, semiconductors, electronic and telecom equipment, as well as critical raw materials.

The former Vice President’s plan outlines several tools to be used in pursuit of this goal, including directing federal agencies to purchase American products in the targeted industries, conditioning federal spending and investment, expanding federal stockpiles and using the Defense Production Act (DPA) more aggressively than President Trump to direct U.S. manufacturing of needed equipment. The plan also calls for working with Congress and agencies to require companies to develop plans to address potential supply chain disruptions for critical products and imposing targeted import restrictions on countries like Russia and China when necessary to protect U.S. critical infrastructure and supplies as well as working with allies to reduce our collective dependence on Russia and China.

The government-wide push to move supply chain dependency away from China has so far been the focus. Under the next president, the scope will likely expand, with additional efforts to re-shore production through tax benefits or subsidies. The Biden plan explicitly includes such incentives, while President Trump has openly promoted the idea. The current economic downturn will increase the political incentive to push companies to create U.S. jobs.

If re-elected, the President will likely be keen to continue the use of tariffs, but several key figures in his administration have expressed preference for tax credits and re-shoring grants, as have influential Congressional Republicans. A potential alternative for a second Trump administration to unilateral pressure could lie in multilateral talks on how to restructure global supply chains to prevent dependence on China and the “Economic Prosperity Network” hinted at in some of its current policies. 

A Model Trade Deal?
President Trump’s only bilateral success in trade issues, apart from smaller single-issue deals addressing economic interests of key constituencies, has been the renegotiation of USMCA to replace NAFTA, which had attained symbolic significance for complaints about trade and globalization. The NAFTA was originally negotiated almost 30 years ago but would have been updated by the multilateral Trans-Pacific Partnership (TPP) negotiated by the Obama Administration. After President Trump announced that the United States would abandon the TPP and threatened to unilaterally cancel the NAFTA without a replacement, his administration initiated negotiations with Canada and Mexico that resulted in the USMCA, which took effect in July 2020.

The USMCA’s two most prominent differences from the TPP (which the other 11 members proceeded to implement under the name Comprehensive and Progressive Agreement for Trans-Pacific Partnership) are in imposing stricter rules of origin for automobiles and adopting a more aggressive mechanism for addressing complaints about enforcement of labor laws in Mexico. The impact of the USMCA on the U.S. automobile industry remains unknown for now, as there is a multiyear implementation period.

Certain features of the USMCA—such as eliminating the availability of investor-state arbitration between the United States and Canada, and abandoning prior U.S. demands for increased international protections for biologic pharmaceutical products—actually ran contrary to traditional Republican positions on trade agreements, but reflected the Trump Administration’s need to compromise with the Democratic majority in the House of Representatives. It remains unclear whether the USMCA will be a practical template for trade agreements with other countries.

The Trump Administration has formally started discussions on trade agreements with the UK and Kenya, which are both in early stages. A potential UK agreement remains subject to, among other things, the resolution of the UK’s trade relationship with the EU. Vice President Biden has not announced specific plans for trade agreements, but his stated goal of reestablishing U.S.-led coalitions to pressure China on economic issues almost certainly will require re-engaging with U.S. allies on trade agreements such as the WTO. However, economic rapprochement might not come without conditions under a Biden administration, given his red line on signing any trade agreement with the UK unless it respects the Good Friday Agreement and his continued opposition to the TPP “as it was initially put forward.”

For a side-by-side comparison of President Trump and Former Vice President Biden’s international trade policies, click here .

(Special thanks to Oscar Theblin for his work in preparing this alert.)

These and any accompanying materials are not legal advice, are not a complete summary of the subject matter, and are subject to the terms of use found at: https://www.pillsburylaw.com/en/terms-of-use.html. We recommend that you obtain separate legal advice.

Links & Downloads