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Joe Biden is the winner of the US presidential race, having secured the majority of electoral votes over the incumbent Donald Trump. When it comes to trade, the president-elect has not yet detailed his specific plans, but it is likely that he will want to resolve disputes with frustrated US trade partners as well as take on China by forming an alliance.

Both sides waited in anticipation in the days following the November 3 election, with the bid to win the presidency much closer than polls predicted – Biden was expected to sweep the majority of votes. In the time since, Biden delivered a victory speech on Saturday, and Trump has refused to concede, making baseless election fraud allegations and filing lawsuits in battleground states to try to overturn election results.

The Democratic president-elect will start in office in January, with his first priority likely to be tackling the pandemic, which has ravaged the US, killing more than 240,000 people across the country. Trump has spread misinformation about the pandemic and downplayed the virus, saying in June that it would “fade away”. The US’ GDP is set to decline by 4.3% this year, which is better than the average forecast of a 5.8% decrease for advanced economies, according to International Monetary Fund (IMF) data.

That said, trade will be a priority for Biden. “Trade has a way of climbing up presidential priorities as presidents serve in office,” Rod Hunter, partner at global law firm Baker McKenzie, tells GTR.

Welles Orr, senior international trade advisor at Miller & Chevalier, adds that while the Biden campaign must focus on trade, it may not “gel” together right away. “But something must happen with respect to the new administration seeking the Trade Promotion Authority (TPA), which expires July 1. We will have to see who the president-elect puts on his USTR [United States Trade Representative], commerce and treasury teams.”

The Trade Promotion Authority is the legislative vehicle that Congress uses to set trade negotiating objectives and to consider implementing legislation for trade agreements under expedited procedures.

“Getting the TPA renewed will be very important, if for nothing else but to get a trade deal with the UK, as it must be agreed to by April 1 to qualify under current TPA rules for Congressional consideration next year. At the moment, that is probably the lowest hanging fruit to go for and it should be pushed through if ready next spring,” Orr tells GTR. However, campaign advisors have said that a US-UK deal will not be prioritised in the first 100 days of the new administration.

It is a contrast to the 2016 Trump campaign, which put trade at its core. Over the past four years, Trump has been heavy handed with tariffs and sanctions to the dismay of US partners and global traders.

However, Biden is likely to hold on to key parts of the Trump administration’s trade policy. ‘Buy American’ rules, reshoring and supply chain resilience will be a major focus for the incoming administration. The Biden campaign has also said it will create a US$400bn federal procurement fund for products made in the US, which it claims would generate millions of new jobs in manufacturing and innovation.

 

“Frustrated” trade partners and China

During Trump’s term, what was considered as “plausible” and acceptable trade policy changed, says Hunter. “I anticipate that some of the policies that have frustrated trade partners Canada and Europe, the steel and aluminium 232 tariffs for example, will fall by the wayside relatively quickly.

“However, there are real trade disputes between the US and Europe, as well as with others. So, even with a much more collaborative, internationalist approach, which is good, I don’t think we can expect to have a ‘Kumbaya moment’ in January because there are serious trade problems that exist, whether that is with the EU over chlorinated chicken or agriculture, or with China.”

The US’ trade relationship with the EU has deteriorated. Last year, Washington hit the EU with tariffs on US$7.5bn-worth of goods over a dispute relating to state aid provided to aircraft manufacturer Airbus. The EU has in turn accused the US of providing unfair state aid to Boeing, and Brussels is retaliating, with tariffs to be imposed on US$4bn-worth of US products as punishment.

The US is also at odds with France over its taxation of digital services companies, arguing that tech companies like Google and Facebook are wrongly targeted – a move which France believes to be fair, given that these companies earn revenue in its market. “There needs to be a resolution on the part of the EU and the French to deal with the digital tax issue. These are commerce and economic issues, but they are very much trade policy issues too,” says Orr.

A report by global law firm Pillsbury Winthrop Shaw Pittman reveals that bridging ongoing trade conflicts with allies in Europe, North America, Japan and South Korea will be important for Biden. These nations could form the coalition the next administration needs to take on China, its biggest sparring partner, and reform international institutions such as the WTO.

Trump declared he would be tough on China when he was elected, and the relationship has certainly made headlines during his term in office. A Biden administration is likely to take a less aggressive approach and be more predictable in its policy towards China. But it is unlikely to change the overall US position on economic issues with the Asian nation, given US-wide support for a tough stance.

“The Biden campaign’s suggestion that it will work with allies to persuade China to change its policies is a welcome approach because that’s when countries have been most successful in persuading China to change its policies,” says Hunter. “But it will be difficult to persuade the Chinese Communist Party to give up the economic model that has been, from its perspective, a raging success.”

President-elect Biden will also need to assess what was going to be included in the second round of negotiations of the US-China deal, the details of which Trump has not shared, says Orr. The phase one deal was signed by the two sides in January following 18 months of tit-for-tat trade exchanges. But as the pandemic spread, tensions built up over the course of the year and further negotiations were abandoned, with Trump repeatedly taking aim at China, where the virus was widely thought to have originated.

Orr adds that it may be important for Biden to consider the ways in which the US can enter back into the fold of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a free trade agreement (FTA) between countries that surround the Pacific Ocean.

“That had bipartisan support under the Obama administration as probably the most effective way to rein in China’s trade policies. But there are certain things the Biden team would want changed and there is a big question about what it would be able to change such that the US can move forward as a member. How that plays out is anybody’s guess.”

 

Greener exports on the list

When it comes to sustainability and greener manufacturing, Biden has pledged to rejoin the 2015 Paris climate agreement, which the US left in 2017, and roll out a US$2tn clean energy investment plan.

The incoming administration says that this would improve support for US manufacturers in the clean energy sector, offering incentives for US firms that “supply low-carbon solutions to the international market in order to spur US industry, jobs, and competitiveness, and make America the world leader in clean energy technologies”.

Biden also plans to reduce US fossil fuel exports and overseas investments as well as tighten regulations for fossil fuel producers in the US.

“Biden has called for a border carbon tax as a trade measure toward getting to a green-centric export policy. While the devil will be in the details, that will be very important to the incoming administration. It wants trade policy to become greener and they will work hard to reach bipartisan consensus for new green trade measures with the new Congress,” says Orr.