U.S. Steel and TikTok: America's new industrial politics

Picking winners means corruption

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Next week, the U.S. Supreme Court is expected to rule on whether a recent law banning TikTok will take effect. Under the terms of the legislation, the Chinese company ByteDance will either have to sell TikTok’s American operations to a U.S. company, or turn the app off in the United States. This is an ostensibly “tough on China” move which is mostly motivated by the idea that the Chinese government uses TikTok to influence American political discourse and steal data about American consumers.

It’s also a move which is opposed by incoming President Donald Trump, who has called on the Supreme Court to at least delay the ban until he takes office to allow him to find an alternative solution. In other venues, Trump has voiced support for TikTok and admitted his basically self-interested motive for doing so. In a recent interview, he said “We won young people [in the election], and I think that’s a big credit to TikTok, so I’m not opposed to TikTok.”

As always with Trump, the hypocrisy argument is easy to make. If a Democratic politician said they’re willing to dismiss security concerns around TikTok to boost their own political prospects, the Republican Party would savage them. But the complete lack of interest that Republican politicians and media show in policing their own coalition allows Trump to get away with it.

But a more interesting angle is to consider what Trump’s stance on TikTok tells us about America’s new industrial policy. And to do that, it’s worthwhile to consider its case alongside that of U.S. Steel.

U.S. Steel is - you guessed it - a large U.S. steel company, one which has recently been the subject of a takeover bid by Nippon Steel, a (you guessed it) large Japanese steel company. After a long and agonizing process, the Biden administration has blocked the sale, arguing that allowing foreign control of the U.S. steel industry comes at the detriment of national security and could lead to layoffs which will be economically harmful for affected communities.

On the face of it, this is also surprising. In contrast to Trump, the Biden administration has been relatively in favor of an open international economy, and has put great effort into improving ties with allied countries like Japan. And as the Wall Street Journal reported, Biden’s national security aides were actually in favor of the deal, but were overruled by domestic policy advisors:

During closed-door discussions, national security adviser Jake Sullivan and Secretary of State Antony Blinken were among the foreign policy-minded aides pushing for options that could keep the deal alive, not wanting to damage a crucial relationship with an East Asia ally, according to the officials. Steve Ricchetti, counselor to the president, and other domestically focused staff said it was best to side with leaders of the United Steelworkers’ union, who had been vocal opponents of the deal since it was announced in December 2023, the officials said. Biden has called himself the most pro-union president in American history.

In truth, the national security case for opposing the sale is pretty slim. It rests basically on the idea that steel is a strategically vital industry and ought to be protected, but there is no particular reason to think that Nippon is going to lay off more workers or close more plants than an American owner. It’s not like American capitalists are famously shy about redundancies or plant closures. Nippon offered as part of the negotiation to not close any plants down for ten years without the government’s permission, which would actually have been a substantial protection for the U.S. steel industry.

But the politics of the steel industry is caught up in nostalgia. There is a general sense that the U.S. steel industry has declined, and that this is part of a broader and undesirable process of deindustrialization. Keeping the industry American makes for a good rallying cry, even if foreign competition or ownership has little to do with the industry’s decline. In fact, the simplest explanation for why the U.S. makes less steel than it used to is because it has much less demand for new construction projects than it used to. It ought to have been possible to find a deal that brought in welcome new capital investment from a U.S. ally while securing the industry’s future.

Perhaps a simpler explanation for the Biden administration’s decision is a political one. Trump has also announced that he would block the deal, and by doing so he would score points with labor unions who are opposed to it. So it made sense for Biden to just block it instead and take the political credit, something that will hopefully pay off in future elections.

But to me, both of these cases - TikTok and U.S. Steel - illustrate something fundamental about how fickle the new American industrial policy is. Everyone now agrees that the era of unfettered globalization caused a lot of harm to American workers and industries, but it’s not clear that the new era in which presidents make major economic decisions on the basis of their personal and political interests is much better.

Trump is a particularly serious offender here. One of the most troubling things about his intent to impose blanket tariffs on other countries is the opportunity that it opens up for political corruption and influence-peddling. Tariffs always have exemptions, and businesses close to the administration will be more likely to obtain them. The example of TikTok has shown that he’s open to giving special favors to businesses who advance his interests. It’s an invitation to corporate America to provide him with donations and political support - or to see their vital interests on the line.

But something was also lost when the Biden administration refused to stand up for the principles of an open economy and the rule of law, rather than picking winners and losers according to political calculations. In the end, it’s not clear what the Biden administration gained from its own trade and investment policy, which left the principles of economic openness without prominent defenders.

As a result, many Americans have now spent years listening to anti-trade and anti-globalization rhetoric, which has softened opposition to Trump’s planned tariffs and precluded an full debate over their likely consequences, which will be extremely harmful for many American workers. When those consequences become clear, a lot of people are going to be in for a short, sharp shock.

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