Why Biden Will Likely Follow Through on His Threat to Triple Tariffs on Chinese Steel and Aluminum

In a speech, yesterday, to union workers in Pennsylvania, President Biden called for U.S. trade representative Katherine Tai to consider tripling tariffs on Chinese steel and aluminum if her ongoing investigation into China’s trade practices confirms them to be anti-competitive. And that doesn’t seem like much of an if.

It’s clear that the president has already assumed the outcome of Tai’s investigation as Biden had already said in the speech, “…China’s steel companies don’t need to worry about making a profit because the Chinese government subsidized them so heavily. They’re not competing. They’re cheating.” Then he reemphasized, “They’re cheating.”

The speech, shared below, made it sound more like the Biden Administration is about to triple tariffs on Chinese steel and aluminum rather than it’s considering the idea.

Especially in an election year, it can be hard to take anything President Biden says in a speech as something that’s actually real. However, when it comes to these tariffs on China, it’s a very real possibility they’ll happen. Here’s why…

Why Biden’s Tariff Increase on China Is Actually Likely

When Biden came into office, he and his administration seemed on a mission to reverse or end all Trump era policies. This included ending the effective “Remain in Mexico” policy, ceasing construction of the Southern border wall, rejoining the Paris Climate Agreement, revoking the Keystone XL Pipeline permit, halting new oil and gas leasing on federal land, calling for corporate tax hikes to more than reverse tax cuts of the former president, increasing or reinstating federal regulations where Trump deregulated, and on, and on…

BUT…

President Biden did not cut President Trump’s tariffs on China.

For a year and a half, Trump heavily escalated tariffs on China until he got a Phase 1 Trade Agreement from the country. Unfortunately, the trade deal was quickly overshadowed and basically negated when COVID-19 spread from Wuhan to the rest of the world. There have been COVID-related exemptions, but those tariffs on Chinese goods stayed right in place, even after Biden took office.

To many, that seemed strange because Democrats, including Biden, criticized Trump’s tariffs on China. But Biden went from, in 2020, telling NPR regarding the tariffs “we’re going after China in the wrong way” to his administration defending the tariffs as “a significant piece of leverage” in 2022.

Clearly, the Biden Administration likes the tariffs so much that even its hatred of Trump and its policy of derision toward everything the former president did isn’t enough to abandon the tariffs. And now Biden wants to take this controversial policy of Trump even further? They must have really strong feelings for these tariffs in the Biden Administration.

That paired with Biden already concluding China is engaging in anti-competitive trade practices would probably be enough to say there’s a good chance the Biden Administration implements this tripling of tariffs on Chinese steel and aluminum, but there’s more…

Politically, Biden Needs to Show Strength Against China

Politically, President Biden needs to show strength against China as evidence of himself and his family receiving money from China hurts his re-election bid.

In the following video, Representative Byron Donalds walks through bank statements and check copies showing a paper trail of money from a Chinese account tied to the Chinese Communist Party to an account controlled by the president’s son Hunter Biden with a portion of the money getting withdrawn and then going to Joe Biden himself, before he was president:

The last thing President Biden can afford, politically, is the appearance that he and his family gaining money from China has affected his policies as president pertaining to China. Especially if it looked like he was going soft on China.

Of course, it could affect his policy on China in the opposite direction. It might make him hold or present stronger policies or stances against China, such as tariffs on Chinese goods and materials or calling China “xenophobic” as he did in his speech yesterday.

The political need to show himself strong against China, especially when showing strength in general has not been his strong suit, ups the odds of him increasing these tariffs on China from a good chance to likely.

7.5% Tariffs to 25%?

Outlets have been reporting that Biden is calling for tariffs on Chinese steel and aluminum to rise from their current 7.5% to 25%. That would actually be a bit more than tripling the tariffs. The 25% number doesn’t appear in the speech or the White House release covering the call to triple the tariffs. However, I suppose that does seem like the nicest number to round 22.5% up to, if that exact tripling of 7.5 didn’t seem round enough.

7.5% isn’t actually the exact tariff on all aluminum and steel imports from China we’re talking about here. In its release, the White House states that’s the current average tariff on “certain steel and aluminum products” under Section 301. It’s implied that those products are all from China and the certain ones Biden is calling to triple, but I’m not sure exactly how the media landed the exact amount of 25% for the percentage to which those tariffs are increased.

Tariff Hike Good or Bad?

Critics of the tariff hike argue that it will only increase the bad inflation the U.S. has suffered under the Biden Administration while the Biden Administration argues it will protect U.S. jobs.

I had ambivalence about the tariff hikes Trump implemented. However, he had a clear goal of getting a trade deal to protect the U.S. and her businesses from China’s unfair trade practices and tackle our trade deficit with China. I don’t see a similar clear goal from the Biden Administration; however, further exposing anti-competitive practices of China and protecting U.S. companies from dumping is a good thing.

U.S. importers of such goods from China would obviously suffer major cost increases that might make them second guess importing them from China. U.S. exporters might suffer retaliatory tariffs.

Joey Garrison reported in a USA Today article, “Imports of steel from China account for only about 0.6% of total U.S. steel demand, according to a senior Biden administration official.” Their argument there is that it’s such a low percentage that it won’t further increase inflation. By that logic, the argument could be flipped to say that this move also wouldn’t do much to protect American either. That would make the move little more than political posturing.

Conclusion

There’s a high chance of the Biden Administration following through on the president’s threat to triple tariffs on steel and aluminum goods from China. For shippers who import or export steel goods to or from China, this would be a big deal. Potentially, the move could lead to more than just a single retaliatory action from China, and reignite the trade war we saw during the Trump era. However, it could amount to little more than political posturing, even if it did happen.

The odds are the move wouldn’t make a huge impact on inflation or U.S. job protection. A small amount on both is possible, but a statistically negligible impact is more likely.