The United States: Counterproductive Protectionism

Like Donald Trump, Joe Biden supports buying American products. Rather than continuing with a protectionist policy that had reviews, the United States would benefit from pushing for rules of reciprocity.

Those who were expecting Joe Biden to do the opposite of Donald Trump in terms of the economy will be disappointed. On the contrary, far from breaking away from his predecessor’s protectionist policy, the new president of the United States plans to strengthen it, at the risk of weakening multilateralism and trans-Atlantic relations that do not benefit Americans.

Jan. 25, five days after his inauguration, Biden signed an executive order to force the administration to buy more from America. From now on, for a product to be considered “made in the USA,” more than 50% of its components will have to come from American companies. In addition, an American company may be chosen in a call for bids, even if it is 20% more expensive than a foreign competitor.

The public market now represents a budget of more than $600 billion, to which we can add a $2 trillion plan to invest in infrastructure over the next few months. The new president wants this spending to benefit American businesses and jobs first.

An Exorbitant Cost

What could be more logical politically? Trump was elected in 2016 because he pushed for protecting those who were losing due to globalization, starting with the white working class electorate of the Midwest’s industrial states. Since then, the Democratic Party has tried to win back these constituents by taking on protectionist overtones. But it won’t be by continuing Trump’s policies that Biden will bring jobs and factories back to American soil.

Concerning the economy, his predecessor’s track record leaves much to be desired. Although Trump deserves credit for raising awareness of China’s noncompliance with international trade rules, the protectionist measures he took have produced the opposite effect of what was expected.

First, as a recent study by the Peterson Institute for International Economics shows, the “Buy American” plan has come at an exorbitant cost to the American taxpayer by considerably increasing the cost of government purchases. Each job saved by these protectionist measures has cost a quarter of a million dollars. This public money would undoubtedly have been better spent on vocational training and transforming the workforce.

The taxes on imports then resulted in an additional cost for the American consumer, without having much of an impact on relocation. Over the past four years, the United States’ trade deficit has continued to grow, reaching an all-time high.

By using Trump’s plan, Biden is likely to achieve the same result. If the ambition to protect American jobs is legitimate, it must bring the United States back to multilateral trading, which the previous administration refused to do. Rather than moving toward a half-baked protectionism model, the United States would benefit from pushing for rules of reciprocity that would allow for access to new markets abroad.

Biden’s message risks being ineffective for American workers and counterproductive for a trans-Atlantic relationship, at a time when the United States and the European Union need to stand together against China to force it to finally respect the rules of international trade.