News: Biden’s legacy on chips

Monday, December 23, 2024

Biden’s legacy on chips

Dec 23, 2024

PROGRAMMING NOTE: We’ll be off starting Wednesday for the holidays but back to our normal schedule on Monday, Jan. 6, 2025.

Joe Biden smiles as he sins a document.

The launch of an investigation into “foundational” or so-called legacy semiconductors marks a significant escalation of the Biden administration's efforts to crack down on China. | Kevin Dietsch/Getty Images

QUICK FIX

— The Biden administration has announced a new probe into legacy chips from China — teeing up Donald Trump’s trade office to make the final determination.

— Nippon Steel and United Steelworkers were unable to come to a consensus during meetings last week ahead of a CFIUS deadline to deliver Joe Biden a recommendation on the sale of U.S. Steel.

— Lawmakers praised a decision from an international trade panel that found that Mexico’s restrictions on imports of genetically-modified corn violate the terms of the USMCA.

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Driving the day

TECH WAR ON TAP: The Biden administration has unveiled a new Section 301 investigation on Monday that could lead to higher tariffs on so-called foundational, or legacy chips, escalating efforts to restrict Beijing's technology dominance.

U.S. Trade Representative Katherine Tai told reporters on a call ahead of the announcement that China is pursuing global dominance in the semiconductor sector. “That is why this investigation is the necessary next step. The resilience and secure supply of foundational chips is critical to U.S. economic security as well as national security,” Tai said.

“This investigation underscores the Biden-Harris Administration’s commitment to standing up for American workers and businesses, increasing the resilience of critical supply chains, and supporting the unparalleled investment being made in this industry,” Tai added in a statement.

The Biden administration had deliberated pursuing either a Section 232 probe under the Commerce Department, or Section 301 under USTR, to pursue new restrictions, before settling on the latter.

The escalation is poised to spook the international technology industry, and invite sharp backlash from China. The timeline for a Section 301 investigation and subsequent action can extend for months and beyond a year, meaning the investigation will have to be finalized under Donald Trump, who tapped Jamieson Greer as his choice to be the next USTR.

What comes next: The Trump administration could decide to alter the scope of the investigation or nix it entirely. However, his trade agency would be under pressure to continue the probe, and even expand its focus rather than abandon it. That could help fend off the risk of China stockpiling materials, and reinforce the perception of Trump as tough on China.

“This investigation could have complex and far-reaching ramifications on the global economy, supply chains, and U.S. competitiveness,” one of the people familiar with the discussions told Morning Trade ahead of the official announcement. “It is critically important that the administration conduct a thorough investigation, engage Congress and industry stakeholders, and not prejudge the outcome – especially as the Biden Administration prepares to transition in a few weeks.”

One step back: The move is the latest in a series of actions on China including new restrictions on semiconductor equipment and tariff hikes on certain tungsten products and other items in the final weeks of the administration. It also comes on the heels of reports from POLITICO and other outlets that Commerce is expected to announce country-specific caps on the sale of advanced chips used in AI technology, among other restrictions.

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REGULATORY REVIEW

NIPPON DEAL DECISION NEARS: Nippon Steel and United Steelworkers met on Wednesday and Thursday last week, but the meetings yielded little progress. Now, both parties are anxiously waiting for the interagency Committee on Foreign Investment in the United States to give Biden its recommendation on whether or not to block the sale of U.S. Steel.

A letter from Nippons’ Representative Director and Vice Chair Takahiro Mori, obtained by Morning Trade, notes that USW “wouldn’t engage with us and refused to make any counterproposals. I was surprised to see a press release that mischaracterized the whole process come across my phone as I was sitting across from them.”

They were referring to a press release the union sent Thursday, which claimed Nippon had “made it clear that it has no intention of meaningfully addressing the problems with the sale.”

The back and forth comes on the heels of a separate letter where Nippon claimed the White House had "impermissible undue influence" over the national security review, per Reuters.

One step back: CFIUS earlier this month informed the two companies that it still saw the deal as a national security risk and has been unable to reach consensus on what is called a “mitigation” plan that would allow the acquisition to proceed.

The current impasse means the committee could present Biden with a rare split decision instead of a unified recommendation. CFIUS’ latest deadline to give Biden its recommendations is on or around Dec. 23.

DELAURO SLAMS ‘PRESIDENT MUSK’: Rep. Rosa DeLauro (D-Conn.) sent a letter on Friday to Congressional leaders accusing Republicans of caving to the demands of Elon Musk, including by rejecting a provision of a spending bill to limit U.S. investment into China.

On the Hill

CONGRESS TOUTS PANEL RULING: Lawmakers praised a decision from an international panel that determined that Mexico’s restrictions on imports of genetically-modified corn violate the terms of North America’s free trade agreement.

“This is a tremendous victory for Iowa corn growers, and it’s a tremendous victory for what we call decisions on international trade based on sound science, as opposed to political science,” Sen. Chuck Grassley (R-Iowa) said in a statement.

Ways and Means Committee Chair Jason Smith also praised the decision, but added: “While we are glad that Ambassador Tai made the right call challenging Mexico’s unscientific ban of American agricultural exports, we look forward to more speedy and decisive action under President Trump in his use of important enforcement mechanisms built into USMCA in order to defend Americans against foreign cheaters.”

What it means for Mexico: The decision puts pressure on Mexican President Claudia Sheinbaum to reverse a policy put in place by her predecessor, Andrés Manuel López Obrador, who argued the restrictions were needed to protect health and Mexico’s native corn varieties.

Several Civil society groups in the U.S., Mexico and Canada also criticized the decision, according to a release. Farm Action President Angela Huffman said the decision “shows the U.S. successfully wielded its power on behalf of the world’s largest agrochemical corporations to force their industrial technology onto Mexico.”

Mexico in a statement suggested it would comply with the decision.

Doug and Meredith Lee Hill have more here (for Pros!).

TRUMP THREATENS TO RETAKE PANAMA CANAL: In two Truth Social posts Saturday, Trump accused Panama of charging U.S. vessels exorbitant rates to pass through the critical waterway. He also claimed that the treaties enabling Panama to take control of the canal in the first place also allow for the U.S. to take it back. Read more here.

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