Treasury Secretary Steven Mnuchin has made a habit of interfering with U.S. sanctions on hostile regimes, to the irritation of China hawks who want President Trump to move more aggressively against Beijing.
“It’s been a real source of frustration on the inside” of the administration, said Foundation for Defense of Democracies Chief Executive Mark Dubowitz.
Economic sanctions have emerged as one of Trump’s preferred means of exerting American power, with the development of “maximum pressure” campaigns targeting at least three different regimes. Yet, the administration has stopped short of implementing those sanctions as aggressively as some of the president’s advisers and Republican allies think necessary — and the frustration with his posture is proliferating on Capitol Hill.
“You see a lot of those guys on the financial side, it’s all about the money, and, you know, ‘we got to trade with them’ and all that,” Florida Rep. Ted Yoho, a senior Republican member of the House Foreign Affairs Committee, told the Washington Examiner.
Yoho has pushed for stricter sanctions on China in recent years, including a proposal to blacklist major Chinese banks that help North Korea circumvent international sanctions on dictator Kim Jong Un’s nuclear weapons program. More recently, he said, he urged Mnuchin to sanction Chinese state-owned companies involved in the construction of artificial islands in the South China Sea — landmasses that Beijing has developed into military outposts with ominous implications for U.S. military strategists.
“We keep asking Treasury, ‘Where the hell are you guys on this?’ And they slow-walk it,” he said.
Secretary of State Mike Pompeo’s team has signaled an interest in such punitive measures. “This is a language the Chinese understand — demonstrative and tangible action,” Assistant Secretary of State David Stilwell said last week.
Mnuchin’s critics acknowledge that his hesitance to wield sanctions has a legitimate policy basis, but some of his tactics in internal debates have grated on colleagues and congressional partners.
“He will wait till the last minute to throw a wrench in a discussion in front of the president that he might not have shared with others, to disrupt the track,” a former White House official said. “Mnuchin might at the very last minute of the conversation say, ‘Oh, well, this might actually hurt the stock market and the dollar, Mr. President’ — just to spook him a little bit.”
In short, Mnuchin is an exemplar of “a bipartisan tradition” of Wall Street financiers who bring to the Treasury Department their belief that “you can seduce the hard men of Beijing” with economic partnerships, as Dubowitz put it.
“You make them rich, you make them moderate, and along the way, you make a ton of money,” the FDD chief described the mentality. “He’s not any different [than past secretaries], but in an administration like the Trump administration, I think he stands out more, because so many people disagree with the traditional way of doing things, particularly with Iran and China.
That attitude accounts for some of the persistent controversies in sanctions policy, such as waivers related to Iran sanctions in March. Most of those waivers were revoked in May, in keeping with Trump’s stated policy of renewing the sanctions that were lifted when the 2015 Iran nuclear deal took effect.
Mnuchin’s policy inclinations could be tested by a draft agreement that could see China invest $400 billion in Iran over the next 25 years. And Mnuchin’s Treasury Department has expelled at least one Chinese bank from the U.S. financial system as a punishment for North Korean sanctions evasions. Mnuchin’s defenders predict that he will be aggressive with Beijing when it comes to Iran.
“He doesn’t want to go and just overtly stick a fork in the eye of the Chinese, because there are a lot of other facets of the government and the economic response that he oversees,” a second former administration official said. Nevertheless, “they’re not going to sit back idly and allow China to undercut a very aggressive campaign that we’ve been waging against the leading state sponsor of terrorism in the world,” the official said.
If and when that happens, however, Mnuchin can be expected to warn Trump of any potential economic downsides. “He is very sensitive to how the stock market is doing, because the president tracks the stock market,” the former White House official said.
