Biden tariff decisions seen subordinate to overarching policy goals
Posted on 12 January 2021
The Biden administration's direction on trade, including tariffs affecting the energy sector, is likely to be driven by the administration's broader domestic or foreign policy objectives, a panel of Washington trade lawyers and experts said Jan. 11.
Speaking during a webinar held by Bracewell, the participants did not predict a rapid unwinding of tariffs on China imposed under Section 301 of the Trade Act of 1974. Chinese retaliatory tariffs, such as a 25% tariff on US LNG imports into China, have been viewed as slowing long-term contracts to support a new wave of US LNG export terminals.
"It's about sorting out what the highest priority issues are for the incoming administration and how these trade policies serve those objectives," said Bracewell Senior Principal Josh Zive. "If the current tariffs are consistent with those Biden objectives, it's going to be harder to get rid of them; if they are at odds, easier."
Jonathan Stoel, a partner at Hogan Lovells, said Biden nominees have in common their support for dealing with climate change, and that they will be confronted early on with whether to continue tariffs on solar panels and cell products put in place by the Trump administration.
"I would argue that all the options, whether it's direct subsidies to producers and industries that control [greenhouse gas emissions], whether it's something to help US producers so that they can deal with a more free trade environment and get rid of the tariffs – I think the sky ought to be the limit," he said.
Kelly Ann Shaw, also a partner at Hogan Lovells, agreed that, "trade is going to be a component part of the Biden administration's broader foreign policy and broader domestic policy, unlike [during] the Trump administration, where it was one of the top three issues and in many ways stood in and of itself."
Panelists also assessed outlook for lifting US tariffs on imported steel and aluminum imposed by Trump under Section 232 of the Trade Expansion Act of 1962. The tariffs have had implications for oil and gas sector costs of imported steel used in pipeline development.
Stoel suggested it is very hard politically to remove the tariffs broadly, because there generally is a winner and a loser for every tariff in place. But he predicted the Biden team might lay out protocols espousing broader principles around when tariffs on certain countries could be lifted.
Zive, for his part, suggested the diplomatic context around the Section 232 tariffs "makes them amongst the easier for a Biden administration to step back from," particularly when viewed in connection with the stated objective of strengthening the US relationship with European allies. European countries were not accustomed to being targeted for posing national security threats, he noted.
In Zive's view, more traditional procedures, like use of Section 301 tariffs on China, were "not entirely revolutionary" in nature and thus harder to pull back than the 232 tariffs, and also fit inside a larger, coherent strategy.
Offering a view from Capitol Hill, Jonathan Tsentas, legislative assistant for Senator Robert Menendez, Democrat-New Jersey, struck a similar theme to other panelists, suggesting it will be important to be cognizant of how trade policy supports the Biden-Harris "Build Back Better" agenda.
"If I could give everybody kind of one main message, I think it's that we should start thinking about how trade policy fits into our domestic priorities first, and the other implications will flow from that. On 232 tariffs, he said there would be support in Congress for setting criteria up front about what a country has to do to meet the goals of the program.
On China tariffs, he suggested the administration might not "rework the program in a major way" but might continue to try to "gently encourage" companies in certain sensitive sectors to move their production out of China.
"One thing that would find a lot of support in a Democratic Congress is being clear what the terms of a tariff exclusion might look like, and making that process very clear, very transparent, and for a set period of time, so that our domestic industry is not constantly wondering: will this program still be here in a year from now, will I still be able to get an exclusion," he said.Source : Platts