January 18, 2021

Volume XI, Number 18

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Four Ways the Biden Presidency Could Impact Imports, Tariffs, and Trade Agreements

One point all can likely agree on in these divisive times is that the Trump Administration’s international trade policy has been aggressive. Over the past four years, we have been clinging to our seats on the rollercoaster ride with some pretty challenging peaks and valleys:

  • Section 301 tariffs on over $370 billion worth of imports from China, under which over $68 billion in total duties have been assessed;[1]

  • Replacement of NAFTA with the United States-Mexico-Canada Agreement (USMCA);

  • Withdrawal from the Trans Pacific Partnership (TPP); and

  • Imposition of Section 232 steel and aluminum tariffs, under which over $9 billion in total duties have been assessed.[2]

While the value of total U.S. imports has remained fairly steady from 2017 through 2019, the imposition of the Section 301 tariffs is largely responsible for more than doubling the total duty amount collected by U.S. Customs and Border Protection (CBP) in 2019 ($71.9 billion collected) compared to 2017 ($34.6 billion collected).

Against that backdrop, will the Biden presidency portend more thrills, or do we expect a smoother ride? Here are our initial assessments of some of the twists and turns the new president may take:

  1. Reframing the trade war with China. The Section 301 tariffs have boosted federal revenues. But at whose expense? Most economic analyses call into question the overall economic value of the tariffs. First, U.S. companies have largely footed the bill (according to one report, $46 billion of the tariffs have been paid by U.S. importers). And on the other side of the equation, studies indicate that Chinese exporters have not lowered their prices in response to the Section 301 tariffs. Add it all up, and U.S. consumers are bearing the brunt the trade war.

While President-elect Biden has not addressed whether he would discontinue the Section 301 tariffs, we expect that his Administration will reframe the trade war with China. Biden advisors reportedly have criticized the unilateral trade war, which indicates to us that the will likely seek support from allies and trading partners to deal with China, which may reduce the need for punitive tariffs.

Relatedly, the President-Elect has proposed a $300 Billion “Innovate in America” fund to support R&D in the United States, in addition to the $400 Billion “Buy American” fund. However, actual allocation of such funds will require Congressional support. In the meantime, we continue to wait on outcome of cases pending in the U.S. Court of International Trade challenging the legality of the Section 301 tariffs on so-called List 3 and List 4 goods.

  1. Reversal of the unilateral approach. We expect that, under a Biden Administration, the United States will hop off its unicycle in favor of a more all-wheel-drive mode of foreign policy, including trade agreements. To that end, we expect more emphasis on diplomacy, multilateral institutions, and rebuilding our relationships with our allies in Europe, North America, and Asia.

  2. Renewing interest in the WTO. The Trump Administration blocked nominees to the WTO Appellate Body, which renders it unable to form the quorum required to hear and resolve international trade disputes. We expect the Biden Administration to take a somewhat more favorable approach to the WTO. He may be under pressure from the political left and right in the United States, which are aligned in their skepticism of the dispute system. But, over time, there may be room to slowly rebuild U.S. participation in the WTO.

  3. Exceptions to the Section 232 tariffs on steel and aluminum. Separate from the China tariffs, the Trump Administration’s tariffs on steel and aluminum tariffs under Section 232 have resulted in the assessment of over $9 billion in duties. Under a more multilateral approach to trade, we expect the Biden Administration to consider make certain exceptions to the Section 232 tariffs for imports from important allies (such as the EU, Japan, and Canada). A Biden advisor has been quoted as saying an end is needed for the artificial trade war with the EU, and we see exceptions from the Section 232 tariffs as a logical next step.

The Biden administration will have some opportunities to slow down the thrill ride that has been U.S. trade policy over the past four years. There are limits to what the President-elect can achieve. Political realities at home and globally will continue to restrict U.S. policy options. And the new Administration will face a sluggish start, since the first step is to start re-staffing many of the key federal agencies, including CBP. But we expect a net increase in predictability and transparency in international trade policy under Mr. Biden. This may allow companies to regain some strategic planning flexibility regarding sourcing, production, and distribution.


FOOTNOTES

[1] See CBP Trade Statistics, available at https://www.cbp.gov/newsroom/stats/trade (last visited November 10, 2020).

[2] See Footnote 1.

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Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume X, Number 321
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About this Author

Lisa C. Mays, Sheppard Mullin, Government Investigations Attorney, International Trade Lawyer
Associate

Lisa Mays is an associate in the Government Contracts, Investigations & International Trade Practice Group in the firm's Washington D.C. office.

  • J.D., The George Washington University Law School, 2015

  • B.A., University of Southern California, 2010

202.747.2307
J. Scott Maberry, Lawyer, Sheppard Mullin, International Trade, Trade Practice
Partner

Mr. Maberry is an International Trade partner in the Government Contracts, Investigations & International Trade Practice Group in the firm's Washington, D.C. office.

Areas of Practice

Mr. Maberry's expertise includes counseling and litigation in export controls, the Foreign Corrupt Practices Act (FCPA), anti-terrorism, economic sanctions, anti-boycott controls, and Customs.  He also represents clients in negotiations and dispute resolution under the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and other multilateral and...

202-469-4975
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