Against the grain of decades of U.S. government policy, President Joe Biden appears to be on a historically unusual course with domestic and international trade. Since the Reagan era of the 1980s, the leaders of both of America’s major political parties had embraced a kind of global liberalization based on deregulation, privatization, and a rejection of any idea that governments should actively shape markets at all. That was until Biden’s predecessor Donald Trump, referring to himself as “Tariff Man,” started dropping import duties on a whole array of product categories. Now, Biden hasn’t just left these protections mostly in place; he’s issuing more than US$200 billion in subsidies, grants, and loans to boost domestic manufacturing—including of semiconductors, electric vehicles, and batteries.
Internationally, his administration is offering billions more to lure foreign investment to the U.S., as well as to direct supply chains away from China and toward U.S. allies. It’s also enacting a ban on exports of cutting-edge semiconductors to the People’s Republic. And it’s done all of this while abandoning most of America’s standing efforts to push for trade liberalization worldwide. “This vision is a fundamental break from the economic theory that’s failed America’s middle class for decades now,” Biden said in a recent speech in Chicago. What is all this?
Katheryn Russ is the chair of the economics department at the University of California, Davis, and was the senior economist for international trade and finance for the White House Council of Economic Advisors in 2015-16. Russ sees the Biden administration both as building on Trump’s trade policies and as developing new ones—designed to combine its economic, climate, and geopolitical goals.
One key shift from Trump to Biden, Russ says, is a new way of using trade policy to advance national security. For example, security imperatives are behind the White House’s recent efforts to reduce America’s reliance on supply chains originating in China—as well as to deny Beijing and its military access to the world’s most advanced semiconductor chips. The new U.S. trade model, Russ says, is also a response to growing income inequality and the damage the Biden administration sees the free-trade regime as having done to local communities, as entire American industries were wiped out by the globalization of production. Still, Russ says, it’s an open question whether workers and the middle class or the wealthy will ultimately benefit more from these new policies—and so, what political gains they might end up meaning for Biden and his party …
Michael Bluhm: Just how much of a change do you see Joe Biden’s approach to global trade representing?
Katheryn Russ: It’s important to understand the extent to which a lot of the Biden administration’s approach is continuous with a shift that started seven years ago during the Trump administration. Since then, there’s been a historically unusual willingness, in the White House and throughout the U.S. government, to use subsidies—even when they may be in violation of World Trade Organization rules. The U.S. is now using tariffs much more aggressively than it used to, including as a tool for global strategy.
