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There’s a new game in Washington DC — WWHD? (What Would, or perhaps Will, Harris Do?) — all the more fun for being largely pointless.
It’s pointless because it’s hardly likely Joe Biden’s vice-president has developed fully fledged alternative programmes for national security, fiscal policy or anything else. The only real question is how much room for manoeuvre a President Harris would have. In the high-profile area of trade and industrial policy, probably not much.
Biden undertook a sharp course correction from the Clinton and Obama administrations, which generally supported open markets at home and abroad. He has kept most of Donald Trump’s tariffs on China and added some on other products, including electric vehicles, semiconductors and critical minerals. He also kept on the books (though temporarily suspending) Trump’s tariffs on steel and aluminium, which supposedly promote national security despite targeting the likes of the EU and Japan.
The common view that Biden is continuity Trump, however, is not quite accurate. Trump’s approach to import taxes, which he is threatening to raise massively further if he wins a second term, is intended — wrongheadedly — to close the US’s trade deficits.
Biden’s tariffs are more precisely focused. The aim of the China taxes is ambitious and at least somewhat principled — an essential part of his programme to combat climate change and reduce technological dependence on China. The function of those on aluminium and steel, however, is the pure electoral politics of keeping the steel producers in the swing states of Wisconsin and Pennsylvania happy.
Biden’s tech and climate change ambitions have involved highly interventionist industrial policy, including lavish public spending plans through the Inflation Reduction and Chips Acts to boost the production of EVs, semiconductors, critical minerals and the like.
On the climate change part of the package, he didn’t have much choice. To give due credit to previous Democratic presidents, both Bill Clinton and Barack Obama tried to push market-based emissions-reducing solutions through Congress; first carbon taxes and then a cap-and-trade carbon pricing bill. Both failed, causing Biden to switch to spending rather than taxes. His administration regards tariffs and “Buy American” domestic content requirements as a politically necessary part of the package to avoid the criticism — often made of European subsidy programmes — that US spending is simply enriching foreign producers.
Biden’s capture by the steel industry is also politically logical but much more economically destructive. He has not just kept the Trump steel and aluminium tariffs but tried to cajole or bully allies, specifically the EU, into imposing similar import taxes.
None of these incentives is likely to change. Public and congressional opinion is hostile to China and hence supports creating technological and industrial independence. There is some conversation about an external carbon border tax in Congress, but almost none on a domestic carbon price. If a President Harris wants to carry on the campaign against climate change — and as a California environmentalist it would be extraordinary if she didn’t — it’s either public spending, assuming Congress allows it, or nothing.
With regard to electoral politics, the instinctively protectionist manufacturing states of Wisconsin, Pennsylvania and Michigan will continue to be pivotal in presidential elections for a while. The relatively free-trade Florida, a swing state in the 2000s and 2010s, now seems safely in the Republican column. Texas, which also tends towards supporting open trade because of its integration with the Mexican economy, is shifting towards the Democrats but probably won’t be in play for years yet.
Nor is Harris likely to encounter an organised push within the Democratic party to return to the philosophy of the Obama-Clinton era. The shift to Bidenomics has strong ideological and organisational roots. It started as a reaction in some quarters to the perceived inability of the US to meet the rising power of China. It was nurtured in Hillary Clinton’s State Department during the Obama administration under the rubric of “economic statecraft” when Jake Sullivan, now Biden’s national security adviser, was head of the department’s policy planning.
Biden himself already leaned somewhat towards industrial policy. As Obama’s vice-president, he pushed for “Buy America” domestic procurement provisions in the Recovery and Reinvestment Act of 2009, the post-global financial crisis infrastructure investment plan. When he was elected president in 2020, the instinct, the plan and the personnel were on hand to make the shift.
The centre of gravity of policy in the Democrats has also shifted towards interventionism. John Podesta, a longtime member of the Clinton camp, led the clean energy part of the IRA and as Biden’s chief climate diplomat is now faithfully following the carbon border tax playbook. Only one or two veterans such as Lawrence Summers, Clinton’s Treasury secretary and Obama’s director of the National Economic Council, are still making a strong case against industrial policy. Summers has in any case reduced his effectiveness since sounding a wildly false alarm about the inflationary impact of Biden’s economic stimulus.
Harris may be from a different political background to the president. But the pressures of public opinion and Congress will be largely the same. Something quite radical will have to shift if the trade and industrial policy of Bidenomics fails to survive the departure of Biden.
alan.beattie@ft.com
