The president remains a protectionist. His administration? Not so much. That is possible because there are two strong and often opposing forces at work in Washington. One is the president of the United States, Donald J. Trump, sometime resident of 1600 Pennsylvania Avenue. The other is the Trump administration, resident of several office buildings scattered around the District of Columbia and environs.
To understand their relationship, you must first understand the president. He lives in a world of us and “them.” Without “them” he has no reason to wake up in themorning, no reason to tweet. “They” can be anywhere. Recently many of them were to be found in Europe, at a meeting of NATO, and in London, where an elected mayor made a remark that with a stretch provided Trump with another “them.” This week, “they” were everywhere.
Although he had signed off on the defense his lawyers were to make of his immigration policy when the Supreme Court heard argument, the president attacked his attorney general for making that agreed defense instead of defending a tougher and less defensible travel ban. The attorney general, the first senator to support Trump’s candidacy, offered to resign, though Trump has yet to accept.
As if it were not enough for the president to attack his own top lawyer, he expanded the definition of “them” by having his press secretary announce that his tweets have the status of official policy. That undermines those in his administration who tried to protect him by arguing that his tweets do not represent official policy, lest the Supreme Court cite his anti-Muslim campaign tweets as proof that the president’s immigration policy has less to do with protecting the American people from terrorist attacks and more to do with religious prejudice.
But there is good news here, for those who are hoping that the split between Trump and his administration extends to trade policy. Ever so quietly, his lead man on trade, Commerce Secretary Wilbur Ross, is leaving the talking to the president while he pursues a far less protectionist policy. So far, Trump has not noticed, or not gotten around to tossing Ross in with the “them,” complaining how wronged he has been by perfidious Wilbur—always addressed by first name by The Donald.
NAFTA, said Trump, is “the worst trade deal” ever negotiated. More broadly, “I’m not sure that we have any good trade deals.” Threats to tear up the deal with Mexico and Canada followed. Now the Trump administration has taken over from the president. Hard-line protectionist Robert Lighthizer, recently confirmed as the new U.S. trade representative, is calling for “modernization” of NAFTA: “We should build on what has worked in NAFTA.” And last week Ross successfully worked out a deal with Mexico on sugar imports, one that satisfied neither Mexican nor American interests, but a deal nevertheless.
More important, Ross has a model for future negotiations: the 12-nation Trans-Pacific Partnership agreement that Trump voided almost immediately upon taking office. What Lightizer and Ross are driving for are trade agreements that cover issues not on the front-burner when NAFTA was negotiated 24 years ago: intellectual property rights, digital trade, and environmental standards among them.
Enter Treasury Secretary Steve Mnuchin, another member of the Trump administration. During the campaign, Trump threatened China with 45 percent tariffs on goods sold in the United States. Mnuchin is taking a different tack. Once he has a redo of the tax code under his belt, and a trade deal that increases access of U.S. firms to China’s markets, he plans to negotiate a bilateral investment treaty (BIT) with China. No real progress yet, but no threats of 45 percent tariffs either. And the words “currency manipulation” have disappeared from comments of administration officials working in the real world of trade negotiations. Christine Lagarde, managing director of the International Monetary Fund summed up the situation in an interview with European reporters: “There is already a great discrepancy between the pre-election rhetoric [of President Trump] and the actual steps that have been taken.”
This does not mean that administration members are united in defying their president. Rather, it means that the officials on the firing line are trying to adopt Ross’ interdiction, “First, do no harm.” Nor does it mean that Trump will abandon his position that most trade deals negotiated by his predecessors—untutored in the Art of the Deal—put America at a serious disadvantage, so great a disadvantage that their ineptitude explains much of America’s ongoing trade deficit. Most economists regard that as a wild exaggeration. No matter to the president, whose low regard for economists was demonstrated when he withdrew Cabinet status from the president’s Council of Economic Advisers despite the general acclaim his appointed chairman, Kevin Hassett, has received from economists and members of both parties.
In short, Trump remains a trade warrior. On his recent trip to Europe he zeroed in on our “massive” trade deficit with Germany: “This will change.” In this case he is on solid ground, and he is not alone in criticizing Germany for using a weak euro to run up large surpluses with its trading partners. He has support from the International Monetary Fund and several of Germany’s trading partners. More generally, Trump is considering whether, in effect, to withdraw from the World Trade Organization. In which case, opines the Economist, “all hell could break loose.” The good news is that the Trump administration seems to have ways of keeping President Trump happy without exactly doing his bidding. Until its members become “them.”
