Inside D.C.

The Trump Trade Strategy

Okay, I think I’ve got this right.  Tariff Terror Phase one:  President Trump threatens to impose punitive tariffs on imports from – fill in here your favorite nasty trade partner – and talks tough about his willingness to punish the trade transgressor.  This is when agriculture starts to get very nervous.

Phase two:  For about a month or so, Trump’s trade team echoes his threats, giving some credence to his rhetoric by creating lists of tariff targets.  This is when the trade terror ends if the targeted country sees things the U.S. way and capitulates to whatever demand this country has made.  If the other side doesn’t blink, then Trump goes ahead with phase three, slapping tariffs on imports.

Phase four: We’re off to the tariff races, or in other words, the U.S. slaps on new levies, the other country retaliates, the U.S. becomes indignant at such temerity and slaps on more tariffs, and on and on.

Phase five:  After all this sturm und drang, little drips of positivity begin seeping from the administration.  “No talks are scheduled, but we’re open,” says one advisor.  “There’s got to be short-term pain for long-term gain,” says another, and my personal favorite,  the anonymous “We’ve never really stopped talking.”

Phase five:  Finally, victory by whatever White House definition is declared, there’s a global group hug, and we’re supposedly back to business as usual.

I figure we’re may just be entering phase five.

This White House is not particularly focused with its carry-a-big-stick-make-lots-of-noise trade strategy.  Today, according to CoBank, as reported by meatingplace.com, fully 70% of U.S. exports are currently involved in negotiations or some kind of trade dispute, including as all of agriculture knows, major trade ugliness with this nation’s four biggest overseas customers: Canada, Mexico, the European Union (EU) and China.

China is the 800-pound gorilla, and almost a personal ground zero for Trump and his trade team.  The public goal, says the White House, is to force China to abandon its policy of “forced transfer” of technology and intellectual property by U.S. companies doing or wanting to do business in China.  But maybe the real primary goal is erasing through increased Chinese purchases of U.S. products this country’s $375-billion trade deficit with the world’s second largest economy.  Trump sees any trade deficit as bad, proof the U.S. is being duped.

This week brought a good-news-bad news report on the China tariff tit-for-tat from a Washington, DC, think tank with, as one report indicates, “ties to the Trump administration.”  The good news, according to Derek Scissors, a resident scholar at the American Enterprise Institute (AEI), is the U.S. and China will likely reach détente on trade as early as August, reports Politico.  The bad news, says Scissors, is trade tantrums will resume, likely as we get closer to the 2020 presidential election.

Scissors, a former colleague of Trump national security advisor John Bolton, a former AEI senior fellow, is described as an outside advisor to the White House on trade issues, someone who takes a “tough line” on China trade.

Scissors told an audience at a panel discussion at the Information Technology & Innovation Forum in Washington, DC, the August deal will focus on reducing to the extent possible the U.S. trade deficit with China.  Any deal cut with China must reduce the trade deficit, he said, or Trump will do as he did in May, namely reject the deal because the Chinese won’t cut deep enough. Two months ago, the Chinese offered up only about $200 billion in additional ag and energy purchases from the U.S.

Capitol Hill leaders urge the president to leverage his personal relationship with Chinese President Xi Jinping and broker a deal.  Talks between Trump lieutenants, including Treasury Secretary Steve Mnuchin and Commerce Secretary Wilbur Ross, and Xi’s Vice Premier Liu He have been unsuccessful.  Let’s see how “artful” this president can be.