In an interview with Bloomberg last week, Sec. Trade Gina RaimondoGina Raimondo’s 12:30 p.m. report from The Hill: Biden increases vaccine needs for federal workers said US tariffs on steel and aluminum have done the trick. People returned to work and producers increased their production. What about the threat that Europe will step up its retaliation by the end of the year if the Biden administration does not end the tariffs? Raimondo said the United States was ready to negotiate, but “just saying ‘no tariffs’ is not the solution.” In fact, it is.
Raimondo’s declaration is the subject of negotiations. After all, the United States is not going to start its talks with the European Union (EU) by disarming unilaterally. His response is worrying, however, as it suggests that the Biden administration is underestimating the issue. It’s not just that tariffs do more harm than good to the economy. Raimondo is wrong about this. That’s it those the tariffs are much more expensive than most precisely because they relate to national security.
If Trump had simply used a “safeguard” instead of Section 232, these steel and aluminum tariffs would never have made headlines. Of course, the EU and other countries would have sued the United States at the World Trade Organization (WTO), but it would also have inspired discussions on reducing global excess capacity, which is probably all that that the United States will derive from these tariffs.
But Trump did not use a backup. He trotted on Section 232, offered an ironic definition of national security, and compromised US exports by showing other countries how to get around their WTO tariff obligations. Tariffs are not leverage, they are a liability of epic proportions.
No one thought Biden would end the tariffs overnight. But make no mistake, there is no time to waste to get out of this mess. And “no tariffs” is exactly the right place to start, that is, to end the section 232 steel and aluminum tariffs.
A few security deposits could help provide political cover for what would otherwise be termed unilateral disarmament. In this sense, and in this sense only, Raimondo is right: “No tariffs” should not mean no trade remedies. But this is politics, not economics.
By claiming that the tariffs on steel and aluminum are “very efficient”, Raimondo talks a lot about China. But it is Brussels, not Beijing, that threatens more retaliation if the United States does not end these tariffs. In addition, section 232 is not about competitiveness. If the United States’ trading partners (our allies) do not follow the steel and aluminum rules, the United States can level the playing field with a safeguard and companies can apply for anti-dumping duties and ( or) compensators.
Why didn’t Trump do this? He probably viewed Section 232 as cheap protectionism. Unlike a safeguard, it does not oblige the United States to compensate affected countries. But it was a mistake. Section 232 is going to be costly in the United States for years to come.
In the short term, the main victim will be the Trade Promotion Authority (TPA). Trump’s use of Section 232 has bothered many members of Congress concerned about delegation to the executive. TPA is vulnerable. It gives the president the ability to negotiate trade deals and subject them to a strict congressional vote up or down on a set clock. If Congress imposes more checks on the TPA, it will undermine the credibility of the United States abroad. The TPA isn’t magic, but after four years of Trump’s trade chaos, the TPA is the best way to signal other countries that the United States is open for business.
In the long run, pursuing protectionism under the banner of national security will erode confidence in the rules-based global economy. Trump didn’t write Section 232, but he made it almost routine. From automobiles to titanium sponges to mobile cranes, each investigation was less provocative than the last. It will come back to haunt the United States’ efforts to secure critical supply chains with allies who have been caught up in these Section 232 investigations.
Even more worrying, the logic is catching on with other countries. At a WTO meeting on cybersecurity, for example, China invoked national security to defend its measures on imported goods and services that frustrate the US, EU, Australia, Canada. and Japan. Ironically, China says US tariffs on steel and aluminum, and Trump’s threat to slap them on cars, is proof that things are out of control, and wants the national security exception be a priority in the reform of the WTO. Funny enough, that was the concern of the United States when it took the lead in drafting the original text of the exception after WWII.
All this to say that it is time to end US tariffs on steel and aluminum.
Marc L. Busch is Karl F. Landegger Professor of International Trade Diplomacy at the Walsh School of Foreign Service at Georgetown University. Follow him on Twitter @marclbusch.