US-China trade war: expect Biden to change tactics towards Beijing, but not the goals

It is clear Biden feels there is unfinished business from the Obama years that was not covered in Trump’s tariff-dominated approach to trade talks with China, and Beijing should not expect an end to tariffs any time soon

Neal Kimberley

Published: 3:30am, 13 Jan 2021

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China-US trade tensions will not disappear when US President-elect Joe Biden succeeds outgoing President Donald Trump, but they will evolve. Trump’s tariff-heavy sledgehammer approach will give way to more subtle stratagems by the Biden administration intended to address perceived grievances. Beijing cannot realistically expect anything better than that.

In some respects, the Biden approach will reflect views formulated during his time as vice-president to Barack Obama. In his new book, A Promised Land , Obama writes that China’s economic rise has seen Beijing “evading, bending, or breaking just about every agreed-about rule of international commerce”.

Strong words, but Obama goes further. He makes reference to China’s use of non-tariff barriers, alleging it also engaged in the theft of US intellectual property and asserting Beijing “placed constant pressure on US companies doing business in China to surrender key technologies”.

Back then, Obama and presumably Biden felt that the fragility of a world economy, emerging from the 2008 global financial crisis, precluded pushing China too hard on such practices and that a multinational approach was required in any case. In Obama’s opinion, the best way “to nudge China toward better behaviour” would be to enlist the help of China’s neighbours.

06:04

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While Biden is his own man, his recent comments about China undoubtedly carry Obama-era echoes. “The best China strategy, I think, is one which gets every one of our – or at least what used to be our – allies on the same page,” Biden told the The New York Times at the start of December. “It’s going to be a major priority for me in the opening weeks of my presidency to try to get us back on the same page with our allies.”

Tellingly, Biden said his “goal would be to pursue trade policies that actually produce progress on China’s abusive practices – that’s stealing intellectual property, dumping products, illegal subsidies to corporations” and Beijing forcing “tech transfers” from American companies to their Chinese counterparts.

Beijing will undoubtedly demur, but it seems clear Biden feels there is unfinished business from the Obama years that was not adequately covered in the Trump administration’s tariff-dominated approach to trade talks with China. Neither should Beijing expect Biden to immediately abandon all of Trump’s tariffs.

Tariffs levied on Chinese goods on entry into the United States are arguably more a tax on US consumers than a burden for China’s exporters and, despite the tariffs, the US trade deficit with China in November hit US$44.9 billion, its highest level since December 2018. Even so, Biden might choose to retain the Trump-era tariffs for now, keeping all options open while his administration finalises its own strategy.

Beijing may well find that dealing with Biden on trade is more challenging than negotiating with Trump. At least with Trump, China could be fairly confident that the US was unlikely to reach out to other major economies to secure support for a common approach towards addressing perceived economic injustices.

The Biden administration will not be so insular. Former British prime minister Gordon Brown has described the president-elect as being “a natural conciliator”, whether that be in the domestic US arena or in the international community.

Trump’s term in office was characterised by unilateral initiatives that chimed with his “America first” agenda, and relations with the leaders of other major economies often were prickly. The Biden administration will adopt a more internationalist approach, especially if Antony Blinken is confirmed as secretary of state.

“When we’re working with allies and partners, depending on who we bring into the mix, it’s 50 or 60 per cent of GDP,” Blinken said in July 2020 at the Hudson Institute, a Washington-based think tank. “That’s a lot more weight and a lot harder for China to ignore.”

02:14

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Echoing that notion, Biden reiterated on December 29 that, “As we compete with China and hold China’s government accountable for its abuses on trade, technology, human rights and other fronts, our position will be much stronger when we build coalitions of like-minded partners and allies.”

Meanwhile at home, and mindful of all the rancour surrounding the presidential election, Biden knows that if there is one issue around which the US Democratic and Republican parties can coalesce, it is a belief that the China-US trade relationship remains too skewed in Beijing’s favour.

The stage is set. Trump might be leaving the Oval Office, but China-US trade tensions will not disappear. It is just that the Biden administration will approach matters differently.

Neal Kimberley is a commentator on macroeconomics and financial markets