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IT'S JUST A PHASE

Biden’s new China trade policy looks a lot like Trump’s

US trade representative Katherine Tai testifies at a Senate subcommittee hearing in April 2021.
Sarah Silbiger/Pool via REUTERS
US trade representative Katherine Tai.
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published

The results of the Biden administration’s comprehensive review of China trade policy bears a striking similarity to his more bellicose predecessor.

Under the Trump administration, sniping at China was constant, but the US gained little from a series of tariffs it imposed on Chinese goods. Though Americans paid billions in new import taxes, the US trade deficit only widened, and their effect on jobs is debatable at best.

In an Oct. 4 speech laying out a response to concerns about China’s control of key global markets and violation of existing trade norms, US Trade representative Katherine Tai made clear that immediate change isn’t on the horizon.

She argued that neither dialogue nor enforcement actions at international institutions had changed China’s path since it became a global trade power at the turn of the century, leaving her no choice but to build from the template Trump had set in place. What may be different are Biden’s investments in competitiveness at home and an (ostensibly) multilateral approach abroad.

Tai laid out a four priorities.

Go back to the Phase One drawing board

The “Phase One” agreement was struck by the Trump administration and China in 2020. In exchange for halting the escalation of import taxes, China agreed to buy specific agricultural goods from the US and adopt new rules to enforce international intellectual property standards.

But China has not purchased as much as it promised (the targets were considered unrealistic from the get-go) and US companies aren’t satisfied with China’s treatment of their proprietary technology, and the deal is largely seen as a failure.  Still, Tai said she would try to enforce China’s commitments under the deal and begin talks on that basis.

More flexibility for US companies

Tai said that her office will “start a targeted tariff exclusion process.” This means US companies can apply to be exempt from tariffs on goods they import from China. While the flexibility is economically useful, putting USTR in charge of choosing which firms get a break will raise all kinds of questions about how those decisions are made. This kind of “managed trade” diverges from the free market line previously held by both Democrats and Republicans.”I’m a tremendously practical person,” Tai said.

Do something about China’s industrial policy

Tai warned of “serious concerns with China’s state-centered and non-market trade practices,” citing Beijing’s successful efforts to dominate the steel and solar panel industries, and worrying that semiconductors will be next. These concerns will be raised anew as part of the Phase One talks.

Tai didn’t offer much in the way of specific conditions that would lead the US to lift tariffs, but last year a coalition of US business groups laid out their agenda (pdf), which predictably enough asks for more clarity on China’s efforts to protect their IP and more access to China’s markets.

Tai did hint, with comments about using the tools available to her office, that the administration could seek more tariffs on new Chinese industries, a move her office is reportedly considering.

Still, one part of the Biden solution that differs from Trump’s approach—and arguably gives him more leverage—is a commitment to invest in competitiveness at home, through infrastructure improvements, worker training, and funding for the research and development of advanced technologies.

Bring the EU and other allies to the table

Tai left for Paris and talks with European counterparts immediately after the speech. In one sense, it’s another striking difference between the administrations: Tai has already reached a resolution of a long-running spat with Europe and the UK over civil airline subsidies, helping unify the two blocs most capable of counter-balancing China and bringing it to the table. But challenges remain, as the US dispute with France over submarine sales to Australia (ostensibly aimed at balancing China) has angered French leaders about as much as anything Trump ever did.

Nonetheless, a Biden administration likely has a better opportunity to push for global trade norms that could provide a middle-ground between the US and China. Tai suggested the issue of forced labor in China might provide a rallying point for global critics at institutions like the World Trade Organization and summits of the wealthiest global economies.

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