Inside Trump’s trade war

  • Economy Premium
  • Saturday, 10 Mar 2018

File pic: Director of the National Economic Council Gary Cohn speaks during an event to introduce the Republican tax reform plan at the U.S. Capitol in Washington, U.S., November 9, 2017. REUTERS

WASHINGTON: From his earliest days in office, President Donald Trump instigated a pitched battle over trade that became so bitter the antagonists would hurl insults at each other. On one side was Gary Cohn, the top White House economic adviser and foremost free-trade proponent, and on the other, Peter Navarro, a former University of California, Irvine, professor and an advocate of aluminum and steel tariffs.

During their showdowns, Mr. Cohn at times accused Mr. Navarro of lying to the president about the effect of his proposals and often laced his accusations with a colorful round of expletives, said White House officials who witnessed their debates.

Mr. Navarro, who rarely swears, would often offer an understated response. “Now, now Gary,” he would tell Mr. Cohn after an interruption, these people said. “You’ve had your piece.”

At a meeting in the White House last week with a small group of steel and aluminum executives, Mr. Trump brought the debate to an abrupt end. “We’re going to be instituting tariffs,” he said to a mostly startled audience of executives and senior aides. “Perhaps some of you folks will be here” for the announcement, he added.

Mr. Trump’s signing of new 25% tariffs on steel and 10% on aluminum imports is poised to reshape the U.S. economy. It is the most significant break in decades from the country’s traditional free-trade stance and has threatened to widen a split within the Republican Party between an older breed of internationalists and newer Trump supporters.

The president’s decision to impose tariffs illustrates how quickly priorities can be set inside the White House, the extent to which the rapid staff turnover has influenced policy, and Mr. Trump’s penchant for keeping those who resist him off-balance.

Mr. Cohn had some success slowing Mr. Trump’s protectionist instincts, but miscalculated on his ability to sway him over time. While Mr. Trump allowed rivalries around the issue, he consistently signaled his intentions. Ultimately, Mr. Trump cut Mr. Cohn out of one of the final meetings, and the administrations’s loudest free-trade voice quit days later.

With a White House often improvisational on policy, it is hard to know whether or how long this moment will last. Intense lobbying by opponents managed to fray the edges of the tariff proclamations Mr. Trump signed on Thursday, which exempted Mexico and Canada and allowed some flexibility in how the tariffs are imposed. That has already set off an international rush to soften the impact.

Some Republican lawmakers are now deciding whether to recalibrate their relationship with Mr. Trump. One option under discussion is to block funding for agencies that enforce tariffs. Other lawmakers are writing their own legislation.

“There are always ways,” said Rep. Steve Womack (R., Ark.), who sits on the House Appropriations Committee and opposes the tariffs. “There are certain things that we have at our disposal. I would hope it wouldn’t go to that, personally. I want to work with this administration.”

Mr. Trump’s nationalist allies are counting the moment as a victory. “The president’s action is bold, smart and necessary,” Steve Bannon, the president’s former chief strategist, told The Wall Street Journal, and a sign “that Trump has returned to his nationalistic roots.”

Conflicting signals
As the president watched Mr. Cohn and Mr. Navarro clash, he sent conflicting signals about the direction he was leaning. In a Journal interview last year, he said: “Hey, I’m a nationalist and a globalist. I’m both.”

Yet long before he entered politics, Mr. Trump made clear he believed foreign countries were abusing U.S. businesses and workers. “We don’t have free trade,” he told Larry King in 1987. “We think of it as free trade, but you right now don’t have free trade.”

Mr. Trump hasn’t much wavered over the past three decades, people close to him say. “This is where the president wanted to land,” Kellyanne Conway, counselor to the president, said. “They’ve been having weekly meetings on the issue for eight months. You could almost have a baby by then, so you could certainly have a trade policy.”

The policy argument reflects a division between longtime advocates of the post-Cold War era of globalization, and those who believe free trade policies undermined American prosperity and sovereignty. The former argue the North American Free Trade Agreement and World Trade Organization advanced U.S. interests and the world economy. They’ve been willing, at times, to scale back on industry-specific protections to show American leadership and support for the system.

Mr. Navarro, and ultimately the president, say a bipartisan elite sacrificed U.S. interests for a misguided ideal, resulting in trade deficits and the erosion of American manufacturing. They want the U.S. to challenge the world trade system and shield American companies, like the steel and aluminum tariffs, without waiting for the blessing of the WTO. “We’re not going to take it anymore,” Mr. Navarro said Sunday on CNN.

Within the White House, Mr. Cohn was positioned to play a long game, consistently offering the president alternatives to broad tariffs. Early in the administration, the former Wall Street executive pushed for a border-adjusted tax, an idea from House Speaker Paul Ryan, to help close trade deficits.

But Mr. Trump rejected that plan in part because he thought it was more difficult to market. Voters implicitly understand slapping tariffs on foreign countries, he told advisers, said a person familiar with the discussions.

Mr. Cohn often reminded the president he had committed to some foreign leaders he would exempt them from potential tariffs. “Remember, you made promises,” Mr. Cohn would say, according to White House officials who witnessed the discussions.

One White House official said Mr. Trump didn’t make broad promises, instead telling leaders he would provide protections in return for specific action, such as lowering a trade deficit or taking steps to curb transshipping or steel dumping.

At the end of last year, Mr. Cohn told the president the trade issue would jeopardize the tax-cut package Mr. Trump and Republican leaders in Congress had made a priority, said White House officials who were present.

As Mr. Cohn was buying time, his opponent, Mr. Navarro, was rising.

Although confined to a small office across the street from the White House without even an administrative assistant, he had found a new way to get his message to the president—through television.

A month ago, Mr. Trump picked up the phone and called an aide to say he had just seen Mr. Navarro on TV and was impressed. “He liked the way Peter presented the issues on TV, and he wanted Peter to represent the president on TV,” the aide said.

Mr. Navarro had other rivals inside the building, but one by one they fell away.

A powerful player in keeping the nationalists in check was a White House aide, Rob Porter, the staff secretary. Mr. Porter worked to isolate Mr. Navarro, said White House officials familiar with the dynamic. He often argued with Mr. Navarro, at one point loudly accusing him of leaking details of an investigation into China’s trade practices, they said.

Mr. Porter was forced to resign early last month amid domestic-abuse allegations, which he has denied. Within three weeks, Mr. Navarro had secured a promotion from the president and an audience inside the Oval Office that set in motion the president’s decision to move forward on tariffs.

“It cannot be overstated enough—there was a process in place with Porter, and you’ve seen how that’s all been blown up,” one White House official said.

Mr. Porter’s absence has helped spring leaks in the rigorous process John Kelly has sought to impose on the West Wing. But in recent weeks, both Corey Lewandowski, whom Mr. Trump fired as his campaign manager in 2016, and Sebastian Gorka, an outspoken White House aide whom Mr. Kelly fired in August, have had West Wing meetings with Mr. Trump, said White House officials briefed on the meetings.

Hatching a plan
Mr. Kelly’s process broke down again last week when Mr. Navarro and Commerce Secretary Wilbur Ross secured an audience with Mr. Trump on Feb. 28—after most other aides had left for the night—and hatched a plan to impose the new tariffs as quickly as possible, said people familiar with the meeting.

Mr. Cohn was nowhere in sight when Mr. Trump decided to move forward with the tariffs. Inside the Oval Office, the president repeatedly asked them: “Where’s the 232s? Where’s the 232s?” he said, a reference to trade law he would use to impose tariffs, said a White House official familiar with the conversation. “Look,” he told them, “It’s time to move on this.”

At that meeting, Mr. Trump asked Mr. Ross to call steel and aluminum executives that night and bring them to the White House the next morning, an administration official said. Mr. Kelly scrambled to find staff to help set up the meeting with CEOs, which the president said he wanted as one final check on opinion from industry leaders.

Messrs. Navarro and Ross left the meeting unsure about what action Mr. Trump would take the following morning, said people familiar with their thinking.

When word spread inside the West Wing on the night of Feb. 28 about the tariff developments, Mr. Cohn appeared livid. He told colleagues he might have to resign, said White House officials who witnessed his reaction.

Mr. Cohn was upset that his opponents had, in Mr. Cohn’s words, “hijacked” the policy process, one official said, making their own private case to Mr. Trump while other relevant officials weren’t in the room.

If Mr. Trump hadn’t apprised Mr. Cohn, that was no accident, an administration official said. Mr. Cohn “knew or didn’t know whatever the president wanted him to know or not to know,” this person said.

The next morning, March 1, as the meeting with steel and aluminum executives was breaking up, Mr. Kelly called everyone back into the Cabinet Room. Bring in the press, he told his aides, so they could see the president at work.

Top members of his staff didn’t know what was coming, nor did the executives in the room, said people who were there.

After about seven minutes, with cameras rolling, Mr. Trump made an announcement that would upend decades of U.S. international trade policy.

Over the weekend, Mr. Cohn made a final push. He hurried to assemble one last meeting of executives who would warn the president about the tariffs. But the meeting was called off on Tuesday, the same day Mr. Cohn handed in his resignation.

“There is literally no other issue that the president has been more clear about than trade,” one White House official said. “What Gary learned this week was that he was no longer going to be able to walk in a bunch of Wall Street executives and wow the president.”

‘Not backing down’
On Monday, the outpouring of opposition from fellow Republicans on Capitol Hill did little to dissuade Mr. Trump. Mr. Ryan, who has been careful not to criticize Mr. Trump since the election, said he was “extremely worried” about the proposal and directly appealed to the president on Monday to “take a more surgical approach” to avoid “unintended consequences.”

On Tuesday, the president heard from Secretary of State Rex Tillerson, who raised concerns he heard from allies, including the U.K. and Canada. That meeting included Mr. Ross, U.S. Trade Representative Robert Lighthizer and Defense Secretary Jim Mattis, officials said. Mr. Mattis also warned the president about national-security implications for such a move.

On Wednesday, 107 House Republicans signed a letter and sent it to the White House calling on Mr. Trump to reconsider the tariffs. By then, it wasn’t clear Mr. Trump was listening.

Rep. Kevin Brady (R., Texas), a White House ally, spearheaded plans to arrange a meeting with Mr. Trump this week, people familiar with the effort said, and Mr. Kelly was asked to arrange a time. The meeting was scrapped, Republican aides said.

“We were unable to coordinate a time that worked well for everybody,” Republican Study Committee Chairman Mark Walker (R., N.C.) told reporters.

Mr. Cohn remained engaged in the issue to the end, attending high-level meetings and pushing to exempt Canada, Mexico and Australia from the duties. Ultimately, the Australia exception was abandoned.

By about 3:30 p.m. on Wednesday, the decision was made inside the White House to start inviting industry workers to a meeting with Mr. Trump on Thursday where the president would sign his proclamation, White House officials said. That night, White House officials warned the paperwork wouldn’t be ready.

The president’s public schedule for Thursday made no mention of the proclamation signing or the meeting with workers. Amid the internal confusion, a Twitter post came from the president: “Looking forward to 3:30 p.m. meeting today at the White House.”

As Mr. Navarro stood near Mr. Trump at the lectern, while Mr. Cohn watched from the back of the room, the president signed the tariff measures.

“Just standing back here with my arms crossed,” Mr. Cohn told reporters. - WSJ

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