Biden eyes Western front to China in EU tariff agreement

President Biden has ramped up efforts to repair the U.S.-European Union trade relationship and form a united Western front against China with a recent deal to ease Trump-era steel and aluminum tariffs.

Under an agreement struck this weekend, the U.S. will lift tariffs first imposed by former President Trump in 2018 on European steel and aluminum imports beneath a certain quota.

The EU, in exchange, will forgo planned 50 percent tariffs on bourbon, denim jeans and motorcycles that U.S. officials feared would cause layoffs and further shortages ahead of the December holidays.

The U.S. and EU also agreed to start longer-term talks focused on curbing imports of “dirty” steel produced through high-emission methods — a direct shot at China and its zealous overproduction of steel to undercut U.S. and European prices.

“We will directly engage with China on its industrial policies, but we will also take all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition,” U.S. Trade Representative Katherine Tai said in a Tuesday speech at the American Iron and Steel Institute and Steel Manufacturers Association summit in Washington, D.C.

“We need to be prepared to deploy all tools and explore the development of new ones, including through collaboration with other economies and countries.”

The deal was not a complete departure from Trump’s focus on using trade barriers to extract better terms for economically vulnerable and politically crucial U.S. industries. Both Trump and Biden have stressed the importance of reorienting U.S. trade policy around blue-collar workers instead of lower prices and better corporate margins in general, an idea historically more popular among Democrats.

“It’s still a very worker-centric trade policy. This is not an entire elimination of tariffs. This is a quota, and there is a huge focus on countering China,” said Marie Kasperek, director of the Institute of International Economic Law at Georgetown Law School.

But Biden’s intense focus on repairing breaches with Europe is a massive shift in strategy in and of itself, she continued.

“It shows the U.S.’s renewed willingness to take leadership and setting standards globally on a multilateral level rather than walking it alone, imposing threats and uncertainty as it was in the previous administration,” Kasperek said.

While both Biden and Trump were more skeptical of free trade than most of their recent predecessors, their similarities on trade policy largely end at the shores of the Atlantic.

Trump drew no meaningful distinctions between friends and adversaries when imposing steel and aluminum tariffs in 2018. He penalized steadfast partners like the EU and Canada beside China under a law meant to protect national security. 

The former president also equated long-standing American disputes with the EU over agricultural trade with China’s theft of U.S. trade secrets, price manipulation, forced technology transfers and predatory lending to emerging market nations.

“The issues on trade with Europe are at the margins, where with China they’re really fundamental,” said Edward Alden, a senior fellow at the Council on Foreign Relations.

“China has a far more expansive network of import restrictions. China is far more restrictive in terms of investment. China is blocked off in terms of most aspects of digital trade,” he explained, adding that disputes with Europe are “quite narrow and they affect certain sectors.”

Trump also acted primarily through bilateral negotiations with trade partners, spurning efforts to coordinate policy internationally. In contrast, Biden has emphasized areas of broad agreement between the U.S. and EU, particularly on corporate tax reform and climate issues, while attempting to repair damage left by Trump.

The agreement on steel and aluminum tariffs came as Biden and administration officials were deployed around Europe to sell an agreement on a global minimum corporate tax and for a United Nations climate summit in Glasgow, Scotland. The pact also followed an agreement between the U.S. and EU to suspend a 2004 dispute over aircraft production subsidies.

“We’ve seen this repeatedly this year, in transatlantic relations, to work out some of these kinks in the relationship,” said Owen Tedford, a research analyst at Beacon Policy Advisors.

The goal, he said, is “for better cooperation when trying to force China to be a responsible actor when it comes to climate and steel overproduction, but also ease cooperation between the U.S. and the EU on things like tech standards trying to avoid a semiconductor race to the bottom.”

Biden administration officials have stressed the importance of uniting with Europe to curb China’s economic influence instead of relying on unilateral threats and tariffs with limited reach beyond the U.S. 

Kasperek said that a successful agreement on climate-related steel standards between the U.S. and EU could be transformative in curbing China’s overproduction if expanded to other powerful nations, while also boosting domestic producers. She added that the deal could also bring an added domestic boost of cheaper prices on steel and limited European penalties on U.S. exports while Biden pursues an infrastructure building spree amid high inflation.

The Biden administration is also bracing for deeper tensions with China and potential new rounds of tariffs, making unity with Europe crucial to prevent Beijing from pressuring individual nations into harmful agreements.

“I don’t think this administration believes there’s anything particularly the United States can do that’s going to change China,” Alden said. 

Even so, Alden said unity between the U.S. and Europe on investment and export controls “will make it harder for China to play divide and conquer,” particularly after an EU-China investment agreement fell apart amid Beijing’s takeover of Hong Kong.

“The Chinese initiative with the Europeans has fallen apart and the U.S. and Europe are knocking off a series of new agreements, so it’s hard to see what the Chinese do,” he said. 

“The Chinese are isolating themselves in a variety of ways by their actions.”