Biden struggles to push trade deals with allies as election approaches

Washington and Brussels have failed to find a permanent solution to eliminate the levies more than two years after the negotiations began. With the announcement, the administration will keep in place a temporary import quota system that replaced Trump-era tariffs while talks continue. The EU has criticized the temporary fix, which could be undone if Biden isn’t re-elected.

Without the extension, import duties of 25% on steel and 10% on aluminum would have returned, inviting retaliatory tariffs from the EU on American products such as Bourbon whiskey and Harley-Davidson motorcycles.

Amid political pressures from the left and the right ahead of the 2024 elections, the administration has failed to clinch much-anticipated agreements with Asian and European allies over several trade issues in recent weeks.

Frustrating foreign officials and U.S. businesses, talks to establish rules for digital services and other trade practices with Asia-Pacific nations collapsed in November, while efforts to improve the European Union’s access to the U.S. electric-vehicle market have stalled.

The breakdowns of the recent talks show how domestic politics are increasingly interfering with Washington’s international relations over economic policies as the election approaches. The trend is expected to deepen in the coming months, bringing a paralysis to trade negotiations.

The administration’s efforts to unwind Trump’s tariffs have been hampered by opposition from pro-tariff labor unions, an important constituency for Biden’s re-election fight. Former President Donald Trump is signaling he would double down on his America First trade policy if re-elected, empowering Republican lawmakers to attack Biden’s efforts to promote trade with allies.

In campaign documents and media interviews, Trump has proposed placing a tariff of 10% on all imported goods, and matching tariffs on trading partners with higher rates “an eye for an eye." He has also hinted at confronting the EU over taxes on digital services such as online marketplaces and advertisements. He has declared Biden’s new economic cooperation pact with 13 Indo-Pacific countries would be “dead on arrival."

Meanwhile, tough labor and environmental standards demanded by progressive Democrats in Biden’s proposed trade initiatives have scared off trading partners both in Asia and Europe. Among them is an effort to hammer out an agreement on critical minerals and batteries for electric vehicles, which would give the EU better access to the American EV market under the Inflation Reduction Act, a broad clean-energy, tax and healthcare law that injects nearly $400 billion into the U.S. economy.

“We are really in a dilemma," said Bernd Lange, chair of the European Parliament’s international trade committee in a recent panel discussion in Brussels. He said the U.S. and EU have worked closely on national-security issues including the wars in Ukraine and the Middle East. But they struggle to agree on economic policies, including the IRA, which “clearly violates" international trade rules, he said.

Despite the lack of progress on key trade policies, Washington’s relations with allied governments have improved under the Biden administration, particularly with the EU, whose officials openly bristled at Trump’s policies, U.S. and foreign officials say. Some agreements were reached, including a trade and investment deal with Taiwan in May. The administration also signed an agreement with Japan on critical minerals for electric vehicles and is negotiating a similar deal with the U.K.

“President Biden is the most pro-worker, pro-union president in history and that unwavering commitment is reflected in our trade policies," a U.S. Trade Representative spokesman said. “We are enforcing our existing trade agreements to defend workers’ rights and forging new, innovative agreements with our partners." He said that the policy may make some “uncomfortable," but said it is necessary after longstanding top-down trade policies that benefited the powerful at the expense of the rest.

The lack of progress in Biden’s new trade initiatives as well as in resolving disputes originating in the Trump era has frustrated business sector representatives and centrist lawmakers in Congress.

“We need this spiral of timidity in U.S. trade policy to be brought to a halt because it really threatens the competitiveness of U.S. companies internationally," said John Murphy, senior vice president and head of international at the U.S. Chamber of Commerce.

U.S. business groups are particularly concerned about the administration’s recent moves to pull back from discussions to establish rules facilitating digital trade, including the cross-border transfer of data on customs and supply chains. Some progressive Democrats had criticized such rules, saying they would only help technology giants. Businesses countered that argument, saying that the U.S.’s withdrawal from discussions would allow China to set the rules of engagement.

The failure to forge an agreement over European steel and aluminum came more than two years after the two sides launched an ambitious plan to promote global trade in metals using environmentally friendly methods to combat climate change and fight overcapacity created by China. That plan is to eventually replace the Trump-era tariff scheme, but the two sides have remained far apart over fundamental issues such as how to measure the price of carbon and whether to adhere to existing international trade rules.

Meanwhile, EU officials have demanded the Trump-era tariffs be permanently removed, calling them illegal. The U.S. refused to do so and has kept in place the complex import quota system to limit the imports of European metals to protect domestic producers. The EU last week promised not to impose countertariffs for 15 months, until after the 2024 election.

U.S. Trade Representative Katherine Tai said Thursday the extension of the temporary measures will give the two sides more time to negotiate the global trade arrangement. “Maintaining viable steel and aluminum production at home is vital to U.S. national security, and our efforts with trading partners, including the EU, will continue to be guided by this tenet," she said.

“It’s much easier to put [the tariffs] in motion than to get rid of them," said Rupert Schlegelmilch, the European Commission’s directorate general for trade. “It’s a delicate policy."

Write to Yuka Hayashi at Yuka.Hayashi@wsj.com