Why Is Biden Still Limiting Imports of South Korean Steel?
Biden's top trade adviser says tariffs must be "strategic," but what strategic value do tariffs on South Korean steel serve?
A day after President Joe Biden indicated that he might consider lifting some of the tariffs that former President Donald Trump imposed on imports from China, the White House's top trade adviser clarified that any adjustments to tariffs would have to be "strategic."
"With respect to the tariffs, our approach as with everything in this relationship, is to be strategic," U.S. Trade Representative Katherine Tai told Bloomberg on Tuesday in an interview with Shery Ahn and Haidi Lun. "All options are on the table in terms of how we address our short-term economic needs, but our eye must be on the ball with respect to the medium and long term needs for the United States to realign this economic and trade relationship."
This is a fundamentally unproductive way to frame a debate over whether Biden should lift those tariffs—which are really just taxes paid by importers—and one that lends credence to economic nationalists' misguided notion of wielding trade policy as a tool of foreign policy. Already, some on the right have signaled that Biden's wavering stance on tariffs is something of a strategic surrender. "Biden should not flirt with a policy that rewards China," the Washington Examiner's editorial board wrote on Tuesday.
This is what happens when trade policy gets mixed up with geopolitics. In a vacuum, most conservatives would favor a policy that eases taxes on American consumers and businesses—especially during a time of rampant inflation. Now that those tariffs also carry the symbolic weight of being tough on China, however, economic reality gets tossed out the window.
But, OK, let's just go with this argument—nonsensical though it may be. Tariffs must be applied strategically. They are economic weapons we deploy to "punish," as the Examiner editorial board put it, our geopolitical adversaries.
Then why are we still applying tariffs to South Korean steel?
South Korea is not a geopolitical adversary of the United States—quite the opposite, in fact—and the tariffs on steel from South Korea are plainly not serving any strategic goal.
Those 25 percent tariffs were imposed by the Trump administration in 2018 as part of an overall raising of tariffs on nearly all imported steel and aluminum. Since then, however, the Trump and Biden administrations have eased or eliminated those tariffs on steel imports from Japan, the European Union, and elsewhere.
The South Korean steel tariffs were waived in 2018, but only because South Korea agreed to artificially suppress its steel exports to the United States. That absolute quota (meaning that South Korean producers are barred by their own government from exporting excess steel to the U.S., even if they found importers willing to pay the tariffs) remains on the books.
Prior to Trump's tariffs being imposed, South Korea was one of America's main sources for steel. In 2017, we imported 3.4 million metric tons of steel from South Korea. Only Canada and Brazil provided more. China, by the way, provided only about one-fifth as much.
Under the quotas imposed in 2018, South Korea is allowed to send America just 2.68 million metric tons per year—about 70 percent of what it exported in 2017.
It should be obvious by now that the Trump administration's experiment with steel tariffs (and quotas) as a means to prop up domestic manufacturing was a failure. American steel-consuming businesses are paying higher prices, but those economic gains have not translated into a meaningful win for steelworkers. Most prominently, a planned $1.3 billion expansion of a U.S. Steel facility in Pennsylvania—the announcement of which was touted by Trump in 2019 as proof that the "tariffs are working"—has been canceled. After a small rise during the first year that Trump's tariffs were in place, overall output by American steel manufacturers has declined.
Meanwhile, inflation is wracking the American economy. Importing more steel at lower prices from places like South Korea wouldn't address the main drivers of inflation, but it would ease some of the pain.
Lifting the tariffs and quota on South Korean steel would provide "much-needed relief for workers in downstream industries who continue to face historically high steel prices," six Democratic members of Congress wrote to Biden and Tai earlier this month, in advance of the president's trip to Asia. The lawmakers noted that the U.S. trade representative's policy agenda officially refers to South Korea as a "valued trading partner and close ally."
While visiting South Korea this week, Biden talked up the importance of the economic ties between the two countries, promising that greater cooperation will "help strengthen our supply chains, secure them against shocks and give our economies a competitive edge."
So…what strategic purpose are tariffs and quotas on South Korean steel achieving?
Biden is maintaining higher taxes, continuing a policy that adds to inflation, and seemingly attempting to punish a close ally—all without providing any clear benefits to domestic producers. It's time to send these tariffs to the slag heap.