Biden’s Trade Moves Raise Tensions With China and Japan but Draw Cheers at Home
President Biden has intensified efforts to shield American industries from foreign competition in an election year, as he courts blue-collar workers and attempts to avoid being outflanked on trade by his Republican rival, former President Donald J. Trump.
The moves have strained Mr. Biden’s relationships with international allies and rivals alike, drawing charges of protectionism from diplomats and some economists, including top Chinese officials during Treasury Secretary Janet L. Yellen’s recent trip to Beijing.
But the measures have cheered labor unions, environmental groups and other key members of Mr. Biden’s political support base, particularly in the swing states of the industrial Midwest.
Mr. Biden and his administration have recently signaled they are preparing new tariffs and other measures to block cheap electric vehicles and other clean-energy imports from China. Those efforts, combined with new limits on American investment in China, restrictions on exports of advanced technology and subsidies for the U.S. semiconductor industry, fueled major tensions during Ms. Yellen’s visit.
Hours after she concluded a news conference in Beijing, the Biden administration announced that it would provide up to $6.6 billion in grants to Taiwan Semiconductor Manufacturing Company, the leading maker of the most advanced microchips, in an effort to bring some of the most cutting-edge semiconductor technology to the United States. The administration has been doling out billions of dollars to semiconductor companies as it looks to reduce its reliance on China for critical microchips.
The president has also announced opposition to Japanese steel-maker Nippon Steel’s proposed acquisition of the iconic domestic manufacturer U.S. Steel, saying that U.S. Steel should be domestically owned and that he “told our steel workers I have their backs, and I meant it.”
His position is creating an economic rift with a crucial ally and is likely to be a focus of discussion when Japanese Prime Minister Fumio Kishida visits the White House this week for a meeting with the president and a state dinner on Wednesday.
Mr. Biden’s industrial policies, including his subsidies for technologies meant to reduce the fossil fuel emissions driving global warming, continue to rankle some leaders in Europe as well. Some of the moves have drawn internal opposition from Mr. Biden’s economic team and from outside economists who warn they are reducing the incentives for foreign companies to inject much-needed investment in the U.S. economy.
The politics behind Mr. Biden’s strategy appears clear: When it comes to manufacturing, the president wants to leave no doubt that he is as much “America First” as Mr. Trump, if not more.
America’s trading partners “are looking at November and thinking, which is the worse outcome?” said Inu Manak, a fellow for trade policy at the Council on Foreign Relations in Washington, who wrote a scathing critique of Mr. Biden’s trade and industrial policies earlier this year. “And it’s the worse outcome, on the economic side, of not-too-great outcomes.”
Still, the moves appear to have helped Mr. Biden secure a coveted endorsement from the United Steelworkers union ahead of the November election. The union cited Mr. Biden’s infrastructure bill and other economic legislation, including Buy America provisions, in its endorsement, along with a broader declaration that the president “is promoting domestic manufacturing and widespread prosperity, not just in the short term but well into the future.”
Mr. Trump attacked China and promised to revitalize American factories on his way to the White House in 2016. In office, he imposed tariffs on more than $300 billion of Chinese imports and restrictions on some American technology transfers to China. As he attempts a presidential comeback, Mr. Trump is calling for a sweeping new across-the-board tariff and a much greater “decoupling” of the American trade relationship with China.
Mr. Biden has not gone that far, though he has retained many of Mr. Trump’s tariffs and added new limits on the export of certain high-tech American semiconductors to China. In official economic publications, Mr. Biden’s aides take a more nuanced view of trade than Mr. Trump espouses.
“There are well-documented gains from trade and cross-border investment flows,” Mr. Biden’s team wrote in the annual Economic Report of the President, released last month. “The benefits of global integration include lower inflation, a greater variety of goods and services, more innovation, higher productivity, good jobs for American workers in exporting sectors, foreign direct investment in U.S. industries, and a higher likelihood of achieving our climate goals.”
But, the Biden economists went on to warn, “policymakers must continue to pay careful attention to negative effects associated with global integration and some trade policies” — most notably, lost jobs and other damage to American workers.
Ms. Yellen raised such concerns with Chinese officials in recent days. The Biden administration is worried that Beijing is purposely flooding global markets with cheap and heavily subsidized green technologies, like electric vehicles and solar panels.
“We’ve seen this story before,” Ms. Yellen said in a news conference near the end of the trip, noting that Chinese government support a decade ago “led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States. I’ve made clear that President Biden and I will not accept that reality again.”
Chinese officials accused the Biden administration of protectionism. An official readout of Ms. Yellen’s meeting with Premier Li Qiang in Beijing stated “China hopes that the U.S. side will work with the Chinese side to adhere to the basic norms of market economy of fair competition and open cooperation, and refrain from politicizing and national-securitizing economic and trade issues.”
Mr. Biden has also risked antagonizing Japanese officials by declaring last month that it was “vital” that Pittsburgh-based U.S. Steel remain “domestically owned and operated.”
U.S. officials are reviewing the merger on national security and antitrust grounds. It has been encouraged to do so by the steelworkers union, by environmental groups worried about high emissions from the merged companies and by a bipartisan group of senators who predominantly hail from industrial states.
One of those critics, Senator Sherrod Brown, Democrat of Ohio, is facing a tough re-election fight. He wrote Mr. Biden this month to request an investigation of Nippon’s ties to China’s steel industry. “This deal is bad for American workers and bad for our economic and national security,” Mr. Brown wrote.
Nippon and U.S. Steel officials are publicly staring Mr. Biden down, pushing forward with a shareholder vote on the merger this week and running digital ads in Pennsylvania highlighting the billions of dollars Nippon plans to invest in American production. Nippon has hired a prominent Washington lobbying firm, Akin Gump. Perhaps most importantly, it is attempting to negotiate peace with the steelworkers union, which has sharply criticized the proposal.
“We will continue to advocate for this deal, and we are confident that a fair and thoughtful evaluation will result in its approval,” the companies said in a joint statement. “Nippon Steel’s investment is the best path forward for U.S. Steel employees, customers, stockholders, the Commonwealth of Pennsylvania and the United States.”
Japanese officials appear surprised and upset by Mr. Biden’s comments and the prospect that the president could scuttle the merger.
“For the United States to say that a Japanese company investing in an American manufacturing firm constitutes a threat to American national security is strange and troubling,” said Michael R. Strain, an economist at the conservative American Enterprise Institute, who discussed the merger this week with Japanese officials.
“My sense is that the election year timing of this is significant,” Mr. Strain said. “It seems this is more about wanting to show support for the manufacturing sector in a swing state, and less about actual security concerns.”
Biden administration officials have played down the importance of the merger in the bilateral meeting set for Wednesday, saying it is one of many agenda items for the heads of state, including security concerns with China and North Korea and deepened cooperation with South Korea.
“There is an awful lot of important things to talk about with Prime Minister Kishida,” John Kirby, the White House national security communications adviser, told reporters last week. “Certainly, our two economies are on that agenda, and I have no question that issues of economic — economy and trade will come up.”
Alan Rappeport contributed reporting from Beijing.
