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FINANCIAL TIMES
Inside the chaos of Donald Trump’s trade wars
Officials
describe a White House in disarray with fierce infighting, no process
for decisions and a president without a strategy
Demetri Sevastopulo, Sam Fleming and Shawn Donnan in Washington
Steven Mnuchin was having a tough day. For several months the Treasury
secretary had tried to co-ordinate the US side in trade negotiations
with China. But on May 29, he found himself explaining to Liu He, the
Chinese vice-premier, why President Donald Trump had just reneged on a
deal aimed at preventing a trade war. Two
weeks earlier, Mr Mnuchin hosted Mr Liu at Café Milano, a Georgetown
restaurant popular among Washington’s diplomatic corps and Trump
officials. Four days after the dinner, Mr Mnuchin announced that the
threatened trade war was now “on hold” and that the US would not place
tariffs on $50bn of Chinese goods.
Yet, as he returned to work after the Memorial day weekend, he was met
with the news that Mr Trump had resurrected the tariffs. In a stark
example of how the president can blindside his officials, Mr Mnuchin had
been told the announcement would come the next day, according to a
senior official. The
Trump administration is now fighting trade battles on several different
fronts with both friends and rivals, leaving governments scrambling to
decipher what is negotiating bluster and what is actual policy. As
Mr Trump arrived at the G7 summit in Canada on Friday some of
Washington’s closest allies were irate at new US tariffs on steel and
aluminium. So sharp are the tensions that Mr Trump at one stage
considered not going.
Inside the administration, the view described by a number of current and
former officials is one that more resembles chaos.
The erratic course
of the trade talks has been partly driven by fierce infighting among
officials who have been sarcastically dubbed “The Magnificent Seven” by
critics.
There is little, if any, policy process to guide the US side. Most of
all, there is a president determined to keep his campaign promise to get
tough on trade but with little consensus on how to proceed. As
the debate within the administration has intensified, Mr Mnuchin has
started to play a bigger role — especially after Congress passed a tax
reform bill last December. Several people familiar with the situation
say Mr Liu had asked Hank Paulson, the former Treasury secretary, and
other US financiers to convince him to play a bigger role. Some hoped he
would tamp down the factional fighting particularly as Gary Cohn, the
pro-free trade head of the National Economic Council, was about to
resign from his role because of his opposition to the imposition of
tariffs. It
has not played out that way. Following Mr Mnuchin’s “on hold” remark,
Wilbur Ross, the commerce secretary, said the deal was not “definitive”
and tariffs were still on the cards. Peter Navarro, a trade adviser to
the president who had failed to turn up for the Café Milano dinner
following several fights with Mr Mnuchin earlier in Beijing, described
the Treasury secretary’s comment as “an unfortunate soundbite”.
Some former officials are even more direct. Steve Bannon, the former
White House strategist, says China was scared of Mr Trump. “You are
always going to have guys like Mnuchin who fumble the ball,” he told the
Financial Times. But
others argue that Mr Mnuchin is the only official who understands what
is feasible in terms of a deal. “The Chinese like Mnuchin because he
realises what other administration officials won’t admit — that the
tariff threats have put us in a box and the only way out of the box is
by negotiating towards an acceptable deal,” says Rob Porter, the former
White House staff secretary who ran a weekly trade meeting to help
co-ordinate policy among a diverse group of officials.
Mike Pompeo, secretary of state, is concerned
that the trade threats are making relations more difficult with a host
of countries, including China, which risked jeopardising the summit
between Mr Trump and North Korea’s Kim Jong Un next week in Singapore,
according to five people.
“It’s like a bad episode of Celebrity Apprentice,” says Chris Johnson, a
former CIA China analyst. “They’re all gaming how to get back in the
centre circle on a daily basis.” The
recent disarray over trade has echoes of the early days of the
administration when there was no inter-agency process and decisions were
influenced by whomever gained access to Mr Trump. The trade discussions
began to adopt more structure after the start of Mr Porter’s weekly
meeting.
“People were so desperate for structure that half the cabinet and most
senior advisers showed up to Porter’s meetings. Everyone wanted a seat
at the table. For a time it was like the biggest show in the West Wing,”
says a former administration official. He
adds that the process ended after Mr Porter left the White House in
February when he was accused of spousal abuse, which he denies. One
reason for the meeting’s demise was because the participants, especially
trade representative Robert Lighthizer, did not want to have to explain
themselves to a big group of rivals. The end of the meetings has
resulted in officials reverting to more Machiavellian ways. “Several
times, Ross has negotiated with the Chinese without keeping other people
in the loop. But he never gets away with it,” says a person familiar
with the internal deliberations. In
one example, Mr Ross tried to negotiate a steel-related deal that
resulted in him receiving a blunt dressing down from Mr Trump. The
lack of structure also reflects Mr Trump’s background running a
freewheeling family business. “The person in charge has never seen
process,” says one individual close to the White House.
Chris Ruddy, a friend of Mr Trump, says the president had made clear
during the campaign that he was his own chief adviser and own general.
“It is an unitary organisation chart that starts and ends with Donald
Trump. He doesn’t want a lot of intermediaries.”
With officials rising and falling, it has been almost impossible for
governments to know who to make their case to.
Beijing has searched for people to act as a bridge, including Blackstone
chief executive Steven Schwarzman.
“The US is effectively in a state of anarchy,”
says Lu Xiang at the Chinese Academy of Social Sciences. “We always say
Trump is a businessman, but even small shopkeepers know their most
important asset is their reputation. Trump is harming his own reputation
and that of the US.” Beyond the medieval
court-style jockeying, Michael Smart, a former White House official,
says the Trump
officials were broadly split into two camps.
“There are some in the administration who believe that if we actually
lower the hammer and apply these tariffs, the market access discussion
is done [because the Chinese will walk away],” he says. “There is
another camp that says you won’t have a good deal unless you impose
tariffs and inflict pain. The latter group seems to be the majority.”
Most experts see
the latter camp as Mr Lighthizer, Mr Navarro and to a lesser degree Mr
Ross, while the first group is mainly of Mr Mnuchin and Larry Kudlow,
the new head of the National Economic Council. Mr
Navarro and Mr Lighthizer also believe that Mr Mnuchin and Mr Ross are
too eager to secure short-term deals aimed at reducing the trade deficit
at the expense of broader measures to change the way the Chinese economy
operates. Mr
Navarro told the FT there were “two structural problems” that needed
solving. “One is the chronic and persistent trade deficit with China
that is resulting in a massive transfer of wealth, factories, and jobs
from American shores. The second problem is to defend the crown jewels
of American technology and intellectual property against Chinese theft,
acquisition by State-backed funds, and forced transfer,” he says. “You
can’t solve one problem by trading off the other so the whole notion of
China simply agreeing to buy more American products in exchange for
America surrendering its rights to impose Section 301 tariffs and
investment restrictions in defence of our technologies and IP is a
non-starter.” The
limits of Mr Mnuchin’s influence were on display in Whistler, Canada
last weekend at a G7 finance ministers meeting, where he was upbraided
for slapping tariffs on allies. At
the same time, Mr Ross was in Beijing trying to negotiate a deal to sell
more to China.
Dennis Wilder, a former White House Asia adviser, says that when the
Chinese asked Mr Ross if he could guarantee there would be no tariffs,
he replied that he had “no authority” in that area.
Another person believes the Chinese were baffled by the whole situation.
“They tried to embrace Mnuchin and do their part to anoint him the
leader,” he says. “Then Ross leads a delegation but they know his stock
has been up and down. They don’t want to deal with Lighthizer, but he
gives the intellectual construct to what Trump thinks.”
Max Baucus, a former
US ambassador to China, says Beijing saw Mr Trump as weak because he was
“very inexperienced and impulsive”.
Some experts say Mr Trump has become emboldened because few of his
actions have created havoc in the markets. One person close to the White
House says the danger now was that he was increasingly not listening to
his advisers and was vaulting impulsively from decision to decision,
sometimes without any vetting.
“Even when his actions anger friends and allies, Trump doubles down,
never admits a mistake or concedes a weakness. He has decided that he
has to take the reins on trade himself,” he says. “Nobody speaks for the
president on trade because he hasn’t empowered anyone.
But he can’t
even speak for himself because he hasn’t decided what to do yet.” But
allies of the president argue that Mr Trump is upending the orthodox
order in a way that will produce results. “He
looks at the trade landscape and knows that with the established order
America loses, so we lose nothing disrupting it. The china is all set,
so pull the tablecloth out from under it and if a few things break, so
be it,” says one senior official.
“Trump is the one who ultimately calls the shots, and I think people
have to understand that.”
Additional reporting by Tom Mitchell in Beijing |