By: Michael Best Strategies
April 13, 2021
The course of relations between the U.S. and China continues to be a top foreign policy priority under the new Biden administration. President Biden recently singled out China as “the greatest geopolitical test” of this century. The path forward on China will now be determined by a different circle of leaders and influencers in the Biden administration than the past four years. We will see them take a different approach to addressing much of what are the same threats and challenges with China.
Below is an overview on the leadership in the Biden administration influencing our policy on China, the threats and challenges the U.S. seeks to address, and what businesses can expect from the Biden administration and Congress as they take action on China.
Key Biden Administration Players to Watch on China
- Katherine Tai, U.S. Trade Representative: President Biden’s lead on China trade policy, bringing a long career in trade policy as a veteran of Capitol Hill and USTR. She also speaks Mandarin.
- Antony Blinken, Secretary of State: Biden’s chief diplomat and the overseer of China policy. He is veteran of the Clinton and Obama administrations.
- Jake Sullivan, National Security Advisor: A trusted veteran of the Obama administration who has thus far been a key interlocutor on China policy, especially as it pertains to national security.
- Gina Raimondo, Secretary of Commerce: Raimondo’s agency plays a key role in determining and implementing steel and aluminum tariffs and restrictions on Chinese technology.
- Key Vacancies: U.S. Ambassador to China; Under Secretary of Commerce for Industry & Security.
- Key Trend to Watch: Whether China hawks will fill deputy roles at USTR, the Department of State, and other key agencies.
President Biden’s Challenges with China Are (Mostly) the Same
The threats and challenges with China are numerous and growing.
- Unfair Trade Practices: Intellectual property and trade secret theft; forced technology transfer; currency manipulation; steel and aluminum overproduction; subsidies and state-owned firms.
- Digital Currency: Issuance of digital yuan threatens U.S. dollar dominance.
- Human Rights Concerns: Hong Kong democracy; Xinjiang genocide; Tibet; forced labor.
- Technology Competition: Hacking of companies and government entities; 5G deployment; rare earth mineral production.
- Geopolitical Risks: Taiwan’s independence; control of the South China Sea; North Korea’s nuclear program; border dispute with India.
- Global Threats: COVID-19 pandemic, climate change, influence over international institutions.
What Businesses Can Expect on U.S.-China Policy
While the details around the Biden administration’s strategy on China have yet to be detailed, we do know the President Biden will take a different approach than President Trump in dealing with China. Because of the escalating and growing conflicts with China, the Biden administration and Congress will have to take concrete actions sooner than later on issues of Section 301 and Section 232 tariffs on Chinese imports, reshoring critical supply chains from China to the U.S., continued restrictions on Chinese foreign investment, and cyber and currency threats. U.S. companies can expect the following as the Biden administration and Congress devises their strategy and takes action:
- Departure from Trump: President Biden and his officials have purposefully interacted with allies before Chinese counterparts. Biden will adopt a more multilateral approach to China. Abandoning policymaking by tweet will be a welcome change, but a deliberative process with U.S. allies takes longer. Biden will be more intentional to seek input from Congress and to work with allies, including the EU, UK, Japan, India, and Australia, on China issues. This approach will also impact our allies’ future negotiations with China.
- Tough Stance Thus Far: President Biden has continued many of President Trump’s tough but politically popular policies, including the Xinjiang genocide designation, Hong Kong trade, blocking imports made with forced labor, and tech import and export restrictions. The Biden administration’s level of enforcement will inform how much substance is behind the public actions. Yet Biden also needs to be careful because he needs China’s cooperation on any climate initiatives.
- Tariffs Will Stay (For Now): The business community can expect the Section 301 on Chinese imports and 232 tariffs on steel and aluminum will remain for now. USTR Ambassador Tai recently referenced the Section 301 tariffs as being leverage in negotiations with China. Biden needs concessions from China before lifting the tariffs. Given the tariffs will remain in place, the federal government’s exclusion processes that provide U.S. companies avenues for relief from the tariffs become even more important. The business community continues to press USTR to reopen the exclusion processes. In addition to the Section 301 and 232 tariffs, the U.S. may implement carbon border adjustment tariffs that could disproportionately impact China.
- Congress Will Push President Biden on China: Democrats and Republicans want strong enforcement and an aggressive approach on China, especially on human rights. Lifting tariffs will require a good deal from China, though “good” will be in the eye of the beholder. Congress is open to legislation giving Biden more tools to go after China and incentivizing resilient supply chains and reshoring.
Additionally, Senate Majority Leader Schumer recently announced the Senate will be fast-tracking legislation to address the U.S. competitiveness with China particularly through technological innovation and reshoring supply chains. Schumer, D-N.Y., Sen. Todd Young, R-Ind., and Congressmen Ro Khanna D-Calif. and Mike Gallagher, R-Wis., have spearheaded the bicameral and bipartisan Endless Frontiers Act that supports increased investments in the discovery, creation, and commercialization of technology fields. It does so through the creation of a new agency directorate focused on technology within the National Science Foundation that would receive $100 billion over five years to lead investment and research in artificial intelligence and machine learning, high performance computing, robotics, automation, advanced manufacturing, and amongst other technologies. The legislation will evolve as proposals move through congressional committees. Other bipartisan legislation advancing through Congress supports critical semiconductor manufacturing in the U.S.
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About Michael Best Strategies’ Trade Team: Michael Best Strategies (MBS) has a dedicated team of trade experts who work with businesses to ensure they effectively navigate complex regulatory and legislative trade issues. Their counsel and expertise in the regulatory and political processes has resulted in our clients receiving over $250 million of dollars in relief from the Section 301 and 232 tariffs. The success MBS shares with its clients has resulted in saving thousands of American jobs, opened opportunities for breaking ground on new U.S. manufacturing facilities, and helped install more efficient regulatory processes for stakeholders impacted by U.S. trade actions. For more information, please contact Sarah Helton at [email protected] or at 202-747-9575.