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Updated March 16, 2022
U.S. Trade Policy: Background and Current Issues
Congress plays a major role in shaping, overseeing and
are more integrated globally, especially with emerging
legislating U.S. trade policy through its constitutional
economies. Recent U.S. and global trade trends reflect
authority over tariffs and foreign commerce (Article 1, §8).
ongoing pandemic and economic recovery effects.
Since World War II, U.S. trade policy has generally sought
to advance U.S. economic growth and competitiveness by:
The 2021 top U.S. trading partners (goods and services,
(1) reducing international trade and investment barriers; (2)
exports plus imports) were, as a bloc, the European Union
fostering an open, transparent, and nondiscriminatory rules-
(EU, $1,091 billion), and by country, Canada ($758 bn),
based trading system, including through the World Trade
Mexico ($725 bn), China ($716 bn), Japan ($280 bn), and
Organization (WTO); (3) enforcing partner countries’ trade
Germany ($267 bn). The United States has a long-running
commitments and U.S. trade laws; and (4) offering relief to
overall trade deficit (imports exceed exports), with the
U.S. workers and firms adversely affected by “unfair”
goods trade deficit outweighing the services trade surplus.
foreign trade practices and trade liberalization.
Most economists argue that macroeconomic variables (e.g.,
aggregate savings and investment; the dollar’s valuation
The Biden Administration came into office with a stated
and role in global markets) exert a larger role on the U.S.
focus on domestic economic issues and many trade policy
trade deficit than trade policies or agreements.
initiatives remain under development. In contrast to
President Trump’s
Figure 1. U.S. Goods and Services Trade
emphasis on unilateral trade actions, the
Biden Administration has promoted an approach of
working with partners and allies to address trade
challenges, including at the WTO. Yet, many Trump-era
unilateral trade restrictions remain in effect, and the Biden
Administration has maintained a focus on addressing
China’s unfair trade practices and enforcing existing trade
agreements, including as part of its “worker-centered” trade
policy. Congress has deliberated on trade issues including
supply chain resiliency, U.S.-China trade challenges,
unilateral tariffs and exemptions, preference programs,
trade agreements, and, most recently, potential trade
responses to Russia’s invasion of Ukraine.
Source: Bureau of Economic Analysis and Census Bureau.
Trade Economics and U.S. Trade Trends Components of U.S. Trade Policy
Economic theory generally holds that international trade is
beneficial at the national level, but that the benefits and
Congress sets U.S. trade negotiating objectives, enacts trade
costs may be unevenly distributed or concentrated.
laws, programs, and agreements, and oversees executive
Countries increase production and export goods and
trade functions conducted by a range of federal agencies.
services in which they have a higher relative comparative
By statute, the U.S. Trade Representative (USTR) is the
advantage in skills or resources, and import goods and
lead U.S. trade negotiator and coordinates trade policy
services unavailable domestically or less efficiently
through an interagency process, with formal public and
produced. Trade benefits can include more efficient
private advisory input. Key policy components include:
resource allocation and productivity through competition,
Trade rules-setting, liberalization, and enforcement.
economies of scale, higher wages and job growth in
Negotiation of trade agreements to open markets and set
exporting industries, and greater choice and lower prices for
rules on trade and investment; enforcement of
consumers and firms using imports as inputs. Costs can
commitments via dispute settlement and U.S. trade laws.
include job, wage, and firm losses through import
Export promotion and controls. U.S. support for
competition and production relocation.
export financing, market research, advocacy, and trade
missions; licensing and control of strategic exports.
The economic impact of trade liberalization is difficult to
Customs, trade remedies, trade adjustment.
measure and widely debated, in part because other factors
Regulation of borders; laws to address adverse effects of
influence economic activity, potentially with greater effect
imports, national security threats, balance of payments,
(such as technology), and expanded trade may lead to shifts
and “unfair” tariff and non-tariff barriers to U.S. trade;
in the composition of economic activity, with growth in
assistance for dislocated workers and firms.
some sectors and decline in others. Most economists argue
Trade preferences. Duty-free access to U.S. markets
that expanded trade benefits the U.S. economy overall (as
for eligible developing countries and products, intended
described above), but has contributed to job losses in some
to encourage trade and spur their economic growth.
sectors and regions, including through offshoring, and that
Investment. Protection and promotion (through
workers may require retraining or relocation to adjust to the
investment treaties and trade agreements); examination
resulting shifts in job opportunities and technologies.
of inbound FDI for national security implications.
The United States is the world’s largest economy and
U.S. Trade Laws and Policy Tools. Congress has
trader, and source and destination of foreign direct
delegated authorities to address trade-related concerns, such
investment (FDI, stock basis). U.S. trade has expanded in
as unfairly traded goods (e.g., antidumping and
recent decades (Figure 1) and U.S. markets and production
countervailing duty laws). The Trump Administration
https://crsreports.congress.gov
U.S. Trade Policy: Background and Current Issues
renewed the use of three authorities: Sec. 201 and Sec. 301
U.S. trade agreement policy was a focus of the Trump
of the Trade Act of 1974 (to address import injury from
Administration, which withdrew the U.S. signature from the
fairly traded goods, and foreign trade barriers or trade
proposed Trans-Pacific Partnership (TPP), made limited
commitment violations, respectively) and Sec. 232 of the
modifications to the U.S.-South Korea FTA, enacted a
Trade Expansion Act of 1962 (to address trade-related
partial-scope agreement with Japan covering some tariffs
national security concerns). The use of these tools declined
and digital trade, and negotiated the new U.S.-Mexico-
after the 1995 creation of the WTO and its dispute
Canada Agreement (USMCA) to revise and replace
settlement system, but President Trump used them to apply
NAFTA. USMCA entered into force through implementing
tariffs and other restrictions on, for example, steel and
legislation on July 1, 2020. USMCA addresses new issues,
aluminum imports (Sec. 232) and imports of certain goods
such as digital trade and state-owned enterprises, drawing
from China (Sec. 301). U.S. trading partners responded by
on U.S. negotiating positions in TPP; increases North
imposing retaliatory tariffs, negotiating exceptions (e.g.,
American content requirements for vehicles; expands
quotas), and launching WTO dispute settlement. President
agricultural market access; and reduces U.S. obligations in
Biden has maintained many of the restrictions, but has lifted
areas such as investment and government procurement. The
some or reached less restrictive arrangements, such as with
Trump Administration also launched FTA talks with the
the EU and Japan on steel and aluminum.
EU, the UK, and Kenya, but did not reach final agreement.
Trade Promotion Authority. Congress and the
The Biden Administration has not restarted pending trade
President generally work together to negotiate and
talks or pursued new FTAs. In 2021, it launched a bilateral
implement U.S. trade agreements. Beginning with the
Trade and Technology Council (TTC) with the EU to
Reciprocal Trade Agreements Act of 1934, Congress has
cooperate on bilateral and global issues. It also announced
periodically delegated to the President limited authority to
plans for an Indo-Pacific Economic Framework, to be co-
reduce tariffs through proclamation in reciprocal trade
led by USTR and the Commerce Department, through
agreements. As nontariff trade barriers grew, Congress
which it intends to pursue commitments on issues such as
adopted “fast track” authority in the Trade Act of 1974 to
digital trade, labor, and environment, but not market access.
provide U.S. trade negotiating objectives and expedited
U.S.-China Trade Relations
legislative consideration for implementing bills on future
trade agreements, while preserving its constitutional
China represents one of the most significant but challenging
prerogatives. Called Trade Promotion Authority (TPA)
U.S. trade and economic relationships. U.S. concerns
since 2002, it was last renewed in 2015 (P.L. 114-26), and
include China’s state-directed economic policies, cyber and
expired on July 1, 2021. Debate over TPA renewal and
other theft of U.S. intellectual property, technology transfer
potential changes, including to U.S. trade negotiating
and other coercive practices, industrial subsidies, and
market access restrictions on key sectors of China’s
objectives, may be a focus of Congress, as it considers the
need for new trade agreements, and their potential impact
economy. To address some of these concerns, the Trump
on the U.S. economy, workers and firms, and the related
Administration imposed Sec. 301 tariffs (prompting counter
role of Trade Adjustment Assistance (TAA).
tariffs by China), and negotiated a limited “Phase I” trade
agreement in January 2020 that addressed some intellectual
World Trade Organization (WTO). The current rules-
property rights issues and new market access in agriculture
based, multilateral trading system is rooted in the WTO,
and financial services, but left many concerns to future talks
established in 1995 to succeed the General Agreement on
that have yet to materialize. It also leveraged national
Tariffs and Trade (GATT). Formed in 1947, the GATT was
security review authorities of FDI to prevent certain
part of the post-WWII effort led by the United States and
acquisitions of U.S. firms, and tightened export controls for
Europe to build a stable, open, and prosperous global
dual use technology to specific entities (e.g., Huawei). The
economy. WTO core principles include nondiscrimination
Biden Administration has continued to rely mainly on the
and transparency, and agreements cover goods, services,
Phase I agreement and Sec. 301 tariffs to counter China’s
and agriculture trade; remove tariff and nontariff barriers;
“unfair economic practices,” and engage with allies toward
and establish rules and disciplines (e.g., on intellectual
multilateral solutions. Other efforts include to limit
property rights, IPR) and dispute settlement (DS). Stalled
dependency on inputs from China in critical U.S. and global
trade liberalization efforts and issues such as consensus
supply chains. Major bills to address China-related trade
decisionmaking, developing country exceptions, concerns
and economic concerns are pending.
over inadequate compliance with and enforcement of WTO
Potential Issues for the 117th Congress
rules, and the WTO’s perceived inability to cope with the
challenges posed by China’s non-market economy, have led
Congressional oversight and legislative issues may include:
the United States and other members to call for reforms.
the future direction of U.S. trade policy, including
The DS system is also a subject of reform debate. Since
assessments of its historic focus on trade liberalization;
2019, the Appellate Body (AB) has lacked a quorum and
U.S. leadership in the rules-based global trading system,
has been unable to hear new cases, due to successive U.S.
engagement on WTO reform, and cooperation with
Administrations’ refusal to name new jurists based on
allies on trade issues of shared concern;
certain concerns of alleged AB overreach. WTO
the economic effects of U.S. and retaliatory tariffs,
discussions continue such as on e-commerce, fisheries
whether to amend delegated authorities to the executive;
subsidies, and trade responses to the pandemic. Some WTO
U.S. trade policy with major economies, including how
members, including the United States, have taken or are
to address China’s state-directed trade, and other
considering WTO-related trade actions against Russia.
specific issues, such as forced labor in supply chains;
Trade Agreement Negotiations.
enforcement of USMCA and other existing FTAs;
As WTO negotiations
prospects and the need for future FTAs; and
on potential new agreements have stalled, bilateral and
regional trade agreements have proliferated; over 300 are in
the effectiveness of national security and trade tools to
force globally. The United States has 14 free trade
review FDI and control technology exports.
agreements (FTAs) with 20 countries in force, with market
Shayerah Ilias Akhtar, Specialist in International Trade
access and rules usually exceeding WTO commitments.
and Finance
https://crsreports.congress.gov
U.S. Trade Policy: Background and Current Issues
IF10156
Brock R. Williams, Specialist in International Trade and
Finance
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https://crsreports.congress.gov | IF10156 · VERSION 19 · UPDATED