The known and not quite known economic views of Ms. Harris
The meteoric rise of Kamala Harris from the number two on a ticket seemingly destined for defeat to a narrow favourite to win in November has generated enormous global interest in how the Vice President might govern were she to become president of the United States. It became evident that she is a formidable debater, that her oratory skills are sharp, that she has a charismatic presence and that she occupies the centrist space in the Democratic Party. But less well-defined are her views on trade and the international economy.
Harris and her campaign know that a degree of mystery surrounds her policy positions. Her much-touted speech on 25 September to the Economic Club of Pittsburgh was designed to counter this. And to a certain degree, it did. Harris outlined an economic policy long on issues that would be popular with middle-class voters including a US$6,000 tax credit for parents with a newborn child and a US$25,000 tax credit for first-time home buyers. Her proposals include startup company tax breaks and prescription drug price caps. What the speech did not mention was trade. She spoke of her desire for the United States to “out-innovate and outcompete the world” and to “unlock the potential of small business so that no one will be able to keep up with us.” Rather than directly bringing up trade, she spoke of industrial policies in key sectors enabling the United States to be the leader in these sectors, such as “America and not China wins the competition for the 21st century.” She identified these sectors as biomanufacturing, aerospace, artificial intelligence, quantum computing, and blockchain. It was essential, she said, that cutting-edge technology products were “not just invented but built here by American workers.” Trade was mentioned indirectly and only to taunt Trump. “I will never hesitate to take swift and strong measures when China undermines the rules of the road at the expense or our workers, our communities, our companies.” Mr. Trump, she said, “constantly got played by China.”
She alleged, that China floods the market with steel, subsidizes shipbuilding and steals American intellectual property. While there is some merit to Ms. Harris’ arguments on shipbuilding and patents, the steel argument spoke more to the Pittsburgh audience than the bilateral trade in steel. China produces about half the world’s steel and accounts for 22% of global steel exports, according to the World Steel Association. The surge of Chinese steel, widely agreed even by Beijing itself as a globally imbalanced economic sector, contributed to average export prices falling 33% year-on-year in 2023, official Chinese data show. Still, the U.S. imports relatively little Chinese steel compared with other economies. Only about 9% of Chinese steel exports went to the U.S., less than 1% of China’s global steel exports ( World-Steel-in-Figures-2024.pdf (worldsteel.org)).
The 82-page Harris-Walz campaign policy paper entitled “A New Way Forward for the Middle Class: A Plan to Lower Costs and Create an Opportunity Economy,” yields no insights on trade policy either ( Policy_Book_Economic-Opportunity.pdf (kamalaharris.com)).
No mention was made of the World Trade Organization in either her speech or in the campaign’s economic manifesto, but then no one running for office in the United States these days will mention the WTO. Rather, the Harris platform refers to her belief “in upholding and strengthening international economic rules and norms that protect fair trade and create predictability and stability.”
Examining her past positions may be useful in determining how she might govern as president. As a senator from the state of California, Ms. Harris was one of only ten US Senators to vote against the revamped North American Free Trade Agreement now known as the US-Mexico-Canada Agreement. In 2016 as a candidate for her Senate seat, she was a vocal critic of the Trans-Pacific Partnership deal the Obama administration negotiated with 11 Pacific Rim countries ( What are Kamala Harris' trade policies? | Fortune). In both cases, she reasoned that the trade agreements lacked effective, enforceable provisions to protect the environment and workers’ rights. But in her career, Ms. Harris has shown that she is, if anything, pragmatic. As a candidate for President in 2019 she said she would ban fracking and indicated her support for a single-payer national health insurance plan that would have abolished private insurance. She has walked both of those positions back. As Vice President in 2022, she actually cast the deciding vote in the Senate on the Inflation Reduction Act which included provisions to open federal land and offshore sites to oil and gas exploration and extraction including by fracking ( Harris supported the Green New Deal. Now, she's promoting domestic oil drilling | AP News). It perhaps might be considered as flexibility on the political side if not as something a bit ridiculous in an ethical aspect or as a tarnished vision of a sustainability horizon.
The one trade issue on which the Vice President has been vocal in her opposition to former President Trump was the tariff plans.
According to the Peterson Institute for International Economics in Washington, DC, the 20% tariff on all imports and the 60% tariff on all imports from China would cost middle-class households over US$2,600 annually. The 10% import tariff would mean US$1,700 in lost income each year for Americans ( Trump's bigger tariff proposals would cost the typical American household over $2,600 a year | PIIE). In their debate, Ms. Harris hit him hard on this. “My opponent has a plan that I call the Trump sales tax, which would be a 20% tax on everyday goods that you rely on to get through the month,” she said." Earnestly considered Ms. Harris's positions by lacking declared intentions about universal tariffs imposing and mass deportation of immigrants (low-cost manpower) should be really assumed less pro-inflationary than the pre-election pillars of Trump.
One issue on which Ms. Harris and Mr. Trump agree is that Nippon Steel’s US$14.9 billion offer for US Steel should not be permitted to proceed. In December 2023, the Japanese producer announced its intention to acquire the iconic but long-struggling Pittsburgh-based company.
After former President Trump said in January that he would prohibit the deal “instantaneously”, the die was cast. President Biden said in March that he opposed the deal and Vice President Harris chipped in that the company “should remain American-owned.” ( Opinion | Blocking Nippon Steel bid for U.S. Steel is a costly political ploy - The Washington Post).
But the story is not over. The CFIUS review has not been completed and the seven-member panel chaired by Treasury Secretary Janet Yellen has permitted the two companies to refile their application meaning that the panel will not rule on the case until after the 5 November deadline ( US decision on Nippon bid for US Steel pushed back to after Nov election, sources say | Reuters). Whether Ms. Harris would block the takeover should she become president is not clear. The heat of a presidential campaign can distort a candidate’s true policies and Pennsylvania, home to US Steel, is a linchpin of her campaign. The Keystone State, with its 19 electoral votes, is one of seven swing states which will determine on Election Day who next occupies the White House. However, logic and strategic reason support the rationale for the deal’s approval. The only other offer on the table has been Ohio-based Cleveland-Cliffs Inc.’s US$7.3 billion bid. It was rejected by US Steel management months before Nippon Steel’s offer was put on the table. Harris has courted union votes by criticizing a proposed Japanese takeover of US Steel. What she would do as President is less clear. Logic and strategic reasons really support the deal’s approval. It might be a test of her international orientation on cross-border investment. Many local politicians, businesses, and even some of the USW rank and file support for the Japanese deal. Nippon Steel has much deeper pockets than Cleveland-Cliffs and has pledged to inject US$2.7 billion into upgrading US Steel’s facilities and its technology. Nippon has also pledged to keep the company’s headquarters in Pittsburgh and respect the existing collective bargaining agreement US Steel made with the USW. Current US Steel management has warned that without Nippon’s cash injection, the company would be forced to close plants and lay off workers.
Whereas a Nippon Steel-US Steel merger would create the world’s third-largest steel producer, a merger of Cleveland-Cliffs, the second-largest producer by output in the United States, with US Steel, the third-largest, raises antitrust questions. Nippon Steel is currently the fourth-largest steel mill in the world. Beyond the economic and strategic logic of the Nippon-US Steel merger, there is the geopolitical rationale, too. The security-driven suspicion against a takeover of US Steel by a highly respected company based in a country that is one of the United States’ most trusted allies appears overblown and self-defeating. Japan is the most important US ally in Asia. More than 55,000 US military personnel are based in Japan. The US steel industry has been in decline for decades and is unlikely to grow organically by domestic resources alone. Moreover, Tokyo has cooperated closely with Washington in curbing high-tech exports to China and tried to align itself with even some of the more controversial US multilateral trade policy decisions. Japan has been constructive in the US-led Indo-Pacific Economic Framework for Prosperity (IPEF) even though Japanese officials believe IPEF to be an empty shell (currently, it is a dead shell, indeed as an organisation existing mainly on paper due to the US protectionist foreign trade pillars). There is no doubt that Tokyo would view the blockage of this merger as a slap in the face.
On industrial policy, Ms. Harris’ campaign commentary seems a Biden's policy copy set with glowing references to the job-creating, innovation-nurturing power of the Inflation Reduction Act and the CHIPS and Science Act both of which became law in 2022. The two programs have been funded to the tune of hundreds of billions of federal dollars and indications are that they have sparked a surge in investment in green energy and high technology. Still, this is not reflected in industrial output growth, however, and the same growth continues to be only a wishful hope.
Ms. Harris’ misgivings about China and her conspicuous silence on global trade are also in lockstep with President Biden. But if there is deviation from the Biden line to be found, it might be found in her approach to Silicon Valley and the tech behemoths that call it home. Oakland, California, is Ms. Harris’ hometown and she has been a public presence in the Bay Area for decades. Her speech in Pittsburgh was rife with references to the need to maintain and bolster US leadership in the industries “of the 21st century.” Specifically, as it was noted above she cited biomanufacturing, AI, quantum computing, and blockchain.
As California attorney general, US Senator, and Vice President, Ms. Harris has weighed in often on issues concerning Silicon Valley. But the focus of her interest was more in strong regulations for data privacy protection. On artificial intelligence, her priority has seemed to be on preventing discrimination and exploitation in the use of the technology. She has not taken strong positions on antitrust questions ( Silicon Valley had Kamala Harris’s back for decades. Will she return the favor? - The Washington Post) and even less on development matters. So, her overall approach in the case seems vague from a strategic point of view.
Selected aides
Looking at who she has chosen to advise her on international economics offers some clues as to what she would likely hear from her inner circle were she to become president. Among those advising Ms. Harris in her campaign are Michael Pyle and Deanne Millison, who have advised the Vice President for years. Another Harris advisor is Brian Deese, who used to head Biden’s National Economic Council. Veteran policymaker Gene Sperling, who chaired the NEC for both President Clinton and President Obama, has also joined the Harris-Walz campaign. Interestingly, anti-corporate segments of the Democratic base greeted the selection of these officials with chagrin. Mr. Deese and Mr. Pyle’s formerly worked in senior positions at the Wall Street investment firm BlackRock, which some liberals find unsettling ( Another BlackRock Veteran Will Join the Biden Administration - The American Prospect). Commentators on the right of the political spectrum criticize these advisors for their links to environmental and sustainability-motivated economic policies ( Kamala Harris’s team underlines her far-left economic agenda - Washington Examiner). Positions advanced by these advisors are, to date, far from uniform. But there are some common themes. Support for Biden’s industrial policies outlined in the IRA and the CHIPS and Science Act is certainly one of them. They embrace environmental sustainability as well as a deep suspicion of China. In an April 25 opinion editorial in the Washington Post, Mr. Deese took China to task for its non-market policies and the vast production surpluses they foster. Beijing’s policies lay at the heart of the “trade shocks” that led “the U.S. economy to lose not just millions of jobs but also the powerful industrial ecosystems that enable us to operate at the cutting edge of global innovation.” This upheaval short-circuited supply chains that were essential to reshoring critical products like semiconductors. “Ultimately, we should not — and will not — accept a framework for global trade that is predicated on hollowing out our industrial base,” he wrote. But, Mr. Deese takes a more pragmatic tack on trade than some others in the Biden administration, acknowledging that the US-China relationship does offer some advantages for the US economy. “It is not practically possible to decouple from any major economy, let alone our third-largest trading partner. There are important benefits from global trade, and unilateral, asymmetric escalation will leave the United States isolated and vulnerable,” he wrote. On the other hand, Mr. Deese appears to be oblivious to the possibility that countries might baulk at his suggestion they collectively violate WTO rules and infuriate China by forming a coalition to jointly hike tariffs on Chinese exports of steel or green energy products.
In an interview with the climate-focused publishing platform Heatmap, Mr. Deese characterized policies designed to prompt a political change in China by offering better access to US markets as an “unsupportable hypothesis".
Mike Pyle, who until the beginning of the year served as President Biden’s deputy national security adviser for international economics at the National Security Council, is perhaps the biggest trade sceptic among the core advisors. In a June 2023 speech to the Carnegie Endowment in Washington, Mr. Pyle said, “We don’t see trade policy as being at the core of international economic policy. Just as the agenda with other industrial economies begins with investment, so too does the agenda for the developing world begin with investment. He missed who knows why the focus that investment often is connected with foreign trade for sustainability and geopolitics sake, especially for the industrial economies.
Among Mr. Pyle’s achievements cited by the Biden Administration, officials are negotiations for the IPEF and his diplomatic efforts to assuage the EU over the impact of Inflation Reduction Act subsidies on European companies. But the IPEF trade pillar collapsed spectacularly last year, just before the Asia-Pacific Economic Cooperation (APEC) summit hosted by Biden in San Francisco. Moreover, the EU remains far from sanguine over IRA subsidies. Washington linked its ok for EU car producers to access IRA subsidies to a “green” steel agreement with Brussels. Mr. Pyle’s efforts to produce such an agreement failed because Brussels refused to unilaterally impose tariffs on Chinese goods and rebuffed Washington’s pressure to exempt US steel exports from any tariffs that might be imposed under the EU’s Carbon Border Adjustment Mechanism.
Mr. Sperling has a long history of involvement in US trade policy. He negotiated the agreement that led Washington to accept China’s entry into the WTO and was involved in the final stages of negotiations for the North American Free Trade Agreement. Writing in the journal Democracy in 2007, Mr. Sperling said “Clintonites such as myself continue to see the trade and economic policies of the 1990s as contributing to a sound post-Cold War foreign policy and a booming economy that was striking for its degree of shared growth.”
Ms. Millison’s positions on trade are less clear. She served as Vice President Harris’ chief economic advisor and before that as her legislative director when Ms. Harris was in the US Senate. She worked from 2017-2019 in the office of Rahm Emanuel when he was mayor of Chicago.
Conclusions
The race for the White House hangs on a knife’s edge. It may well be that vote counting goes some days past the 5 November election date while the outcome remains in doubt. What is not in doubt is how Donald Trump would engage with US trading partners. On many levels, he may be an unpredictable character but on trade, his decades-long protectionist positions are dead certain. He cares little for conventional economic principles and is unbothered about antagonizing America’s allies. He perhaps is poorly aware that offers as a whole an economic nonsense. Or if he is aware, then he is too corrupted. Or maybe he is even so narrow-minded that he cannot perceive himself as corrupted, either. Never mind. With Kamala Harris, the future of US trade policy would be less predictable. But given that Democratic protectionist policies are now hardwired into the party’s political psyche, a betting person might conclude she is likely to stick close to Biden's policy, at least at the beginning of her new term. Never in the postwar era has the US political landscape been so anti-trade. Virtually no politician in America today sees a political upside in advocating pro-trade policies. Today politicians in the United States regularly conflate trade with China. China is a rival and possibly a threat. China is the world’s largest trading nation. Therefore, trade must be suspect. Kamala Harris falls squarely into this category. When she references trade in speeches, interviews, and campaign policy documents, it is about China.
At the other end of Pennsylvania Avenue, members of Congress are equally reluctant to speak about trade, let alone support it. Polls indicate that while Democrats may regain the House of Representatives, they will likely lose control of the Senate.
There is little question that most US allies would prefer that Vice President Harris win next month. On the environment and matters of security, Ms. Harris’ policies would be well received in most foreign capitals. But allies are under no illusion that a Harris administration will be warm and welcoming when it comes to trade either bilaterally or at the WTO. There is the possibility of progress on digital trade and possibly on sustainable trade. But there is acceptance the United States will not resume its global leadership in trade any time soon nor that bilateral trading relations will become more open. Expectations ran high that the Biden administration would be more open to trade than its predecessor, but those hopes were quickly dashed. Many allies were shocked and dismayed by the extent to which Biden trade officials leaned heavily into protectionist policies. They are unlikely to be caught off guard a second time.
But can Ms. Harris do much good for America first of all without a comprehensive foreign trade strategy? It seems scarcely possible. And the competition with China is the litmus for that. The U.S. has a wobbling manufacturing and labour productivity with a clear trend to go down in the last decades, lags behind in industrial output and export both as sizes (nearly 1.7 times) and growth (almost twice in the last 7-8 years), has a smaller weight in key international supply chains, can rely on smaller investments in the real economy, usually scales up slower manufacturing products and has at hand more than 10 times less industrial workers. All these disadvantages are not possible to surmount just with protectionism and faith in the biggest and most solvent domestic market worldwide. Having slower industrial scaling up means that even innovations cannot reach their full impact potential. And innovations are normally more impactful in the industry, not in the services sector. Then the refusal to participate in global trade through leading multilateral agreements and partnerships promotes an admission of economic vulnerability. Harris and Trump react to it with different kinds of populism, but none of them seem able to spell out a trade strategy that can counter the growing wealth polarization in American society (regardless of available or intended income redistribution subsidies) stemming primarily from the unequal chances to technology access and application for many American people/companies. It happens in a reality in which trade makes only 27% of the US GDP while the average figure for the world is 62%. That is why the simple truth about Ms. Harris' silence on foreign trade comes from the US economic vulnerability which by the low trade value generative levels continues to produce wealth polarization in society without the economy reaching its best competitive shape. The economy's diminished competitive capacity originates from underinvesting, unfulfilled export potential and too high capital concentration in important sectors. Any competitive mediocrity on the other hand conceives inflation. A good foreign trade strategy conceptualizing re-industrialization, re-shoring sectorial government policies, supply chains restructuring and the setting up of alternative chains with a clear geopolitical focus, cross-border business partnerships encouragement and relevant transnational agreements signing can sustainably suppress inflation by improving economic competitiveness. But any strategy of this sort targeting technological transformation and suppressing inflation, aimed at better competitiveness will require an initial austerity of heavier tax levies and government budget social spending cut. The latter contradicts greatly the current public expectations in the country. Exactly to that fact, Ms. Harris attributes silence. Trump echoes his suicidal tariffs. And a lot of impoverished Americans from globalization prefer to treat their wounded souls and empty pockets with hypocritic myths of the Trumpists' echo about national pride and protectionism, denying thus the cynical international trade (export growth) usefulness for making their economy more competitive. After all, it is easier to be a cultural chauvinist or philistine within any social strata than to compete and grow in it and beyond it. Ms. Harris knows that well and tries to adjust herself to the circumstances silently. It is done at the expense of the due structural transformations and global competitiveness enhancement of the US economy. However, if it is dubious whether whatever enhanced American economic competitiveness can ever be realistically sufficient to beat down China internationally, it is certain that any improved competitiveness can minimize the national economy vulnerability and pro-inflation sensitivity. If it does not work this way, then America has nobody to blame, but itself for its own choices.