In March 2023, President Joe Biden’s trade representative, Katherine Tai, was testifying before Ways and Means, a powerful congressional committee she once worked on, when a lawmaker lobbed a backhanded compliment. 

“I think you’re too nice a person to be in the job you’re in,” said Rep. Greg Murphy, a North Carolina Republican. “Negotiators are usually very, very tough and sometimes mean people — they aren’t nice people like you are.” 

Tai tried to dodge the jab with polite tact, noting she had no reason not to be nice to the U.S. Congress. But Murphy kept at it, adding that she “had too nice a smile” to effectively negotiate with an increasingly influential and aggressive China. She’d “been put in a tough spot,” he said. 

Tai turned steely. “I don’t need your pity,” she countered. “I stand up for the American people. When I speak, people listen because I represent the interests of the United States.” 

The congressman was cowed. 

Tai is the first woman of color to be U.S. Trade Representative (USTR). She is also the first fluent Mandarin speaker. Her parents were born in mainland China but immigrated to America from Taiwan. Unlike past trade representatives, most of whom boasted long careers in the private sector, Tai is a creature of Washington. She began clerking in the U.S. District Court in D.C. before briefly working as an associate at a private law firm. In 2007, she joined USTR as an associate general counsel focused on China trade enforcement. While there, she was heavily involved in World Trade Organization (WTO) matters, suing China in a case involving critical minerals, among other disputes. In 2014, Tai became chief trade counsel for House Ways and Means. 

“She comes from the trenches of trade policy, really working on the nitty-gritty,” says Simon Lester, a China-focused economist with the Baker Institute. 

Yet, for all her experience and policy chops, Tai has flown relatively under-the-radar as USTR. As Mary Lovely, an economist at the Peterson Institute of International Economics, glumly sums up Tai’s tenure, “She hasn’t done basically anything.” 

While this lack of action has nothing to do with her demeanor, Tai does strike a particularly sharp contrast to her predecessor, Robert Lighthizer, who helped initiate and successfully carried out Donald Trump’s trade war with China. A large man with a gravely, Appalachian-tinged baritone, Lighthizer is probably what Murphy was envisioning as a trade negotiator. Lighthizer is easily riled, especially when discussing his detested bugbears like trade deficits and what he has deemed “radical free trade theology.” His and Trump’s iconoclastic skepticism of global free trade — and in particular China’s role in it — were almost preternaturally in sync, and led to the most consequential partnership in recent economic history. 

When you look at Lighthizer and Tai, they certainly reflect the extremes of both their parties in many ways, and that’s where there’s lots of commonality.

Inu Manak, a trade policy fellow at the Council on Foreign Relations

“Lighthizer was extremely empowered,” says Ed Gresser, a trade official under President Bill Clinton and vice president of the Progressive Policy Institute. “He was able to make very drastic threats with China and carry through on them.” 

As USTR, Lighthizer publicly bemoaned that Beltway bureaucrats had paved China’s way by allowing it into the WTO, causing an “unmitigated disaster for working people”; he demanded “reciprocity” and raised the average tariff on Chinese products from 3 percent in 2018 to 21 percent by the end of 2019; and he mapped out the contours of the Phase 1 Trade Deal, which, signed in January 2020, committed China to increased purchases of U.S. goods, among other measures. It was also Lighthizer who orchestrated the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA and strengthened North American economic ties. 

Given this flurry of groundbreaking activity — much of it anathema to decades of mainstream economic thought — many observers in Washington and on Wall Street expected Tai to come in just as busily and loudly, at the very least reversing some of Trump’s trade policies. 

“There was a feeling that a Biden administration would want to distinguish itself from the Trump administration on this policy of high tariffs, which violated U.S. international commitments in the WTO,” says Wendy Cutler, a longtime USTR negotiator who is now at the Asia Society. 

“Biden was under tremendous pressure from the old guard to get rid of the tariffs and to just go back to stuff like the Trans-Pacific Partnership,” adds Robert Kuttner, a Brandeis professor and the author of a forthcoming book on Biden. 

Specifically, as Biden’s USTR, Tai was expected to rescind the Section 301 China tariffs — an expectation shared by Beijing. (This obscure section of the 1974 Trade Law, shrewdly weaponized by Lighthizer, permits tariffs against countries whose trade practices are “unjustifiable and burdens or restricts U.S. commerce.”) 

But Tai didn’t do any liberalizing measures — and has even made it clear that she has no intention to. By all accounts, she is right where the administration wants her to be: judiciously and quietly continuing America’s gradual withdrawal from the neoliberal era. 

“The China tariffs are, in my view, a significant piece of leverage and a trade negotiator never walks away from leverage,” Tai testified in a 2022 congressional hearing. “The question is how do you convert this leverage into a strategic program that will strengthen American competitiveness.” 

(Neither Lighthizer nor Tai responded to requests to be interviewed.)

This unexpected synergy between the administrations, manifested in their respective trade czars, reflects Washington’s bipartisan consensus on China, wherein bilateral compromise is largely verboten. But observers also see in that continuity signs of a sea change in American trade attitudes more generally: If the second half of the 20th century belonged to neoliberal free traders, the first half of the 21st is shaping into a protectionist reset. 

Left: Then USTR Robert Lighthizer with then Chinese Vice Premier Liu He, in Washington, DC, April 4, 2019. Right: Katherine Tai met with Wang Wentao in Detroit, May 26, 2023. Credit: U.S. Trade Department, @AmbassadorTai via X

“What we’re experiencing is a significant shift in how the U.S. approaches trade policy, and I think that shift is with us for a while,” says Inu Manak, a trade policy fellow at the Council on Foreign Relations who is writing a book on this bipartisan shift. “When you look at Lighthizer and Tai, they certainly reflect the extremes of both their parties in many ways, and that’s where there’s lots of commonality.” 

Both Lighthizer and Tai have celebrated this shift as a transfer of power away from corporate and political elites to regular Americans. “The disconnect between the elites who think primarily about foreign policy or economic efficiency and the vast majority of our people is great,” writes Lighthizer in his recent memoir, No Trade Is Free. “It was time for the people to take back the policy.” Both progressives and populists, echoed Tai recently, “are meeting in a new center that is pro-worker and pro-competition, that is trying to take on oversized corporate power and looking to rebalance the equities within our system.” 

Remarks like these have convinced observers that, whichever POTUS prevails in November, the reign of the free traders is kaput. 

“This is not a short-term pause,” stresses Robert Atkinson, an economist and president of the Information Technology and Innovation Foundation. “This is a permanent hiatus.” 

LIGHTYEARS

In late 1987, as American anxieties over Japanese economic ascension reached a fever pitch, a former Reagan trade appointee named Robert Lighthizer spotted a vindictive advertisement in the New York Times. “For decades, Japan and other nations have been taking advantage of the United States,” the full-page ad decried. “It’s time for us to end our vast deficits by making Japan, and others who can afford it, pay.” 

At the time, Lighthizer was familiar with the ad’s author, Donald Trump, as a tabloid star, he writes in his memoir. But Trump’s reactionary call to arms resonated with the young, brash attorney from Ohio; he had pushed a similar line as deputy U.S. trade representative when confronting a mercantilist Tokyo. Over subsequent decades, as Lighthizer established a private sector career defending steel companies in international trade disputes, he “cheered on [Trump’s] pronouncements on trade and the harm done to our country by unfair imports” with admiring gusto. 

From 1999 — a year before America granted China permanent normal trade relations status — to 2011, the U.S. lost over two million jobs. The hemorrhaging occurred mostly in the manufacturing sector, following aggressive offshoring and a flood of Chinese imports. From 2001, when China joined the WTO, to 2017, the U.S.-China trade deficit ballooned from $83 billion to $375 billion. 

This period of rapid deindustrialization, known as the “China shock,” still reverberates through American politics, and Trump rode its waves of “American carnage” into the White House. For those in the trade world, Trump’s tapping of Lighthizer as his chief trade representative came as little surprise. While the Manhattan billionaire could only channel America’s discontent into his own political success, Lighthizer seemed to feel it at a gut level. 

Growing up, his hometown of Ashtabula, Ohio, was “an ordinary, prosperous, bustling American city — one of many such places,” he writes in his memoir. In his estimation, “poor international trade policy,” alongside automation and other advances, wrecked it. Nearly a third of residents are now impoverished in Ashtabula; less than 10 percent have a college degree. “Growing up in Ashtabula doesn’t hold as much promise these days,” he gripes. “Our country simply does not make many of the things we need anymore.” 

 In meetings with administration colleagues, Lighthizer mentioned his Ohio upbringing “every day,” recounts Clete Willems, a trade lawyer who served under Lighthizer in the administration. And in the White House, it gave Lighthizer rare freedom to maneuver; throughout Trump’s tumultuous term, as so many cabinet members fell out of presidential favor, Lighthizer remained in sterling repute. When asked in a recent Fox News town hall whom he might bring back into a second term, Trump named only Lighthizer.

“He’s an excellent negotiator and he understands leverage,” says Willems. “Everyone respected him, including the president.” 

But five years on from its first shots, results of Trump and Lighthizer’s trade war are mixed. 

The fraction of Chinese imports into America has fallen by a third since 2017. The trade deficit with China did shrink. But some economists say this was offset by growing deficits with other large exporters like Vietnam and Mexico, which last year surpassed China as the biggest source of American imports. Many of the manufacturers there, in booming border states like Nuevo Leon, are Chinese firms that simply relocated to Mexico, where they face lower tariffs. In 2022, China’s direct investment in Mexico reached $587 million, the highest on record, according to Mexico’s Economic Secretary.

Yet much of the dire predictions made at the beginning of the trade war, such as rampant tariff-induced inflation, have not come to pass. While importers paid most of the cost of the China tariffs, it was retailers, not consumers, who swallowed the bulk of the cost, limiting inflationary effects, according to one study.

“The 301 tariffs began this process of reducing our dependence on China, decoupling from the Chinese economy and basically setting an example that you can put tariffs on a country and the world doesn’t end, the sky does not fall in,” says Jeff Ferry, chief economist for the conservative Coalition for a Prosperous America. 

Meanwhile, the politics of China trade have become more Lighthizerian. Absent a small contingent of climate-focused Democrats, who argue that America should import more cheap renewable energy products from China, both parties are content to minimize trade in the name of “de-risking” and establishing a “level playing field” — the decoupling euphemism of the moment. 

…the Biden people might say some good things here and there about trade and globalization, but at the end of the day they’re a lot closer to Trump than they are to Obama.

Robert Atkinson, an economist and president of the Information Technology and Innovation Foundation

Tai, for her part, has held these politics for a while, although she briefs as more East Coast elite than Lighthizer’s smalltown champion. Born in Connecticut, Tai grew up in the D.C. metro area, where her parents worked as federal medical researchers. At Yale, Tai majored in history with a focus on Asia. Afterwards, she lived in Guangzhou for two years, teaching English as a Yale-China Fellow, and later earned her J.D. at Harvard Law. 

While rising the ranks in D.C., she kept her political cards close; to many observers, she seemed to be more or less on board with the free trade consensus. 

“Lighthizer really believes what he’s doing, and he’s really committed to that vision,” says Atkinson, who knows Tai. “For Tai, it was a little more of an evolution into this.”

Congressman Earl Blumenauer of Oregon and Senator Sherrod Brown of Ohio — both longtime critics of American trade policy — became allies, for instance, as Tai gradually fell in with the more progressive end of the Democratic spectrum. And as American polarization expanded across issues, the more extreme ends of the parties actually inched closer on trade policy. “Bidenomics,” observers note, is the culmination of this evolution. 

“The progressive left has a lot in common with the Trump Republicans when it comes to trade: more protectionist, more focused on building U.S. manufacturing and less interested in opening markets,” says Cutler. “Their skepticism is based on the belief, like Lighthizer, that trade agreements have contributed to income inequality and resulted in the offshoring of U.S. jobs.” 

One of the key stepping stones in Tai’s ascent, for instance, was the rapid response mechanism, a component of USMCA — Trump’s NAFTA replacement — which she co-designed to swiftly address labor disputes. She was the lead House Democrat staffer on the USMCA negotiations between Lighthizer and Congress to make the agreement more amenable to Democrats who had just taken the House. Her performance as “a really tough negotiator,” says Manak, had her noticed by higher-ups as a “worker-centered” trade thinker — a Biden coinage that Tai often parrots. 

The mechanism “was an effort to include more provisions in the agreement to make it more attractive particularly to the labor community,” says Cutler, adding that when it comes to trade, Biden is “a traditional labor Democrat.” “If you look at his voting record before he became president on free trade agreements, he voted against a lot of them,” she says. “His true colors on trade and his concerns about whether trade has benefited workers, led to the policies that are being pursued now.” 

In his USMCA negotiation with Tai, Lighthizer came away with a fond impression of his successor. In his recounting of that period in No Trade Is Free, he refers to the rapid response mechanism as “groundbreaking” and his Democratic successor as “the estimable Katherine Tai.”   

Two weeks ago in Geneva, I reaffirmed the United States’ commitment to the @wto and willingness to work with Members on long overdue reform. Together, we can make it an organization that empowers workers, protects the environment, and promotes equitable development. pic.twitter.com/ouXM3pRRbP

— Ambassador Katherine Tai (@AmbassadorTai) October 30, 2021

The two trade czars are similarly minded on the WTO, the longtime punching bag of American trade skeptics. Unlike Lighthizer, who freely bashed the body as “wholly inadequate,” Tai chafes at accusations of ill will — but in practice, she is hardly more supportive.

“I really bristle at this narrative that the United States…is WTO inconsistent because that calls into question our good faith in engagement and our good faith as a WTO member,” she remarked during a Q&A in September.

Yet under Tai’s watch, the U.S. has let the organization wither on the vine, refusing to nominate key officials, basically paralyzing it. 

“I think she’s been disingenuous in her support for the WTO,” says Lovely, of the Peterson Institute, which is a longtime bastion of free trade triumphalism. “She claims that they support the WTO, but then the U.S. remains one of the main barriers to creating progress there.” 

In late 2022, Tai excoriated a WTO ruling in a steel and aluminum case brought by China for allegedly impinging on American sovereignty, adding the organization was on “very, very thin ice.” 

Lighthizer, he writes in his memoir, “couldn’t have said it better myself.”

PROTECTIONIST RACKET

On both ends of the partisan horseshoe, Tai and Lighthizer’s skeptical reassessment  clashes with mainstream economic thought, which posits free trade as, more or less, universally good for Americans. And it has been good by several metrics. 

Between 2000 and 2007, the purchasing power of Americans increased by $1,500, a massive gain, due to increased trade with China. Prices for staple goods plummeted; a 1 percent increase in imports was associated with a 1.4 percent decrease in U.S. prices. Moreover, GDP economic losses in manufacturing have been offset multiple times over by gains in other industries like tech, which benefited enormously from Chinese manufacturing.  

To castigate free trade as harmful for Americans is “totally misguided,” says Gary Hufbauer, a senior fellow at the Peterson Institute. If America continues down the protectionist path, Hufbaeur continues, “we’re going to lose a lot of the efficiency benefits of trade to the U.S. economy and throw out a lot of babies with the bathwater.” 

“How Tai paints trade with China as hollowing out America and being bad for workers ignores all the people in the service sector who really benefited,” adds Lovely, pointing to jobs that appeared in human resources, marketing and sales in the tech sector. “There were thousands and thousands of jobs created.” 

For Tai and Lighthizer’s defenders, who ridicule economists as too beholden to models and theories they say have been discredited, it is a confrontation long in the making. 

“Since the mid-1980s, Bob has recognized that the theoretical underpinning of America’s post-World War II free trade doctrine is mushy to say the least,” says Clyde Prestowitz, a former Reagan trade negotiator who worked with Lighthizer in that administration. “Bob lives in the real world, and I think the same is true of Katherine Tai.” 

But where Lighthizer was granted carte blanche to pursue his reformist mission, Tai must navigate a much tighter political space. 

“The reason [the Biden administration has] to hide the ball is because there’s a lot of rich Democratic donors who still want global integration, particularly in the finance community,” says Atkinson. “So the Biden people might say some good things here and there about trade and globalization, but at the end of the day they’re a lot closer to Trump than they are to Obama.” 

“All of corporate America wanted to go back to the status quo ante,” adds Kuttner. “You also had all these people who built their careers on that model of free trade. Now it’s a tug of war where Katherine Tai is the rope they’re pulling on in two directions.”  

The most provocative moment of Tai’s tenure occurred in October, when Tai unexpectedly withdrew Trump-era proposals in a WTO negotiation over cross-border data flows. In their way, these proposals were free trade for the digital world, allowing for free cross-border data flows and prohibiting national requirements for data localization for e-commerce companies. Many multinationals were eager to see them enacted. 

Reva Goujon, a China expert and director of the Rhodium Group, notes that many observers “thought it was a given that the U.S. would lead by example as an ardent proponent of unfettered cross-border data flows in the name of preserving the principles behind a free and open internet.” 

But Tai withdrew them, she said, in order to give the administration more room for its antitrust maneuverings with Big Tech firms. 

…USTR inherited the Trump-era tariffs and has been in this very uncomfortable position of defending the continuation of those tariffs but also not having much to show for new initiatives.

Reva Goujon, a China expert and director of the Rhodium Group

Tai’s steady stewardship of America’s withdrawal from free trade principles has largely gone unnoticed because it’s been eclipsed by another important shift in American trade policy: that the USTR is just one instrument in a larger toolbox. In prosecuting China policy, Biden has relied less on USTR as Trump did and more on the Commerce Department, which issues export controls, and the Treasury Department, which screens outbound investments, deploying the arsenals of each department in a more surgical way. 

“The center of gravity shifted under the Biden administration in terms of which agency has been most active in trying to provide new solutions around de-risking efforts,” says Goujon. “So USTR inherited the Trump-era tariffs and has been in this very uncomfortable position of defending the continuation of those tariffs but also not having much to show for new initiatives.”

If Trump returns as president, the center of gravity could shift back. On the campaign trail, Trump has indicated that the trade war would scale up, saying that he would issue “more than” 60 percent tariffs on all Chinese imports. (Willems, the USTR official under Trump, sees this proposal more as a “negotiating tactic” than an actual possibility.) 

Multiple sources also say that Lighthizer would be a candidate for Treasury Secretary; Willems indicated it could be a good fit given Lighthizer’s interest in his book of using currency and tax policy to reduce trade deficits. He could, for instance, try to crack down on China’s alleged currency manipulation or pursue a border-adjustable tax.

Under either administration, one dramatic possibility for the near-future is the revocation of China’s permanent normal trade relation (PNTR) status. The president does not have the authority to do this on his own, but congress does, says Manak. The House Select Committee on China, an influential bipartisan body, has recently indicated that it might support such a drastic move; Lighthizer himself advocated for it during testimony to the committee last year. In his memoir, he calls the U.S. granting China PNTR “one of the worst mistakes in its history.” Before this, America’s annual review of China’s trading status had served as “a vital bargaining chip” in dealing with Beijing, and Lighthizer wants to bring that leverage back. 

If this were to happen, experts warn, it would massively disrupt U.S.-China trade by sparking a large Chinese retaliation.

“If I had to guess, I would say China’s reaction would be a mix of targeted retaliatory tariffs on U.S. agricultural products, as well as measures to restrict U.S. investments in China or how U.S. firms operate in China,” says Manak. “I also wouldn’t be surprised to see export controls applied on critical minerals and other strategic goods that the United States needs.” 

A recent report from Oxford Economics, a consultancy, estimates that it could result in a $2 trillion loss in the U.S. GDP.

It’s not as clear what a second Biden administration would bring to trade policy. Tai would probably be out, as trade representatives typically serve a single term. (The job is said to be extremely stressful.) Observers say it’s not clear who might replace her yet, but many guessed she would leave the government for a think tank. 

Her legacy, however, of overseeing this shift in U.S. policy seems secure.

“It seems that Biden has settled into a comfortable acceptance of Trump’s protectionist themes, with quieter decibels, and that suits unions and progressive Democrats fine, so a dramatic change would surprise me,” predicts Hufbauer. “More likely is a ramping up of trade restrictions against China, stretching the ‘small yard’ to include autos as well as anything with a genuine national security flavor.” 

In May, the same month that Lighthizer called for PNTR revocation at the Select Committee, Tai sounded an optimistic note about the future of global trade. “I remain convinced that through all of this disruption we’re moving towards a new economic order,” she said in a press interview. “I’d really like to fill that gap with a positive vision that we will be prepared for it.” 

Part of that positive vision will likely involve rearranging Lighthizer’s disruption into a more coherent program, sweeping up the proverbial china shop after a bull has passed through it. But until then, Tai’s job is simply to ensure no one puts things back the way they were. 

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