A day after President Joe Biden indicated he may consider lifting some of the tariffs former President Donald Trump imposed on imports from China, the White House’s top trade adviser clarified that any adjustment tariffs should be “strategic”.
“On tariffs, our approach, as with everything in this relationship, must be strategic,” said U.S. Trade Representative Katherine Tai. Bloomberg Tuesday in an interview with Shery Ahn and Haidi Lun. “All options are on the table as to how we meet our short-term economic needs, but we must be mindful of the medium- and long-term needs of the United States to realign this economic and trade relationship.”
It’s a fundamentally unproductive way to frame a debate over whether Biden should lift these tariffs — which are really just taxes paid by importers — and lend credence to economic nationalists’ misguided notion of to use trade policy as a tool of foreign policy. Already, some on the right have signaled that Biden’s wavering stance on tariffs is something of a strategic surrender. “Biden should not flirt with a policy that rewards China,” said the Washington Examinerwrote the editorial board on Tuesday.
This is what happens when trade policy mixes with geopolitics. In a vacuum, most conservatives would favor a policy that cuts taxes for American consumers and businesses, especially in times of runaway inflation. Now that these tariffs also have the symbolic weight of being hard on chinahowever, economic reality is swept out the window.
But, OK, let’s go with this argument, as absurd as it is. Tariffs should be applied strategically. These are economic weapons that we deploy to “punish”, such as the Examiner editorial board said so, our geopolitical adversaries.
So why are we still applying tariffs to South Korean steel?
South Korea is not a geopolitical adversary of the United States, quite the contrary, and tariffs on South Korean steel clearly serve no strategic purpose.
These 25% tariffs were imposed by the Trump administration in 2018 as part of an overall tariff increase on almost all imported steel and aluminum. Since then, however, the Trump and Biden administrations have eased or eliminated those tariffs on steel imports from Japan, the European Union and elsewhere.
South Korean steel tariffs were scrapped in 2018, but only because South Korea agreed to artificially suppress its steel exports to the United States. This absolute quota (meaning that South Korean producers are prohibited by their own government from exporting excess steel to the United States, even if they have found importers willing to pay the tariffs) remains within the books.
Before the imposition of Trump’s tariffs, South Korea was one of the main American sources of steel. In 2017, we imported 3.4 million metric tons of steel from South Korea. Only Canada and Brazil provided more. China, by the way, provided only about a fifth.
Under quotas imposed in 2018, South Korea is only allowed to send the United States 2.68 million metric tons a year, about 70% of what it exported in 2017.
It should be obvious by now that the Trump administration’s experiment with steel tariffs (and quotas) as a way to support domestic manufacturing has been a failure. US steel-consuming companies are paying higher prices, but these economic gains have not translated into a meaningful victory for steelworkers. Above all, a project $1.3 billion expansion of a US Steel plant in Pennsylvania – the announcement of which was touted by Trump in 2019 as proof that “tariffs work” – has been cancelled. After a slight increase in the first year of Trump’s tariffs, overall output by U.S. steelmakers has declined.
Meanwhile, inflation is ravaging the US economy. Importing more steel at lower prices from places like South Korea wouldn’t solve the main drivers of inflation, but it would alleviate some of the pain.
Lifting tariffs and quotas on South Korean steel would provide “much needed relief to workers in downstream industries who continue to face historically high steel prices,” six Democratic members of Congress wrote to Biden. and Tai earlier this month, ahead of the president’s decision. trip to Asia. Lawmakers noted that the U.S. Trade Representative’s policy platform officially refers to South Korea as a “valuable trading partner and close ally.”
During his visit to South Korea this week, Biden stressed the importance of economic ties between the two countries, promising that greater cooperation “will help strengthen our supply chains, protect them against shocks and give our economies a competitive advantage”.
So… what strategic objective do the tariffs and quotas on South Korean steel achieve?
Biden is maintaining higher taxes, pursuing a policy that adds to inflation and seemingly trying to punish a close ally, all without offering clear benefits to domestic producers. It’s time to send those rates to the slag heap.
