Joe Biden accuses China of 'cheating' amid call for added steel, aluminium tariffs

US President Joe Biden criticised Beijing during a campaign stop on Wednesday as he called for a tripling of import tariffs on Chinese steel and aluminium in what analysts characterised as a classic election-year move designed to help win support from union workers in key swing states, analysts said on Wednesday.

The play for votes comes as Biden faces a tough re-election battle in November and tries to avoid looking weak on China or getting outflanked on trade policy by his presumed opponent, Donald Trump, the former Republican president who has campaigned on protectionism and a pledge to impose a 60 per cent tax on imported Chinese goods.

"I'm not looking for a fight with China but competition, fair competition," he told a cheering crowd at the United Steelworkers union headquarters in Pittsburgh, Pennsylvania. "It ends up dumping extra steel on the global markets at unfairly low prices. And the prices are unfairly low because China's steel companies don't need to worry about making a profit because the Chinese government is subsidising so heavily.

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"They're not competing, they're cheating."

Biden said under his leadership the script has flipped with America now on the rise, its GDP up and its trade deficit with China at its lowest level in more than decade. This comes as Beijing battles a rapidly ageing population and xenophobia, he added.

"Would you trade places with China?" asked Biden, a Pennsylvania native. "They've got real problems."

The tougher trade and rhetorical line also creates a dilemma for Biden, however. In recent months, he has worked to put a floor under the battered US-China relationship, calling for Beijing's help in the Middle East, on global warming, fentanyl and reducing military tensions in the South China Sea. Biden and President Xi Jinping spoke by phone two weeks ago following a summit in California in November.

In a related move on Wednesday, Biden directed US Trade Representative Katherine Tai to start an investigation under Section 301 of the Trade Act of 1974 into China's alleged subsidies in shipbuilding, logistics and the maritime industry following a complaint by five national labour unions.

Steel and aluminium imports from China currently face tariffs of 7.5 per cent that, under the proposal, would rise to 22.5 per cent. These would be added to national security tariffs imposed by the Trump administration that remain in place, amounting to 25 per cent on Chinese steel and 10 per cent on Chinese aluminium.

China "utilises a wide range of non-market policies and practices to undermine fair competition and dominate the market, both in China and globally", Tai said. "I pledge to undertake a full and thorough investigation into the unions' concerns."

Section 301 trade moves under US law are subject to an investigation and months-long comment and review period before they are enacted.

Biden has made the rebirth of American manufacturing a central theme of his presidency, pushing the passage of landmark legislation that directed some US$50 billion to shore up the nation's semiconductor industry and another US$370 billion to boost the environmental technology and green energy sectors.

For weeks, Biden administration officials have warned Beijing that it should not try to export its excess capacity by shipping cheap goods abroad as a way to reverse its faltering economy, a point highlighted during Treasury Secretary Janet Yellen's recent trip to Beijing.

"Certainly this is an election-year initiative, meant to appeal to audiences in battleground states like Pennsylvania and Ohio," said Kevin Nealer, a principle with the Scowcroft Group, formerly on the board of the Overseas Private Investment Corporation. "It's a bid to garner support of steelworkers rank and file - he has the leadership endorsement - and to fortify his trade policy for the middle class theme."

This comes amid expectations that Washington will further raise tariffs on Chinese electronic vehicles, previewed by Tai in a letter to Congress in January that cited China's "state-led approach to its economy", a message reinforced by Yellen last week in Beijing.

"You may have heard that there is an election in November," said Rod Hunter, a partner with Baker McKenzie who was formerly with the National Security Council. "It does not seem random that the Commerce Department also recently announced initiation of an investigation of security risks associated with 'connected vehicles,' an investigation that could lead to the banning of imports of Chinese electric vehicles as well as auto parts from China."

In another election-related move, Biden announced earlier this year that he would oppose Nippon Steel's US$41 billion bid to take over US Steel, winning points with the steelworkers' union, which opposed the transaction and quickly endorsed him.

Biden said Washington also planned to start working with Mexico to prevent China from trans-shipping goods and evade tariffs. "Mexico and the United States are going to work together to solve it, I promise you," he said. "Taken together, these are strategic and targeted actions that are going to protect American workers and ensure fair competition."

The president added that his administration was "standing up for peace and stability across the Taiwan Strait, revitalising alliances across the Indo-Pacific and ensuring that America's most advanced technologies will not be sent to China and undermine US national security.

"When I spoke with Xi Jinping, he said 'why?' I said 'because you're using it for all the wrong reasons, so you're not going to get those advanced computer chips.'"

Analysts said the president's trade and industrial policy were inflationary but would not be hugely noticeable given the size of America's US$28 trillion economy.

But China's reliance on exports is now proportionally greater than was Japan's in the 1980s, they added, creating resistance from developed countries and undercutting Beijing's bid to drive a wedge between Washington and Brussels.

On Wednesday, China pushed back on the idea that it was using cheap exports to work its way out of its downturn.

"The notion that China's overcapacity harms the global market is a complete fallacy," said Foreign Ministry spokesman Lin Jian in Beijing. "Those who spread that narrative to justify protectionism have nothing to gain from it and will only destabilise and disrupt industrial and supply chains, hinder the world's green transition and curb the growth of emerging sectors."

The prospective tariff increases "are the embodiment of unilateralism and protectionism," added Liu Pengyu, spokesman for the Chinese embassy in Washington. "The US is making the same mistake again and again."

Analysts said Beijing had been through enough US election cycles to read the politics driving Biden's recent trade moves and would likely hold its fire.

"The Beijing playbook in response is very predictable," said Nealer. "China will protest the idea but won't roll out a response until Biden acts. When that happens it will be proportional but probably asymmetric - going after American firms in unrelated sectors to create maximum pain."

Biden also used the opportunity to call out Trump repeatedly by name - something he has generally avoided during his presidency - citing what he said were Trump's racist beliefs, unwillingness to stand up for US workers, block advanced chip sales to China or pursue buy-America policies, or rebuild America's crumbling infrastructure.

"For all this tough talk on China, it never occurred to my predecessor to do any of that. The bottom line is, I want fair competition with China not conflict," he said. "You may remember my predecessor promised infrastructure week, after week, after week for four years and never built a damn thing. Nothing."

Despite his pledge to review Trump-era policies - and pressure from the US business community - Biden has retained Trump's US$300 billion in punitive tariffs on Chinese goods that led to the continuing US-China trade war.

Tai told lawmakers on Tuesday that the Biden administration's year-long review of Trump-era tariffs is expected to be completed "soon", without providing details.

Additional reporting by Liu Zhen

This article originally appeared on the South China Morning Post (SCMP).

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