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Biden’s exact industrial policy may change soon
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Biden’s exact industrial policy may change soon

Sullivan acknowledged that the U.S. approach forces its partners to adapt on the fly. China has used subsidies and aggressive exports to dominate overseas markets, while U.S. sanctions and tariffs have forced other countries to shift production and stay away from Chinese buyers.

Workers assemble the body structure with the battery pack and front and rear subframes while assembling electric vehicles at the Lucid Motors plant in Casa Grande, Arizona, U.S., September 28, 2021. Photo: Reuters/File

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Workers assemble the body structure with the battery pack and front and rear subframes while assembling electric vehicles at the Lucid Motors plant in Casa Grande, Arizona, U.S., September 28, 2021. Photo: Reuters/File

Joe Biden’s industrial policy legacy depends on who replaces him. It’s been two years since the U.S. government attempted to bring semiconductor and renewable energy production back to the country, and with less than two weeks left in Biden’s term, the president’s top national security aide, Jake Sullivan, has offered to defend his boss’ key economic choices.

In a speech at the Brookings Institution think tank in Washington on Wednesday, Sullivan outlined how the United States and its allies could use targeted investments, tariffs and sanctions to improve and protect jobs and know-how from the threat of China. But there’s a big asterisk next to this fragile success: Donald Trump could use the same weapons to wage a more direct trade war.

Sullivan’s main economic goal in office was to reset the United States’ post-Cold War approach to trade, which has been under political attack from the Republican presidential candidate and others for a decade. Sullivan’s Democratic version was heavier on public investment in strategic industries like chipmaking and greener in its focus on renewable energy like solar panels.

It has also sought to be friendlier to other countries, envisioning shifting supply chains to America’s allies and neighbors; This was in stark contrast to Trump’s “America First” approach. The USA is not alone either. Sullivan pointed to similarly ambitious domestic industrial policy plans released by the European Union, Canada, Japan and India as a sign that U.S. allies are also recognizing the dangers of becoming too dependent on China.

Sullivan acknowledged that the U.S. approach forces its partners to adapt on the fly. China has used subsidies and aggressive exports to dominate overseas markets, while U.S. sanctions and tariffs have forced other countries to shift production and stay away from Chinese buyers. In the long term, supply chains will be less dependent on China. Meanwhile, the transition means higher prices and shortages.

The Biden administration has sought to target its measures with surgical precision. In a speech at Brookings last year, Sullivan described the U.S. approach to technology measures as maintaining “a little garden with a high fence.”

But in a global economy where every device contains several dozen computer chips and inflation remains a painful memory of recent times, policymakers risk falling prey to chauvinism. This is much more likely to happen if Trump returns to the White House and follows through on his threat to impose 20 percent tariffs on imports. The Biden administration has kept almost all of the China tariffs imposed by Trump, although Sullivan has argued that its targeted approach involves as few trade-offs as possible. In different hands, U.S. tariffs and sanctions could once again become sharp weapons.