Biden faces dilemma on Trump steel tariffs

CLEVELAND — President BidenJoe BidenTrump hails Arizona Senate for audit at Phoenix rally, slams governor Republicans focus tax hike opposition on capital gains change Biden on hecklers: 'This is not a Trump rally. Let 'em holler' MORE faces a dilemma on whether to lift tariffs on steel and aluminum imports imposed on the European Union by the Trump administration.

Biden wants to ease tensions with European allies and has faced pressure from the U.S. Chamber of Commerce and domestic industries that rely on metals to lift the tariffs.

However, the president risks angering steelworkers and other labor unions if he takes that step, particularly as the U.S. steel industry has boomed with the tariffs in place. That would give Republicans an opportunity to hit Democrats before the midterm elections in crucial swing states like Pennsylvania and Ohio where the steel industry is strong.

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“It’s just a challenging issue because obviously for steel manufacturers, for steel workers, for people who work in that industry who want to see more jobs created, increased prices are more good news,” said Pennsylvania-based Democratic strategist Mark Nevins. “On the other hand for consumers, one of the downsides of the trade wars is that increases prices for consumers.”

Biden won Pennsylvania by about 80,000 votes in November, but lost Ohio to former President TrumpDonald TrumpTrump hails Arizona Senate for audit at Phoenix rally, slams governor Arkansas governor says it's 'disappointing' vaccinations have become 'political' Watch live: Trump attends rally in Phoenix MORE by about 500,000 votes. Both states have competitive Senate and House races next year that will be critical for Democrats as they try to maintain their razor-thin majorities in both chambers.

The White House is reviewing the tariffs placed on goods from the EU and China but has not made any promises on lifting them. At the same time, U.S. Trade Representative Katherine TaiKatherine TaiBiden's trade agenda is off to a rocky start Pence v. Biden on China: Competing but consistent visions Biden's budget vacancy raises eyebrows MORE has been engaging with EU officials in order to smooth over trade disputes that came to a head during the Trump administration and led to a slew of retaliatory tariffs on U.S. exports.

Last week, seven major steel trade groups and unions, including the United Steelworkers and Steel Manufacturing Association, sent Biden a letter urging him to keep the tariffs in place.

"The tariffs were necessitated by repeated surges in steel imports driven by global steel overcapacity that threatened our industry and the nearly two million jobs it supports," they wrote, adding that the import taxes "have been a success, allowing our industry to restart idled mills, rehire laid-off workers and invest in the future."

But auto manufacturers and parts producers, who see their costs rise when the price of steel is more expensive, have demanded that Biden scrap the tariffs. They’re joined by other exporting industries that have been hit with counter-tariffs, adding a complicating wrinkle to the political calculus.

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Biden is headed to Cleveland on Thursday to deliver remarks on his economic agenda that the White House says will highlight the successes of his $1.9 trillion coronavirus relief plan as well as his infrastructure and families proposals.

Biden has positioned himself as a champion of union and middle-class workers, pledging to focus his agenda on growing the economy from the “bottom up, middle out” as the pandemic subsides.

Trump won Ohio in 2016 and 2020, in part, by appealing to the state’s industrial workers, which had long backed Democratic candidates. The turnaround was particularly apparent in the Mahoning Valley, which includes the city of Youngstown and has a history of steel production going back to the 19th century.

Last year, Trump became the first Republican to win Mahoning County since 1956, besting Biden by 2 percentage points. The former president also built on his 2016 win in nearby Trumbull County, where he won by 10 points in 2020, up 4 points from the first time around.

“Donald Trump had won by over 8 points [in Ohio] because of his ability to connect to these union Democrats, so to speak,” said Capri Cafaro, the former Democratic Ohio State Senate Minority Leader, who represented parts of the Mahoning Valley.

Still, some Democrats are resonating with voters in steel country. Rep. Tim RyanTimothy (Tim) RyanSix takeaways: What the FEC reports tell us about the midterm elections Schumer, Tim Scott lead as Senate fundraising pace heats up Here's what Congress is reading at the beach this summer MORE (D) won reelection in Mahoning County last year by nearly 14 points, extending a congressional career that began in 2003.

During much of that time, steel has been a key concern among his constituents.

Ryan, who is now hoping to win the seat being vacated by Sen. Rob PortmanRobert (Rob) Jones PortmanSunday shows preview: Bipartisan infrastructure talks drag on; Democrats plow ahead with Jan. 6 probe Key Biden ally OK with dropping transit from infrastructure package Frustration builds as infrastructure talks drag MORE (R), met with steelworkers on Monday in Richland and toured a steel plant in Trumbull County two days later.

"Tim has spent his career championing Ohio's steel industry and the workers who power it — and has long been an outspoken advocate for tariffs and other measures to crack down on China and other countries that have engaged in illegal practices to undermine American steel jobs,” Ryan’s spokesperson Izzi Levy told The Hill.

The debate over free trade versus fair trade has divided Democrats nationally in recent years. While the Obama administration lobbied Democrats to embrace the Trans-Pacific Partnership trade deal, 2016 Democratic presidential nominee Hillary ClintonHillary Diane Rodham ClintonBiden flexes presidential muscle on campaign trail with Virginia's McAuliffe Shontel Brown gaining ground against Nina Turner in Ohio: poll Biden hits trail for McAuliffe in test of his political brand MORE notably distanced herself from the multilateral trade agreement when campaigning in states like Ohio.

“Ohio Democrats, a lot of Midwestern Democrats, a lot of labor-centric Democrats, so to speak, have always talked about free trade being fair trade — trying to be tough on China and not being for things like fast-track authority for the Trans-Pacific Partnership,” Cafaro said.

Despite Trump not being on the ballot next year, Republicans hope to indirectly put his economic policies on the ballot.

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“For traditional industries in Ohio, Donald Trump did pretty well, and both the owners and the workers liked Trump’s policies,” said GOP strategist Mark Weaver, who’s based in Columbus, Ohio. “Biden is having much more trouble in this area and the palpable economic decline is on his watch. This creates problems for Democrats including Tim Ryan.”

Charlie Gerow, a Republican strategist in Pennsylvania, argued that lifting the tariffs would hurt Democrats in the western part of the Keystone State, where Biden’s policies toward coal and natural gas are already creating tensions.

Although the tariffs were a hallmark of Trump's trade policy, Biden would have some political cover if he decides to leave them in place.

"Four years ago, the U.S. primary aluminum industry was hanging on by a thread," a report Wednesday by the left-leaning Economic Policy Institute said, noting that aluminum production increased 37.6 percent after Trump’s tariffs went into effect.

The report argues that higher prices have had no meaningful effect on consumer prices or other industries.

But Biden is facing the additional challenge of confronting trade policies amid an uneven economic recovery, raising questions on how tariffs might play into the broader concerns about inflation.

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Some economists have raised the alarm about recent price surges, arguing Biden’s expansive spending packages could send costs even higher for a prolonged period.

Michael Cembalest, J.P. Morgan Asset and Wealth Management’s chairman of investment strategy, said in a recent report that decades of lowering barriers on trade and capital flows had paved the way for low inflation.

“For years, analysts correctly described globalization as deflationary,” he wrote, pointing in particular to the role of production inputs that include commodities like steel. “I don’t know how to avoid the conclusion that de-globalization will be inflationary."

But Joe Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington, says that even though tariffs can drive up some prices, they have little to do with widespread inflation.

“The economy basically wants to keep the same trade balance, which is driven by other forces," he said. “Tariffs tend to make the dollar go up, and what that does is lower other import prices.”

For Biden, the most immediate question on tariffs has to do with domestic steel and aluminum manufacturers, who want prices to stay up, and the businesses that rely on those products and want to see prices move in the other direction.

“The administration is really torn between two competing priorities. On the one hand, it wants to resolve outstanding trade differences with the EU and present a more united front in dealing with China. But on the other hand, the administration has made clear that it wants a worker-center trade policy here in the United States, and lifting the tariffs will face considerable opposition from the steelworkers and other labor unions,” said Edward Alden, a trade expert at the Council on Foreign Relations.

“That’s just a difficult dilemma that the administration is facing.”