A flurry of new manufacturing-related executive orders have flooded the White House agenda since Joe Biden took office in January of this year, from strengthening the critical supply chain to an expanded Buy American Plan and a massive new infrastructure bill. One major item still on the table are the Trump-era tariffs that set off a trade war between the U.S. and China and impacted numerous industries, both positively and negatively. The Biden Administration has yet to address the question of tariffs, leaving manufacturers wondering: what’s next?
Trump-Era Tariffs and Phase One Deal: Where Did We Leave Off?
The first round of tariffs enacted by the United States Trade Representative were rolled out in July of 2018, and the USTR finalized tariffs on $200 billion of Chinese imports to the U.S. in September 2018. The finalized list represents roughly 50% of all Chinese goods imported to the U.S. China immediately retaliated with its own set of tariffed goods, thus setting off a volley of tariffs that consumed the two trading partners until a deal of sorts was reached in January of 2020. In this “Phase One” trade deal, China agreed to purchase an additional $200 billion worth of U.S.-made goods and services during a two-year period, 2020-2021.
Yet, China does not appear to have met the purchasing targets for the Phase One commitment, purchasing just $63 billion for all of 2020, while for 2021, its imports of American goods hit $56 billion in May—short of the $82 billion year-to-date target.
What Biden Has Said About Tariffs
As noted, the Biden Administration has remained mum on tariffs for the most part, while the United States Trade Representative site remains mysteriously absent of any updates on Section 232.
In December of 2020, then incoming president Joe Biden said he had no plans to immediately remove Section 232 tariffs, but rather sought to first fully review the “Phase One” agreement. “I’m not going to make any immediate moves, and the same applies to the tariffs. I’m not going to prejudice my options,” Biden told the New York Times in December.
This appears to be an about-face from the anti-tariff stance Biden took during his election campaign, pushing instead for the idea of an international coalition to tackle trade rule violations and calling tariffs “Going after China in the wrong way.”
Since then, not only has the Biden Administration retained section 232 tariffs, but has also expanded some additional protectionist policies with its Buy American Plan, an expanded version of the Trump-era directive which seeks to further increase the number of American-made products and components purchased by federal agencies.
Global Response
The International Monetary Fund came out in criticism of both the Buy American Plan and ongoing Section 232 tariffs, stating that the Buy America provisions should be “tightly circumscribed and made consistent with U.S. international obligations,” and recommending that the Biden Administration should move forward on eliminating the Trump-era tariffs.
Tariffs: Current Impact on Manufacturers
For some industries, eliminating tariffs would represent a step backwards. U.S. steel companies, for instance are largely in favor of keeping the Trump tariffs, as many have seen increased domestic demand for their products. The U.S. steel industry and United Steelworkers Union reported that the tariffs had led to $15.7 billion worth of new capacity investments. Said the Steel Manufacturers Association, “Eliminating the steel tariffs now would undermine the viability of our industry." The Association warns of an overcapacity of steel in the global market and warned that the lifting of tariffs could lead to a “devasting import surge,” similar to what the industry had experienced prior to the tariffs.
On the other side of the debate, manufacturers that consume steel are lobbying for the elimination of the Trump-era tariffs, as domestic supply shortages brought on by the pandemic have caused prices to surge, making it more difficult and costly to keep up with soaring demand.
The most recent report from the Institute for Supply Management found the prices paid index for manufacturers has hit its highest level since July of 1979. Hot-rolled, cold-rolled and other types of steel were listed as commodities with the highest increase in price.
Further, some items subject to the Section 232 tariffs such as semiconductors and electrical components have exacerbated pandemic-related supply shortages, sparking layoffs and shutdowns in industries that rely on semiconductors and electronics products such as the auto industry.
Further reading: Steel, Semiconductors & More: The Impact of Supply Shortages on U.S. Manufacturers
That said, the Biden Administration’s recent directive to invest billions in domestic semiconductor manufacturing as a part of its mission to support critical supply chains should have a mitigative effect. In the meantime, however, U.S. manufacturers and consumers alike can continue to expect shortages and higher prices in the short term.
EU Trade Truce
In other tariff news, the Biden Administration has succeeded in forming a trade truce with the European Union, following a 17-year feud between Boeing and Airbus over aircraft subsidies. That particular dispute spurred a new round of tariffs from the Trump Administration in October 2019, impacting a wide range of products. Since October 2019, the two trading partners have been slapping tariffs on $3.3 billion worth of goods, ranging from E.U.-produced whiskey, wine, cashmere, and cheese to U.S.-produced cotton, potatoes, and tractors. The latest move tariffs on these products have been suspended for the next five years, helping to improve transatlantic trade relations.
Looking for U.S.-made products, parts, supplies and services? Search, source, and quote for free on IndustryNet, the industrial marketplace.
Related posts:
What U.S. Manufacturers Were Saying About Tariffs in 1930
Trump issues new round of import tariffs on Chinese goods. Here is the full list.
What manufacturers need to know about Trump's steel and aluminum tariffs
