Brainard, who has served as a Fed governor since 2014, is likely to face scrutiny of her record on China from Biden’s transition team and, if nominated, from senators of both parties.
“The approach under Biden will be strategically similar to the Trump administration: Tough. But tactically different,” said PGIM Inc. chief economist Nathan Sheets, who was Brainard’s successor at Treasury under Obama.
Biden’s team is also said to be considering ex-Fed official Roger Ferguson and current Fed official Raphael Bostic for Treasury Secretary.
Trump, who has repeatedly bashed Obama’s approach to China, has ratcheted up tensions during his term, slapping tariffs on hundreds of billions of dollars of Chinese goods and labeling Beijing a currency manipulator — the move Brainard is said to have unsuccessfully supported. And Trump appeared to win some concessions from the move: Chinese officials lobbied the U.S. to lift the designation before they would sign any trade deal.
But there were reasons to tread more carefully during Obama’s presidency. Brainard’s time at the Treasury Department came during the height of the global financial crisis. The U.S. relied more heavily on G-20 and G-7 meetings to speak out on China, rather than take direct action, because the U.S. needed China’s help.
The Asian nation held $1.2 trillion in debt issued by the American government. If China dumped any of it to save itself from further losses, it would have triggered further chaos in financial markets.
For that reason, Geithner flew to China in 2009 to assure officials that their investments in the U.S. were “very safe.”
“The U.S. saw China as potentially playing a useful role in stabilizing U.S. financial markets and assisting the global recovery,” said Eswar Prasad, an economist at Cornell University who worked in the International Monetary Fund’s China division.
Even though lawmakers of both parties and business groups argued for greater pressure on Beijing, the Obama administration never designated China a currency manipulator. Geithner downplayed the significance of the label, saying it would merely trigger a dialog between officials from the two countries, something he said was already happening. And Brainard was a key figure in the discussions.
“Issuing a report that requires us to consult accomplishes nothing,” Geithner said in 2010.
Since then, imbalances have grown. The annual U.S. trade deficit with China has increased by more than 50% to $345.6 billion in the past decade.
—With assistance from Craig Torres, Jennifer Epstein and Jordan Fabian.
This article was provided by Bloomberg News.