[Future of America Series] ④ The 2024 US Presidential Election Viewed Through Trade and Industrial Policy

I. Uncertainty

After the 2024 US presidential election concludes, what kind of America will we face? Until early 2024, experts anticipated that despite former President Trump's legal risks, the judicial system's rulings would not come until after the presidential election, leading to an uncontested rematch between former President Trump and current President Biden. However, this scenario has undergone a significant change. On Sunday afternoon, July 21st, US time, President Biden announced via social media that he would not seek re-election for the greater good. Instead, he endorsed his Vice President, Kamala Harris, as the new presidential candidate.

At this juncture, there is no apparent internal strife within the Democratic Party regarding Vice President Harris's nomination, but it is difficult to definitively rule out the possibility of such conflict. Given the limited time remaining before the election and the need to efficiently utilize the political funds accumulated by the Biden-Harris ticket, it is undeniable that Vice President Harris's succession to the presidential candidacy is the most realistic option for the Democratic Party. However, it remains uncertain whether Harris can unite the diverse factions of the Democratic Party and appeal to white working-class voters in the Rust Belt, as Biden did in the 2020 election, to secure a victory for the party. As is well known, Harris, who is of South Asian and Black descent and is a woman, is seen as a politician representing minority groups in the United States and helped Biden enter the White House in 2020. However, to win this election, Harris must play a different role. Specifically, she must actively court the votes of the white working class. This is undoubtedly a challenging task. Harris hails from the Bay Area, near San Francisco, a stronghold of historic longshore worker unions (e.g., the International Longshore and Warehouse Union) and a region where diverse racial political dynamics are at play. As this is a Democratic stronghold, it is unclear how effectively she will be able to reach the more conservative Midwestern and Southern white voters she needs to persuade. If the Democratic Party decides on Harris as its presidential nominee, the party will likely soon select a male politician from the Midwest or South as her running mate to actively support this difficult endeavor. However, it remains uncertain whether Harris can overcome Trump's racial(?) attacks and win the election by securing the support of white working-class voters in the swing states of the Midwest. Therefore, if Vice President Harris does not quell the skepticism within the Democratic Party in the coming weeks, the party's presidential campaign could face significant challenges.

Meanwhile, about a week before Biden's announcement of withdrawal from the race, on July 13th, former President Trump was shot during a rally in Pennsylvania. The Republic of Korea and the rest of the world watched the event with shock. Trump sustained only minor injuries in the shooting, and his composed reaction immediately after the incident is expected to further rally Republican supporters around him. With the investigation seemingly concluding without clarifying the assassin's motives, Trump's momentum appears to be solidifying. Seizing the opportunity created by the silence of the assassin, who had just turned 20, was a Republican, and left no other political message, Trump is campaigning fiercely, portraying himself as a candidate chosen by God.

The reason for President Biden's decision to withdraw from the presidential race, discussed at the beginning of this manuscript, can also be seen as a consequence of unrelated events becoming connected and taking on special significance. Biden's disappointing performance at the first televised debate on June 27th might have been merely an episode that could have been overcome by subsequent successful campaigning. However, this was not the case, as the assassination attempt on former President Trump and his miraculous survival were broadcast shortly thereafter. Amidst this chain of events, the Democratic leadership urged President Biden to step down, and Vice President Harris, from California, took the baton to begin a new challenge.

II. The Political and Economic Legacies of Trump and Biden

1. Trump's Legacy and the Democratic Party's Transformation

The direction of the 2024 US presidential election has become even more unpredictable. Even when assuming a rematch between Biden and Trump, the outcome was difficult to forecast, but now the Democratic presidential nominee has been changed with less than four months remaining until the election. To predict the election results and subsequent policy changes in this uncertain environment, it is necessary to examine the policy legacies of the Trump and Biden administrations. What are the policy legacies of the Trump and Biden administrations, how are they being inherited or broken, and how are voters who cast their ballots for Biden and Harris four years ago reflecting on and evaluating the past four years within this context? Simultaneously, what did Trump learn from his defeat in 2020, and what strategies will he employ in this election to overcome it?

The Democratic Party rapidly transformed following its defeat in the 2016 presidential election. On the surface, Democratic politicians seemed preoccupied with criticizing the policies of the Trump administration. They condemned President Trump for undermining American values by attempting to control immigrants from Central and South America by building a massive wall on the Mexican border, demanding increased defense cost-sharing from allies, and undermining the authority of international organizations in which the US had been deeply involved since World War II, pursuing unilateralism centered on the US instead of multilateralism.

However, the reality was different. Experiencing the defeat in the 2016 election and the subsequent Trump administration, Democratic politicians appear to have re-evaluated the political utility of Trump's policies. This represents a radical shift compared to the Democratic Party's previous economic policy preferences. Let's examine this more closely. Prior to the 2016 defeat, the Democratic Party focused on free trade and market liberalization economically, while politically engaging in identity politics. In fact, since the advent of the Bill Clinton administration, for nearly a decade, Democrats argued that the decline of manufacturing jobs due to free trade was a tolerable pain compared to the benefits free trade would bring to consumers as a whole, and a necessary cost to maintain the US-centered world order. Simultaneously, the Democratic Party dismissed the anxieties and aggressive reactions of low-income white working-class voters towards the influx of undocumented immigrants competing for low-wage, unskilled jobs as uneducated, racist responses, and did not permit the expression of such sentiments in public forums. The real problem was that the Democratic Party's policy stance failed to bring about any change in the lives of white voters who were economically deteriorating. The low-wage labor market was increasingly filled by cheap undocumented immigrants, and white workers easily concluded that the influx of undocumented immigrants was the cause of their worsening situation. Thus, the Democratic Party, which had neglected the economic and social grievances of the white working class, underwent a significant transformation after its defeat in the 2016 election (Teixeira and Judis 2023, chapters 2 and 7).

In particular, the Democratic Party appears to have closely benchmarked the content and effects of the Trump administration's trade policies, which seemed irrational and populist on the surface (Lighthizer 2023, chapter 1). According to Robert Lighthizer, who served as the US Trade Representative under the Trump administration, the Trump administration increased tariffs on foreign products entering the US market and began to actively regulate foreign companies, including Korean home appliance manufacturers, for unfair practices such as dumping and utilizing state subsidies to target the US market (Lighthizer 2023, chapter 1). Lighthizer assessed that these trade policies of the Trump administration successfully reduced US foreign economic dependence and significantly decreased the trade deficit (Lighthizer 2023, chapter 4). This also served as a valuable opportunity for President Trump, who was outside the mainstream Republican establishment, as it allowed him to check the free trade advocates within the Republican Party while presenting new justifications and means for the US federal government to intervene in the market for security and national interest reasons. Consequently, the Trump administration's trade policies, unafraid of friction with other trading partners, appear to have held strong persuasive power for blue-collar voters employed in manufacturing.

Lighthizer argues that President Biden took note of the achievements of these Trump policies during his presidential campaign for the 2020 election and largely adopted them (Lighthizer 2023, Introduction). Specifically, the Biden administration, like the Trump administration, was actively using trade policy to promote US manufacturing and maintained the tariffs imposed on China by the Trump administration without repeal. Even considering the possibility that Lighthizer, who held senior positions in the Trump administration for a long time, might be exaggerating his achievements to emphasize the continuity of the Trump administration's policy legacy in the next government, this assessment appears generally valid. This is also confirmed by the Biden administration's economic policy direction announced by the Director of the White House National Economic Council (NEC) on June 23, 2021.[1] The first agenda item, "Supply Chain Resilience," stated that the US government planned to re-foster US manufacturing, including the semiconductor industry, protect US companies from competition with foreign companies, including Chinese firms, and invest long-term in advanced technologies.

However, contrary to the description that Biden benchmarked the Trump administration's trade policies, it remained uncertain how the Biden administration would concretely realize the policy direction it announced. In fact, the Trump administration, beyond imposing tariffs with protectionist characteristics, never actively presented an industrial policy. While a plan for fostering advanced industries, classifiable as industrial policy, was announced in the "Strategy for American Leadership in Advanced Manufacturing" report by the National Science & Technology Council (NSTC) under the Trump administration in October 2018, this report was never presented as policy, including government budget plans (NSTC 2022). In the 2020 election, then-President Trump never pledged an industrial policy targeting the US manufacturing sector.[2] It was solely up to the Biden administration to determine what kind of industrial policy could be implemented, following Trump's aggressive trade policies.

2. Biden's Industrial Policy and Political Legacy

A year later, in August 2022, the CHIPS and Science Act and the Inflation Reduction Act (IRA) were passed by the US Congress and enacted upon President Biden's final signature. The Biden administration's policy direction, centered on industrial policy as presented by the National Economic Council, was concretized through these two laws.[3] While risking generalization, the implications of these two bills as industrial policy can be summarized as follows: The US federal government will exercise unprecedented regulatory power over advanced manufacturing industries, including semiconductors, batteries, and electric vehicles, based on these two laws. Foreign companies, in exchange for access to the US market, must establish production facilities and create jobs in the US. In cases where sensitive materials such as critical minerals are used in production, they must adhere to production guidelines that limit the proportion of raw materials obtained from Foreign Entities of Concern (FEOC) designated by the US government. Failure to comply with these guidelines will result in the forfeiture of incentives such as tax credits from the US government, leading to a loss of price competitiveness in the US market.

With just over three months remaining until the November 2024 election, the question that captures our attention is the political impact of the industrial policies implemented by the Biden administration. First, let's examine the influence of Biden's industrial policies on US domestic politics. It is unlikely that Biden's industrial policies will immediately serve as a boon for the new Democratic presidential candidate who will replace Biden. Above all, it will take several years for the two bills, which the Biden administration worked hard to pass, to prove effective and receive positive public evaluation. The case of the CHIPS and Science Act among the two bills clearly illustrates this point. As of May 2024, approximately 77% of the $39 billion allocated for direct and indirect support to the semiconductor manufacturing industry under the CHIPS and Science Act has been allocated and invested, with the remaining 23% of the funds being sequentially invested in various projects up to this point.[4] Unless the funds are injected into US semiconductor manufacturers that already have infrastructure, creating immediate employment effects, it is difficult to expect this law to broadly influence voter preferences. However, if the public deeply considers the potential impact of this law on local communities in the near future, even if not immediately, and anticipates its sustained positive effects, then Biden's industrial policies could exert a positive influence on the Democratic candidate in the 2024 election.

Meanwhile, the effects of the Inflation Reduction Act are expected to be more complex. Trump and other Republican politicians have long criticized the law as unfair and argued that it fuels inflation rather than reducing it. Furthermore, Republican politicians have argued that subsidies provided to consumers in the form of tax credits for electric vehicle purchases should be eliminated because they may infringe upon consumer choice. In an interview with Bloomberg News on July 15th, Trump reiterated these arguments, claiming that the green energy subsidies under the Inflation Reduction Act are actually increasing the price of energy, which is the foundation of industrial development, thereby fueling inflation (Bloomberg 2024-07-15). It is uncertain how persuasive these arguments will be to voters by the November 5, 2024 election. However, considering that voters are likely to react sensitively to high interest rates and rapidly rising prices, while the effects of the Biden administration's industrial policies are difficult for voters to intuitively grasp, the Trump camp may be able to lead the election advantageously by simply criticizing the current administration's price management policies without presenting new policies distinct from the Biden administration's industrial policies. According to a July 18, 2024 Politico article interviewing workers in the green energy sector, a beneficiary of the Biden administration's policies, the interviewee stated that despite working in a sector that has greatly benefited from the Biden administration, the perceived economic indicators are very negative due to high interest rates and inflation, making it difficult to support the current administration. This situation, as depicted in the Politico article, might be the prevailing sentiment among blue-collar workers who supported Biden four years ago (Bade and Hill 2024).

III. The Future Direction of Industrial Policy After the 2024 Presidential Election and Our Stance

This manuscript has introduced the rapidly changing trends of the US presidential election and examined the development of trade and industrial policies from the Trump administration to the Biden administration. It has also attempted to predict the political legacies of these policies and how they will operate on Election Day in November 2024. However, as many preceding paragraphs have indicated, much of this analysis remains speculative rather than definitive. This may be due to the election experiencing an unusual number of variables and undergoing rapid changes.

If, as many anticipate, the Democratic Party nominates Vice President Harris, they will likely strive to find a conservative running mate, considering her background as a non-white woman. It is questionable whether this newly formed Democratic presidential ticket will fully embrace the policy platform of the previous Biden-Harris team, but it is highly probable that their election campaign will involve largely adopting the industrial policy experiments meticulously crafted by the Biden administration. If the Democratic Party wins the 2024 election again, the free trade and finance-centered neoliberal path that took root after Bill Clinton's election will likely come to an end within the Democratic Party, replaced by a conservative industrial policy that partially incorporates Trump's economic nationalism.

Trump and the Republican Party have already accelerated their campaign by recruiting J.D. Vance as their vice-presidential candidate. As noted earlier, Trump's economic policy platform is straightforward: it will likely be highly effective by focusing on criticizing the current administration's high interest rate and high inflation policies. Regarding the industrial policy legacy from Trump's first term, the focus will likely be on strengthening trade sanctions against China and withdrawing various preferential treatments that the US has unfairly borne for its allies. However, if Trump is re-elected, the method by which he will realize such policies is not easily predictable. Trump's leadership is difficult to anticipate, and legislative politics through Congress will pose an insurmountable obstacle for Trump amidst the trend of polarization.

Regardless of who wins, the linkage between trade policy and industrial policy, which began during the Trump administration, is likely to continue to a significant extent in the next administration. Even if the Democratic Party regains power, the previous industrial policies are unlikely to be inherited without change; rather, they are expected to be modified in response to macroeconomic indicators and other unforeseen circumstances. In principle, the industrial policies of the Biden administration, institutionalized through legislation with the consent of both houses of Congress, are likely to be sustained. The possibility of the Republican Party securing both the White House and both chambers in the congressional elections held concurrently with the 2024 presidential election appears extremely low at present. If even one chamber is lost to the Democratic Party, it will be difficult for the administration to unilaterally amend or abolish related legislation, even with strong presidential will. In this regard, the fact that the Biden administration has established industrial policy through legislative politics can be evaluated as a policy achievement that is difficult to attain in an era of political polarization.

However, if Trump wins the election, the executive branch could intentionally delay the implementation of Biden's policy legacy, thereby preventing these policies from receiving adequate financial support and execution. Since the executive branch is responsible for enforcing laws, it can intentionally delay the timing of financial support and reduce the amount of financial support compared to the plan during the implementation phase, hindering the full execution of the policies. However, this process could lead to legal disputes over responsibility for policy delays and failures, making it a choice that the executive branch cannot arbitrarily make.

In summary, South Korean citizens and businesses with deep interests in the US market should maintain their strategies for responding to the existing CHIPS and Science Act and the Inflation Reduction Act while observing the emergence of a new government. The new administration is likely to undertake gradual and partial institutional changes under various conditions. Stakeholders in South Korea should pay close attention to the laws where these gradual and partial changes will occur and how the revised laws will be applied. ■

References

Arcuri, Gregory. 2024. “Innovation Lightbulb: What's Left of the CHIPS Act Funds?” Center For Strategic and International Studies Newsletter. May 8. https://www.csis.org/analysis/innovation-lightbulb-whats-left-chips-act-funds(Accessed: July 24, 2024)

Atlantic Council. 2021. “The Biden White House plan for a new US industrial policy.” June 23, https://www.atlanticcouncil.org/commentary/transcript/the-biden-white-house-plan-for-a-new-us-industrial-policy/(Accessed: July 24, 2024)

Bade, Gavin, and Meredith Lee Hill. 2024. “Biden has poured billions into Rust Belt economies. His ‘Blue Wall’ is crumbling anyway.” Politico. July 18. https://www.politico.com/news/2024/07/18/wisconsin-democrats-biden-midwest-elections-green-00167994(Accessed: July 24, 2024)

Bloomberg. 2024. “The Donald Trump Interview Transcript.” July 15. https://www.bloomberg.com/features/2024-trump-interview-transcript/?embedded-checkout=true(Accessed: July 24, 2024)

Information Technology and Innovation Foundation: ITIF. 2020. “Trump vs. Biden: comparing the Candidates’ Positions on Technology and Innovation.” September. https://www2.itif.org/2020-trump-v-biden.pdf(Accessed: July 24, 2024)

Lighthizer, Robert. 2023. No Trade is Free: Changing Course, Taking on China, and Helping America's Workers. New York: HarperCollins.

National Science and Technology Council: NSTC. 2022. “National Strategy for Advanced Manufacturing.” October. https://www.whitehouse.gov/wp-content/uploads/2022/10/National-Strategy-for-Advanced-Manufacturing-10072022.pdf(Accessed: July 24, 2024)

Teixeira, Ruy, and John B. Judis. 2023. Where Have All the Democrats Gone?: The Soul of the Party in the Age of Extremes. New York: Henry Holt and Company.

[1]The economic policy direction announced by the Biden administration consists of the following five areas: 1) Supply Chain Resilience; 2) Targeted Public Investment; 3) Public Procurement; 4) Climate Resilience; 5) Equity. (Atlantic Council 2021-06-23)

[2] This was also pointed out in a compilation of technology policies of the two major party presidential candidates published in September 2020 by the Information Technology & Innovation Foundation (ITIF), a U.S. non-profit think tank. (ITIF 2020) Please refer specifically to page 23 of the electronic document.

[3] Analyzing the specific details of the two bills would go significantly beyond the scope of this article. Furthermore, there are already many introductions to legal and management advisory services aimed at providing advice on the impact of the detailed provisions of the bills on Korean companies. Therefore, this paper will omit a detailed introduction to the two bills.

[4] According to a newsletter published in May 2024 by the Center for Strategies and International Studies (CSIS) in the United States, only 23% of the budget allocated by the relevant law remains unused (Arcuri 2024). Meanwhile, the National Institute of Standards and Technology (NIST), an agency affiliated with the U.S. Department of Commerce, continues to update programs supported by the CHIPS and Science Act (https://www.nist.gov/).

■ Jeong Young-woo_Assistant Professor, Department of Political Science and International Relations, Incheon National University.

■ Editor: Park Han-soo_EAI Research Fellow

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