By: Edward Seglias
PHILADELPHIA – A new presidential administration always triggers discussion about what policies will change from the past administration and what new initiatives will be advanced. No doubt the new Biden administration will depart significantly from the Trump administration on many domestic and foreign policy issues. But trade, particularly with China, may be a different story.
If we draw back to 2018, we can recall the Trump administration’s effort to impose tariffs on steel and aluminum imports from China. Justification for this action was aimed at protecting domestic steel production because of its strategic importance to the U.S. This effort eventually led to the imposition of a 25% tariff on imported steel and a 10% tariff on aluminum from China.
While there were several legal challenges to the Trump administration’s action, they all failed on the grounds that under Section 232 of the Trade Expansion Act, the Secretary of Commerce is authorized to conduct comprehensive investigations to determine whether imports of goods or materials pose a threat to national security.
Perhaps more interesting than the legal challenges was the complete absence of any dissent by Congress to the imposition of the tariffs on China. This silence is especially remarkable in view of the constant acrimony that otherwise existed between the Trump administration and congressional Democrats.
But steel and aluminum are not the only construction material or goods imported into the U.S. Drywall, timber, and a host of other building material are on ships or trucks right now making their way to various ports of entry in the U.S. and will be incorporated in projects across the country. Also, China is not the only country importing such materials.
Canada, Mexico, and a host of other European and Asian countries similarly import construction materials into the U.S., and at times for less than fair market prices. In many instances, these goods compete directly with products from domestic manufacturers and producers and directly threaten the ability of domestic companies to maintain employment and competitiveness.
From economists to consumers, virtually everyone agrees that fair trade is fundamental to the capitalistic system. But that expectation is under constant assault by both friend and foe. The Commerce Department and International Trade Commission are charged with protecting our domestic market from unfair competition.
Up to this point, many believed, and even adversaries agreed, that the Executive branch, and the Trump administration, in particular, sought to protect domestic industries, like steel, from unfair competition. The discussion now, however, is whether the Biden administration, will maintain the same approach or whether it will move in a different direction. In some measure, that will depend on which constituency it favors among the competing interests at play.
In the recent challenges to the steel tariffs, for example, project owners, steel importers, and foreign producers stood on one side of the issue while domestic steel producers and fabricators stood on the other. The Trump administration aligned itself with the domestic steel industry and imposed tariffs, which it found necessary to help protect the domestic steel and aluminum industry from unfair competition.
At present, it is not clear whether the Biden administration will take the same approach. Many commentators believe that the Biden administration will attempt to improve relations with China and with other countries due to strained relationships that arose over the last four years. But improving those relationships may be a tricky issue. Common sense will tell you that it does not come without some horse-trading. Indeed, one of the most enduring methods to improving foreign relations is to relax trade regulations and import barriers. With China, that effort may be particularly difficult given its recent trade history and the barriers it has erected for entry into its own market. Couple that with reported entanglements involving the Biden family, and the outlook is murky at best.
An important bulkhead against unfair foreign competition is the Buy America Act and its cousin, the Buy American Act. Many states also have adopted similar regulations favoring domestic products. However, these protections only relate to public procurement or projects that include federal funds. They do nothing to protect domestic industries on private projects from unfair competition.
Several national trade associations representing the domestic steel industry and the United Steelworkers Union are not waiting to be heard and have taken the initiative to urge the Biden administration to keep steel tariffs in place. In a recent letter to the President-Elect, the American Iron and Steel Institute, the Steel Manufacturers Association, the American Institute of Steel Construction, the Committee on Pipe and Tub Imports and the United Steelworkers Union wrote that the “continuation of steel tariffs and quotas is essential to ensuring the viability of the domestic industry in the face of a massive and growing excess in steel capacity. Removing or weakening these measures before major steel-producing countries eliminate their over-capacity…will only invite a new surge in imports with devastating effects to domestic steel producers and their workers.” The group closed their letter by offering to “work with the administration to address global trade distortions in steel that continue to threaten our industry and workers.”
Predictions are inherently risky, especially when they concern the intentions of our political leaders. However, the available information appears to indicate that there still is solid political and industry support to maintain the current tariffs against China and to continue enforcement of federal trade and acquisition laws. Indeed, the President-Elect already has voiced support for an expanded Buy American Act for public infrastructure projects.
The real test will be whether the new administration will continue to maintain or increase tariffs on those countries that seek to dump building materials like steel in the U.S. market at unfair prices. Signs are there, but only time will tell.