By Kenneth Rapoza, CPA Industry Analyst
Trade lawyers from Hogan Lovell and Bracewell believe the Biden Administration will keep China tariffs for now, but likely reduce them elsewhere. Subsidies and other measures may take their place to protect industries and sectors deemed strategic, or important to national security.
Washington DC trade lawyers from Hogan Lovells and Bracewell are convinced that President Elect Joe Biden will indeed keep tariffs, especially those on China goods, and including (for now) the Section 232 tariffs on steel and aluminum coming in from Europe.
There were a number of takeaways from Monday’s webinar with panelists from both law firms, led by Paul Nathanson of Bracewell, discussing trade policy in the Biden years. But two may be of interest to CPA members. First, Biden is not going to go easy on China, even if he wanted to. There is very little appetite for it in both Congress and in the State and Defense departments.
Second, the Section 232 tariffs on steel are likely to be used as leverage to come to an agreement on the Airbus-Boeing dispute, as well as further engagement with China.
President Trump made trade a top line issue in 2016. Part of the disdain for Trump within the Beltway and in Corporate America was how willing he was to tear up the book on trade. Companies (and their lawyers, and investors) complained that they didn’t know what was coming next in terms of tariffs and exemptions. Many pushed back, vociferously.
The “return to trade normalcy” – one where trade is a matter between corporate lobbyists and Congress – has been so beaten down by four years of the Trump Administration that Biden had to develop his own home-centric trade policy to put himself on the same page on global trade and its impact on manufacturing.
“Covid took away all the oxygen on trade this election year, but both Trump and Biden were running towards the same issue – protect markets, and protect manufacturing,” said Josh Zive, a partner at Bracewell.
Hogan Lovells attorney Kelly Ann Shaw said that observers need to pay less attention to how Biden feels about China and more about what the American population thinks about China.
“We are in a very different place on China than we were four years ago. China now is more about leveling the playing field and has even morphed into human rights and national security and forced labor matters,” she said. “The number of issues is just growing. That’s why I think the China tariffs are here to stay for the short and medium term, if not the long term. We have to decide whether we are comfortable doing business with a totalitarian regime.”
One of the better parts of the webinar actually came in the opener when legislative aide Jonathan Tsentas, who has worked for Senator Robert Menendez (D-NJ), gave listeners some insider intel on how the Hill is thinking about trade under Biden’s ‘Build Back Better’ pledge.
“We should start by thinking about how trade policy fits into our domestic policy first and everything else will flow from that,” he said, citing Senator Chuck Schumer’s America Leads Act, which focuses on domestic investments to make the US more competitive with China.
On China tariffs, he essentially said Biden will be Trump-lite. “I think you are going to see a similar process whereas Biden does not rework the Trump program in a major way…and gently encourage companies in certain sectors to move production out of China. You also have to let companies know what tariff exclusions look like and give those who are getting Section 301 tariffs a better time line to know how long they can benefit from it.”
On the Generalized System of Preferences, or GSP: “You’re going to see a lot of Democrats and Republicans ask how these programs fit into our trade agenda, and does it really help American manufacturing. You’re beginning to see a closer look at the GSP program in a way that supports the domestic agenda,” he said.
Zive said something we like here at CPA; he thinks the next couple years will be good for trade advocates.
“Advocates will play a bigger role over the next few years as Congress plays more of a gatekeeping role,” Zive said. “We are not seeing Congress lay out plans or Biden saying these are my five objectives with China… so that leaves them with maximum flexibility in ways that allows them to balance specific facts as they learn them,” he said. “Facts matter a lot on trade policy because they are detailed and they are hard. From China to the rest of them, we will still see outcomes that are uncertain, but the outcomes might be more stable, longer lasting.”
Trade lawyers for both firms said that they believed a Biden Administration would use other measures to help manufacturing and strategic growth sectors, rather than introducting new tariff actions.