It’s often said that imitation is the highest form of flattery. That’s why one of the most curious aspects of President Biden’s presidency has been his emulation of his predecessor’s trade policy.
Since the start of his tenure, Biden has done his utmost to mimic Trump’s transactional approach to trade. Americans have paid a record amount on import tariffs. Biden’s “Indo-Pacific Economic Framework” (IPEF) is still missing market access. And United States Trade Representative (USTR) Katherine Tai has stated that she believes, much like Trump administration USTR Robert Lighthizer, that the rollback of protectionist policies has worsened both the plight of workers and national resiliency.
Nothing could be further from the truth, of course. Trade and globalization have afforded the vast majority of American undeniable economic benefits.
Now, one of Biden’s signature pieces of legislation, the Inflation Reduction Act (IRA), is harming America’s trading relationships with allies like South Korea, Canada, France, and Germany. The main points of contention seem to be the statute’s provisions that advantage American electric-vehicle (EV) manufacturers.
While these accusations certainly come across as dubiously hypocritical, especially when considering the European penchant for picking winners, that doesn’t change the fact that the IRA is bad policy. Indeed, industrial policy rarely produces its intended results, but it does unnecessarily debilitate economies. If you want proof of this, look no further than China, where the practice has actually held the nation back economically.
In the case of the CHIPS Act, one can justify the legislation’s incentivization of reshoring semiconductor manufacturing because of the national-security imperatives resulting from our competition with Beijing. But there is no comparable rationale for the IRA’s subsidization of EVs, particularly when we know that the law won’t significantly mitigate the risks associated with climate change. The IRA’s EV subsidies gratuitously harm our trading relationships with our allies in exchange for comparably few tangible benefits.
Biden told us that he would end Trump’s policies and restore ailing relationships with partners harmed by the previous administration’s zero-sum trade and international relations approach. You can add this pledge to the long list of POTUS’ broken promises.