The hard-working staff here at Drezner’s World has made no secret of its support for economic globalization in general and a relatively open U.S. foreign economic policy in particular. Donald Trump’s first term was an omnishambles in this regard, lessened only by the fact that it took Trump two years to start implementing his counterproductive trade wars.

As the hard-working staff here has noted repeatedly, however, the primary difference between the Trump administration’s foreign economic policy and the Biden administration’s foreign economic policy is that the Biden team has been way better at implementing protectionist policies. Since early 2021 I have been pointing out the logical contradiction at the heart of Biden’s approach: it is schizophrenic to ratchet up U.S. levels of protectionism while simultaneously attempting to bolster the U.S. alliance system to counter rising threats. To be sure, there may well be valid national security justifications for prioritizing the geography of trade when thinking about, say, China. Using protectionism to restrict exchange with stable U.S. allies, however, undermines the notion that the United States is a responsible stakeholder of the order it created.

How well did the Biden administration do at resolving this contradiction? In the end, not very! To be fair, the administration succeeded in developing ad hoc international coalitions to sanction Russia and contain China. This administration accomplished a lot of solid diplomacy behind the scenes. But it never squared the circle on how to build support for economic security agreements to counter rivals. This is one reason why the Americas Partnership for Economic Prosperity, Indo-Pacific Economic Framework, and the US-EU Trade and Technology Council never panned out.1

The result was the enshittification of global economic governance. The Biden administration continued to flout the rules and celebrate their flouting, thereby spurring others to follow suit. The U.S. application of extraterritorial sanctions encouraged China to engage in the same practice. As for trade, Benn Steil and Elizabeth Harding pointed out in Barron’s last month that “the growing use and abuse of the national-security trump card, combined with Washington’s dismantling of dispute settlement, have effectively reduced the WTO to the status of a self-censoring, single-issue think tank.”

Maybe that was inevitable in a world of great power competition, but that’s not what the Biden administration claimed to think. Last month the Biden administration belatedly tried to proffer a solution to the WTO part of the problem. The Financial Times’ Alan Beattie wasn’t having it, however: “It’s typical of the disingenuousness or incompetence (hard to tell which from outside) of the Biden administration that it endlessly moaned about the status quo without ever specifying publicly what it wanted instead…. Seriously, it took four years to come up with a two-page proposal, and they released it when Biden was a lame-duck president? It’s hardly worth debating.”

That was just the warm-up act for the Biden administration’s last big act of foreign economic policy. As I observed last week, the CFIUS process to approve Nippon Steel’s takeover of U.S. Steel had ground to a halt. A reminder: this was a deal largely supported by U.S. Steel’s workers. U.S. Steel needed the injection of capital. Furthermore, one of the few arguments in favor of higher tariffs is that it in large markets like the United States, they can encourage foreign direct investment as a means of leapfrogging the protectionist barriers.

Despite these arguments in favor of allowing the takeover, Trump, Biden, and Kamala Harris all opposed the deal during the campaign. Even with the election over, it hit another political roadblock. As the Financial Times reported:

The Financial Times reported this week that at least three Cfius agencies — the Treasury, Pentagon and State department — had concluded that the acquisition of the iconic American steelmaker posed no security risks. The main opposition inside Cfius to the transaction is being led by Katherine Tai, the US trade representative.

Biden and president-elect Donald Trump have both voiced opposition to the deal. Biden came out publicly against the deal this year, which critics said amounted to politicising the Cfius process….

A person close to the process said Biden was determined to block the deal.

Beattie provided further context to Tai’s opposition: “Tai’s always been obsessed with steel. She told counterparts in other governments that backing the industry was essential to winning Pennsylvania in the election and that they had to join in. It would appear that since the head of the steelworkers’ labour union — though not union officials or workers on the ground — is against the Nippon Steel deal, so is she.”

So it was unsurprising when the Biden White House announced today that the president was blocking the planned takeover, despite last-minute attempts by Nippon Steel to reassure the White House that they had no plans to reduce steel production. Nonetheless, the White House’s official justification for the decision bordered on the absurd. The executive order declared that, “Nippon Steel North America, Inc., a New York corporation…. might take action that threatens to impair the national security of the United States.” Unsurprisingly, this seems like a stretch.

It will shock readers to learn that Biden’s decision has ruffled some allied feathers:

President Joe Biden bowed to growing protectionist pressures in the United States and formally blocked a Japanese company’s proposed purchase of U.S. Steel, winning praise from the president’s labor allies and scorn from proponents of an open U.S. investment policy….

Biden’s action raises broader questions about the future of foreign investment in the U.S. and the process CFIUS uses to review certain transactions. Foreign investment into the U.S. has traditionally been unfettered unless the panel determines there are clear national security threats. With the imminent arrival of Trump’s second term, Biden’s decision to block the transaction could send a signal to foreign companies that diplomatic and political factors, in this case strong opposition from the United Steelworkers union, rise above pure business strategy when considering a decision to invest in the U.S.

“I think for the Japanese it’s a very bad signal. I think it will raise eyebrows in Europe and make people more cautious,” said Bill Reinsch, a former Commerce Department official now at the Center for Strategic and International Studies. “I think some of them will buy the ‘one-off iconic American company argument,’ but it’ll give everybody pause.”

The Japanese government will likely be insulted by Biden’s explanation that he is blocking the deal on national security grounds, even if the administration tries to persuade them that U.S. Steel is an exceptional case, said Reinsch.

A White House spokesperson denied that Biden’s decision damaged the United States’ reputation as a reliable partner and ally.

Biden’s decision “isn’t about Japan,” White House National Security Council spokesperson John Kirby said in a briefing with reporters Friday….

Nippon’s frustration and dissatisfaction with how the Biden administration has handled the proposed deal is evident in an extraordinary letter the company sent last week to CFIUS.

Nippon accused the White House of exerting “impermissible influence” over the CFIUS review “at the behest of third parties who oppose the transaction,” namely, Cleveland-Cliffs CEO Lourenco Goncalves, who made a previous bid for purchasing U.S. Steel, and McCall, the USW president.

I suspect that Kirby’s assurances this decision was not about Japan will not mollify the Japanese. Last week the Japan Times editorialized, “When is an ally not a partner? Apparently, when a Japanese company seeks to purchase an iconic U.S. corporation. There is little explanation other than raw politics and naked nationalism for the looming refusal of the U.S. government to approve Nippon Steel’s proposed takeover of U.S. Steel.”

Imagine what these editorials will sound like next week.

Let’s go back to Beattie for a paragraph that I agree with wholeheartedly:

As I’ve said before, the Biden administration’s “worker-centred” trade policy is comically misnamed. It’s a policy dictated by union leaders representing a small number of relatively well-paid employees in a small number of declining sectors. Among other things, it’s hurt steel-using industries, trashed international law, angered allies and had a shot (fortunately failed) at destroying the only real chance we have for an international carbon tax. Apart from that, it’s been a roaring success. I’m not saying I’m going to be welcoming Trump’s trade policy, but I’m glad I don’t have to listen to this worker-centred thing any more.

The Trump administration’s foreign economic policy will either be super-protectionist or Omnishambles II: The Omnishambling. Either way it will be incredibly frustrating to witness, particularly with Trump himself demonstrating the economic literacy of a child.2 Part of that frustration, however, has been that the embrace of mercantilism has been bipartisan in nature. Historians will look back on this era and write that when it came to foreign economic policy, Biden’s single term represented a continuation of Trump’s two terms.

The Biden administration put an intellectual patina on rank protectionism, and then got offended when anyone pointed out the policy contradictions. And for continuing to justify a foreign economic policy that alienates allies while accomplishing little of economic substance, I will not miss having to write about Biden’s foreign economic policy team ever again.