Politics Seen as Preventing Biden From Reversing Section 301 Tariffs

National Foreign Trade Council panelists addressing the future of U.S.-China relations agreed that the political climate won't allow President Joe Biden to reverse the Section 301 tariffs on China, even though they think those tariffs haven't been effective in achieving their goal of changing the competitive playing field with Chinese firms.

Rep. Stephanie Murphy, D-Fla., who introduced a bill during the previous Congress that would have allowed Section 301 and Section 232 tariffs to last only 120 days without an affirmative vote in Congress, believes the 301 tariffs imposed more damage on U.S. firms, farmers and workers than they did on China. But Murphy, a House Ways and Means Committee member, was not able to get any Republicans to sign on to the bill, and two of the six moderate Democrats who co-sponsored it lost their elections in November.

She said both in the country and in Congress, sentiment on China makes removing the tariffs very difficult. “Biden won in areas that are reflexively anti-trade, who have not yet had a compelling argument made to them as to why trade is anything but negative to their communities,” she said. Biden won Pennsylvania, Michigan and Wisconsin, rebuilding the “blue wall” that Trump dismantled in the 2016 election.

Murphy, who is starting her third term representing central Florida, said during the Jan. 12 webinar that Republicans are creating “a little bit of a 'Red Scare'” in their campaign ads. “You either think China is the big bad boogeyman or you're a socialist,” she said, describing what she called their narrative. “There is no room for a nuanced approach to China,” she said. “That is too simplistic for the relationship that the U.S. has with China. That completely eliminates any room for nuance, any room for rational, reasonable, strong strategy.”

Dave Hanke, a former Republican Senate staffer and now an Arent Fox partner, agreed that the China tariffs weren't “particularly strategic or thoughtful,” and that the political dynamic is not there for negotiating concessions to secure their removal.

Murphy did express hope that Biden might undo the Section 232 tariffs on Europe and Japan, which she said angered allies “that should be working with us to form a united front on China.” She said using Section 232 tariffs for questionable national security claims is bad policy, even aside from that concern. “Because when we do that, it opens the door for others to follow suit and claim a national security rationale when one doesn’t really exist,” she said. Hanke called the Section 232 tariffs “huge unforced errors by the U.S. We needed teammates, not adversaries,” he said.

Murphy said she was heartened by Biden's trade and national security appointments, and said she's “hopeful that team will be able to lead us out of this convoluted place the Trump administration landed us.”

Webinar moderator David Lynch, an economics reporter for the Washington Post, asked Hanke if decoupling from China is inevitable now.

Hanke said that “there is decoupling happening. You might call it selective decoupling or surgical decoupling.” But he said when you block sales of U.S.-designed semiconductors to Chinese users, you have to help them financially. He said “we can't have policies that kneecap” firms that are crucial to U.S. economic innovation and strength. He said Congress is acting to bolster firms that have lost business due to export controls through the USA Telecommunications Act and HIPS for America Act. “These things would have never even been considered three or four years ago,” Hanke said. “You might say these are industrial policy-lite.”

He said the government will spend billions of dollars in the semiconductor field “so we can stay in the game.” He said there will be decoupling in semiconductors, 5G, personal protective gear and pharmaceuticals.

Panelist Monica He, director of international trade policy for biotech firm Amgen, cautioned that requiring the strategic stockpile or other government purchasers to buy U.S.-manufactured drugs could have “tremendous adverse economic impacts” if other countries follow suit and require domestic pharmaceuticals for their government purchases. She said the new administration should be asking itself: “What are the international implications for 'Buy American'? Could that have implications for U.S. companies doing business abroad?” Companies that make biologics are mostly located in the U.S. and Europe, as many of the older-style prescription drugs are manufactured in India and China.

Hanke also cautioned that the political rhetoric about making goods in America doesn't make economic sense. “People need to do a reality check on that,” he said. But he said policymakers could encourage companies to shift production to democracies with free markets, such as India and Mexico. “The North American value chain can come into play to replace some of those value chains running through China,” he said.