The last time a trade war happened in the U.S., things didn’t go well for the economy. Will history repeat itself as Trump puts a tariff on steel and aluminum? Here are the facts.
Just the FAQs
WASHINGTON — At the White House these days, the “nationalists” are winning.
At least for now.
The departure of top economic adviser Gary Cohn, a “globalist” free trader who fought a losing battle against tariffs, is a stark sign that President Trump intends to pursue aggressive trade policies despite opposition from allies across the globe and within the White House itself.
In a tweet claiming that existing trade deals led to shuttered factories and lost manufacturing jobs, Trump cited “bad polices & leadership” by past administration, and said that we “Must WIN again!”
And yet: This is the Trump administration, and he and his aides have sent mixed signals about how the tariff issue will play out.
As the president ponders a replacement for Cohn, director of the president’s National Economic Council, aides said at least two of the possible names have opposing views on trade.
One is Peter Navarro, the adviser on trade and industrial policy at the White House who pushed Trump to adopt the new steel and aluminum tariffs. The other is Lawrence Kudlow, an economic analyst at CNBC who has criticized those same tariffs.
“The president’s got a number of people that could potentially fill that role,” White House spokeswoman Sarah Sanders said. “What I can assure you obviously is he’s going to make a good pick that can help him continue to further building a strong economy and continue creating jobs and continue focusing on long-term economic success.”
Trump, who has cast tariffs as an effort to protect American manufacturing jobs, told delegates at a Latino Coalition Legislative Summit on Wednesday that he is pursuing a “rebirth of the American Dream,” and will continue to do so.
“It looks a little nasty when you watch it on the news, or as I sometimes call it, the Fake News,” Trump said. “But everybody in the world is talking about what’s happening in the United States.”
Navarro, meanwhile, told Bloomberg TV that he is not on the short list to replace Cohn, and “I’ve got a very full plate here at the Office of Trade and Manufacturing Policy.” (For his part, Kudlow told CNBC that “I just don’t want to walk through all those scenarios.”)
Navarro made his name, in part, with scathing attack on Chinese trading policies, including a book entitled, Death by China: Confronting the Dragon — A Global Call to Action.
Other economic analysts, including Cohn, have said Trump is ignoring the role that automation has played in eliminating many manufacturing jobs in recent decades. They also say that Trump, who has attacked trade policies since the rise of Japan in 1980s, say he is discounting the benefits of free trade, including increased jobs in other sectors of the economy.
Free trade also enables companies to buy things like steel and aluminum from overseas at lower costs, meaning they can charge less for their products — developments that may be reversed under a trade war.
Cohn’s tenure as head of the National Economic Council reflected a basic tension evident during Trump’s 2016 presidential campaign and his subsequent presidency: Disputes between “globalists” who support free trade and “nationalists” who believe other countries, especially China, have taken advantage of the United States because of what Trump calls “bad trade deals.”
During the election, Trump’s attacks on trade deals found great resonance in industrial areas of Pennsylvania, Michigan, Ohio, and Wisconsin — key states that Trump won, sometimes surprisingly, en route to his Electoral College win.
Since Trump moved into the White House, Cohn and other aides have restrained Trump from pursuing what they regard as protectionist policies.
Others persuaded Trump to follow through on his campaign rhetoric, led by Navarro and Commerce Secretary Wilbur Ross.
They helped develop the tariff plan Trump sprung on the economic world last week, to the surprise and consternation of Cohn and others. Trump said he plans to authorize tariffs of 25% on steel imports and 10% on aluminum imports.
While aides said Trump hopes to sign the required paperwork by the end of this week, aides continue to suggest that there may be changes of exemptions, a sign of possible flexibility within the nationalist agenda.
Trump himself said Mexico and Canada could avoid steel tariffs if they made concessions during re-negotiations over the North American Free Trade Agreement. Sanders said there could be other countries exempted on a “case-by-case” basis, based on “national security.”
As predicted by Cohn and others — including national security officials — other countries have threatened to respond to Trump’s tariffs by placing their own tariffs on American good, raising prices on consumers worldwide. The European Union and other allies are targeting items that include orange juice from Florida, motorcycles from Wisconsin, and tobacco from North Carolina, all of which are politically important states.
Trump, meanwhile, says he will take counter-counter measures, if necessary.
If EU officials impose tariffs on U.S. goods, he told reporters on Tuesday, “then we put a big tax of 25% on their cars. And believe me, they won’t be doing it very long.”
Speaking with reporters little more than a hour before news of Cohn’s departure surfaced, Trump said that “I like conflict” and “I like having two people with different points of view, and I certainly have that.”
With Trump, you never know.
“In the tariff situation, the globalists like Cohn clearly were body slammed,” said Stan Collender, a federal budget expert and executive vice president at MSL, a global communications firm.
“But Trump is anything but consistent and only barely has an economic philosophy,” Collender said. “He’s as likely to abandon Wilbur Ross and Peter Navarro in the future as he is to embrace them permanently.”
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