Why Biden wants to raise tariffs on Chinese steel

President Biden called for tripling the tariff rate on steel and aluminum imports from China Monday, a move that reflects simmering geopolitical tensions with the world’s top steel producer as well as an increasingly protectionist economic posture ahead of the 2024 election.

The move also echoes the trade war with China undertaken by former President Trump, the latest point of continuity in trade policy between the previous president and Biden, who kept many of his predecessor’s tariffs on Chinese goods in place.

Biden hit the campaign trail Wednesday in Pennsylvania — a battleground state for 2024 and a historical home for the U.S. steel industry — to tout the new import tax.

“​​The current average tariff on certain steel and aluminum products is 7.5 percent under Section 301,” the White House said in a release, adding that “President Biden is calling for USTR to consider enhancing the effectiveness of tariffs on Chinese steel and aluminum products by tripling them.”

The U.S. Trade Representative (USTR) will be starting an investigation into what it terms “unfair trade practices” on the part of China in the shipbuilding and logistics industries, the White House said, calling out the country’s “uniquely aggressive set of interventions in these sectors.”

The investigation is a response to pressure from U.S. industrial labor unions, including the United Steelworkers (USW), who say American industries are being squashed by competition from China’s maritime Belt and Road initiative, a set of policies designed to reshape global supply lines with China at the center.

“The government of China has funneled hundreds of billions of dollars and adopted numerous supporting policies to achieve the goals laid out in plans for shipbuilding, and it has consolidated the leadership of these efforts in large state-owned enterprises,” a union petition filed with USTR last month reads.

Industry and policy groups were quick to sing the administration’s praises for initiating the investigation and requesting the boosted metals tariff.

“The Biden administration is right to move ahead with an investigation into China’s predatory practices in its shipbuilding industry,” said Scott Paul, president of the Alliance for American Manufacturing, an industry group, in a statement.

Paul added that he was encouraged by Biden’s call for tripling the tariff on Chinese steel imports.

Protectionist-oriented economic policy organization the Coalition for a Prosperous America said it welcomed the call for a boosted tariff but suggested that additional pressure from the administration should be directed at Mexico for acting as a “conduit” for Chinese steel.

“Chinese steel is likely to be a substantial portion of Mexican shipments to the U.S.,” the group found in an April analysis.

The USW said Wednesday it “proudly welcomed President Joe Biden to the union’s International Headquarters as he announced a series of aggressive steps his administration is taking to further ensure U.S. trade policy supports workers and their communities.”

The AFL-CIO, the largest U.S. labor confederation, did not immediately respond to a request for comment.

The tariff proposal comes after the announced sale of top American steel-producing company U.S. Steel to Japanese competitor Nippon Steel in December, a merger that set off a political firestorm and galvanized opposition from organized labor.

The tariff may aim to assuage some of that resistance, which saw labor union USW blasting shareholder approval of the sale last week.

“We are not surprised by stockholders electing to cash in and sell out the iconic American company’s employees and retirees,” union leaders Mike Millsap and David McCall wrote in a Friday letter to union members.

“Lawmakers from both parties, government agencies, regulators, and the President of the United States have all raised concerns and promised a thorough investigation of the deal,” they wrote.

Democratic lawmakers immediately applauded the amped tariff and administration’s increased scrutiny of Chinese economic policies, with statements of approval coming from Senate leadership and the Democratic side of the Ways and Means Committee.

Top Ways and Means Democrat Rep. Richard Neal (Mass.) said the USTR investigation is “even more evidence of the strength of labor in moving these critical conversations forward.”

The Chinese Ministry of Foreign Affairs did not immediately respond via email to questions about the tariff proposal.

Despite the focus on domestic politics spotlighted by the new Chinese tariff plan, analysts say the move could exacerbate an already growing rift between the two economic giants.

“Presidential election years tend to stir things up in the U.S.-China relationship, even when the two countries are on relatively good terms with each other. 2024 is not such a time,” Allen Carlson, an associate professor of government at Cornell University, wrote in a commentary.

“In the past Beijing has tended to take shifts in U.S. policy during election years with a grain of salt. But this year may be different as Xi’s China is in a stronger position than it was before,” he wrote, referring to Chinese President Xi Jinping.

Cornell economics professor Nancy Chau cautioned that the tariff could adversely impact the transition to more environmentally friendly technologies, a massive shift in the global economy that is now underway.

As part of the green transition, U.S. policymakers have been exercising more top-down control over the economy than in recent decades, increasingly taking issue with Chinese economic competition in the process.

“By the time President Biden came into office, we had to contend with the reality that a large non-market economy had been integrated into the international economic order in a way that posed considerable challenges,” national security adviser Jake Sullivan said in a speech last April.