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Ahead of the U.S. presidential election in November, incumbent President Joe Biden and former President Donald Trump are using protectionist arguments to compete with each other. It is impossible not to be concerned about this inward-looking debate in the world’s largest economy.
Speaking at the headquarters of the United Steelworkers union in Pennsylvania, Biden said he asked the U.S. Trade Representative to consider tripling the current 7.5% tariff rate on steel and aluminum imports from China.
The reason is that Chinese steelmakers are getting large subsidies from the Chinese government and are exporting their products at unfairly low prices. Pennsylvania is a battleground state in the presidential race and has a large number of steel-related workers. Biden probably aims to win the votes of these workers in the presidential election.
The United States has a law, Section 301 of the U.S. Trade Act, which provides that Washington can unilaterally raise tariffs for the purpose of correcting unfair trade practices of its trade partner countries. The tariff increase is to be implemented based on this provision.
The Trump administration also used this law to raise tariffs on many Chinese products, including home appliances and steel, intensifying trade friction between the United States and China.
Trump is reportedly considering imposing a 60% tariff on Chinese imports if he wins the next presidential election. It is also reported that he intends to impose a 10% tariff, in principle, on all imports, not just those from China.
Trade disputes should be resolved based on the rules of the World Trade Organization. If each country were to unilaterally raise tariffs, trade would be stalled, and it could deliver a blow to the global economy.
In the U.S. steel industry, there is a debate over the planned acquisition of United States Steel Corp. by Nippon Steel Corp.
Biden is cautious about the acquisition, saying that U.S. Steel should “remain an American steel company that is domestically owned and operated.” Trump is proclaiming his strong opposition, saying, “I would block it [the deal] instantaneously.”
U.S. Steel was once the world’s largest steelmaker, but its competitiveness has declined, and it had dropped to 27th place in terms of global crude steel production as of 2022.
Using Nippon Steel’s cutting-edge technology to strengthen its production system would surely be a great advantage for U.S. Steel. It is hoped that a decision will be made from the standpoint of economic rationality without making the planned deal a political issue.
On the other hand, the Chinese side should also correct its unfair trade practices. It is a problem if Chinese steelmakers use government subsidies to overproduce steel products in order to expand exports of inexpensive products. In the area of electric vehicles, Europe and other regions are becoming increasingly wary of cheap Chinese products.
China needs to shift from an export-dependent economy to a domestic demand-led economy and curb trade friction with other countries.
