Stockman: Trump Is a ‘Hopeless, Mercantilist Protectionist’

welcome back to cheddar business
everyone on Monday saw the Dow suffer
its worst one-day drop since January 3rd
while the SP and the Nasdaq hadn’t seen
a day like it since early December
joining us now is David Stockman he’s
the former director of the Office of
Management and Budget under President
Ronald Reagan he’s also the author of
peak Trump the under a noble swamp and
the fantasy of manga David it’s great to
have you on chatter happy to be here
look a huge sell-off yesterday right
what do you make of the escalation of
the trade war between the US and China
well I think yesterday was a wake-up
call I don’t think this trade war is
going to end anytime soon
you got two fundamentally incompatible
economies you have a policy being driven
by you know a guy who’s you know lost
his lunch I think Trump has no clue what
he’s doing he’s sliding by the seat of
his pants he’s a hopeless protectionist
he doesn’t really know what he wants and
he has no clue how this is going to
unfold so I think we have big trouble
ahead
so why do Republicans the party of
Reagan right why do they seem to be
going along with Trump I think they’re
going along with Trump because the GDP
was had a three in it last quarter and
because we’re at the end of a business
cycle where the whole economy looks good
my point in peak Trump is the peak is
behind us the market peaked last
September at 29 41 we’re now triple peak
I don’t think we’re going back the
economy’s in month 118 of the longest
weakest expansion in history we got
headwinds everywhere we got a federal
debt that’s out of control we have a Fed
that waited way too long to tighten and
now doesn’t know what to do
we have Europe which i think is rolling
over into another recession we have what
I call the red ponzi and China’s
struggling with 40 trillion of debt none
of these things suggest there’s smooth
sailing ahead I think they all suggest
that there’s a huge risk that some kind
of Black Swan or orange Swan is the case
maybe is likely to upset the whole apple
cart you have to assume that recessions
haven’t been outlawed
and what’s going to happen when we get a
recession and the markets way up in the
stratosphere and the federal budget is
already running 1.2 trillion of red ink
and then revenue falls and expenditures
soar we’re gonna have the biggest mess
you can ever imagine so given all these
headwinds that you listed out you said
recessions haven’t been outlawed do you
think this is do you think Trump is
aware of these factors do you think he
feels the pressure to get a trade deal
done with China do you think he’s
capable of getting a deal done that will
be beneficial for US markets no I think
he’s delusional he thinks he has far
more power that he’s far more skilled at
the art of the deal in negotiation that
than he really is and so I don’t think
any deal is going to get done at all and
I think he believes the economy is far
stronger than it actually is because
we’ve had some aberration in the numbers
which aren’t sustainable in other words
we’ve had some inventory build-up and
we’ve had all this turmoil and trade
that pulled imports forward if you
strain that out the economy is growing
at less than 2% a year it’s not a boom
if you actually look at Trump’s first 28
report cards on jobs 200 2,000 per month
Obama‘s last 28 report cards before the
election
220,000 per month there’s been no
acceleration there’s no boom what we
have is an aging business cycle this
company to the end of the road and we’ve
done nothing to get prepared for the
trouble that’s ahead what is the Fed
going to do the interest rate is only
two point four percent and Trump is
complaining its balance sheet is still
almost four trillion what is the fiscal
policy going to do when we’re already
locked in to a borrowing rate at the end
the tippy-top of a business cycle of 1.2
trillion a year we’ve never been in
these circumstances before and so
therefore I think we have to get over
this recency bias which says well last
couple quarters look pretty good so
what’s to worry there’s everything to
worry because the last 30 years have
been taking us to a point of
much speculation in so much debt now
remember we had the financial crisis
people don’t even remember that anymore
but we did have it in 208 and they said
it was a wake-up call we got too much
debt we need to deleverage right well
there was 53 trillion of debt on the US
economy then this is mid 208 public
private business households government
today it’s 72 trillion all right we went
from 53 trillion which was too high to
73 trillion we’ve added 20 trillion debt
that did give us the kind of you know
appearance of a recovery in prosperity
but really we only doubled down and now
we’re gonna face the music in a far
weaker position with a madman in the
Oval Office who’s home alone and what I
mean by that is who are his advisers
nowadays okay I mean Steve minuchin is
an 80-pound political weakling who gives
yes-men a bad name okay Larry Kudlow has
been snorting bullish ethers down on
Wall Street for so long that he’s not
even in the economist Peter Navarro
would rather have a real war with China
rather than a trade war and you know
Wilbur Ross may have a heartbeat or not
I don’t know but he’s he’s as bad in
terms of trade policy as Trump so it’s
all being run by Bob light Howser who I
know from way back when I was on Capitol
Hill and in the Reagan White House in
the early 80s he’s a lifelong swamp
creature who wants to make government
bigger and better and more intrusive and
that’s the kind of trade deal he wants
it’s really for a big business it’s not
for jobs in the economy what do you
think Reagan would think of President
Trump he would be horrified he would be
horrified because Ronald Reagan was a
small government guy he was a free trade
guy he was a free-market guy he believed
in fiscal
you know rectitude and he was not for
hectoring the Fed for easy money when
Volker put on the brakes and interest
rates went into you know double digits
Ronald Reagan said we have to do it we
got to bite the bullet we got to get rid
of this inflation and let the Fed
restore sound money
so everything that Reagan stood for
Trump is really against okay
he is a hopeless mercantilist
protectionist he is the worst big
spender we’ve ever had in the Oval
Office on the Republican side and you
know he’s he’s a bombastic yes I guess I
go back to my earlier question I just
have a trouble understanding why
Republicans are buying into this and why
Republicans Senators and Representatives
don’t stand up for the party and stand
up for the legacy of the Republican
Party against Trump I could give you an
anecdote from my own history in January
1973 I was a young guy on Capitol Hill
Nixon was riding high he had won the
election 44 million – twenty-eight
million wasn’t a squeaker squeaker like
Trump but swept the whole electoral
college he told his whole cabinet you
got to resign I’m so strong I don’t need
you and within 18 months they had him on
the helicopter and sending him out of
town because the economy went down in
the interim in other words as long as
the economy was showing decent numbers
the Republicans kept quiet and when the
economy and the stock market went down
38 percent they were gone we only have
10 seconds for this answer but is there
a challenger to trump you’re behind
right now probably not okay well come
back when there is okay a former
director of the Office of Management and
Budget under President Ronald Reagan
he’s also the author of peak Trump he
under a noble swamp and the fantasy of
Nagas thank you so much for joining us

As China Talks Begin, Trump’s Trade Negotiator Tries to Keep President From Wavering

WASHINGTON — In the middle of his crowded dinner in Buenos Aires with President Xi Jinping of China, President Trump leaned across the table, pointed to Robert Lighthizer, the United States trade representative whose skepticism of China runs deep, and declared, “That’s my negotiator!

He then turned to Peter Navarro, his even more hawkish trade adviser, adding, “And that’s my tough guy!” according to aides with knowledge of the exchange.

Now, with talks between China and the United States set to begin this week in Beijing, Mr. Lighthizer, aided by Mr. Navarro, faces the assignment of a lifetime: redefining the trade relationship between the world’s two largest economies by Mr. Trump’s March 2 deadline to reach an agreement.

And he must do it in a way that tilts the balance of power toward the United States. His approach will have significant ramifications for American companies, workers and consumers whose fortunes, whether Mr. Trump likes it or not, are increasingly tied to China.

First, however, Mr. Lighthizer will need to keep a mercurial president from wavering in the face of queasy financial markets, which have suffered their steepest annual decline since 2008. Despite his declaration that trade wars are “easy to win” and his recent boast that he is a “Tariff Man,” Mr. Trump is increasingly eager to reach a deal that will help calm the markets, which he views as a political electrocardiogram of his presidency.

Mr. Trump has repeatedly told his advisers that Mr. Xi is someone with whom he can cut a big deal, according to people who have spoken with the president. On Saturday, Mr. Trump called Mr. Xi to discuss the status of talks, tweeting afterward that good progress was being made. “Deal is moving along very well,” Mr. Trump said.

The administration has tried to force China to change its ways with stiff tariffs on $250 billion worth of Chinese products, restrictions on Chinese investment in the United States and threats of additional levies on another $267 billion worth of goods. China has responded with its own tit-for-tat tariffs on American goods. But over a steak dinner during the Group of 20 summit meeting in Argentina, Mr. Xi and Mr. Trump agreed to a 90-day truce and to work toward an agreement that Mr. Trump said could lead to “one of the largest deals ever made.”

Mr. Lighthizer — whose top deputy will meet with Chinese officials this week ahead of more high-level talks in February — has played down any differences with Mr. Trump and views his role as ultimately executing the directive of his boss. But the trade representative, who declined to be interviewed, has told friends and associates that he is intent on preventing the president from being talked into accepting “empty promises” like temporary increases in soybean or beef purchases.

Mr. Lighthizer, 71, is pushing for substantive changes, such as forcing China to end its practice of requiring American companies to hand over valuable technology as a condition of doing business there. But after 40 years of dealing with China and watching it dangle promises that do not materialize, Mr. Lighthizer remains deeply skeptical of Beijing and has warned Mr. Trump that the United States may need to exert more pressure through additional tariffs in order to win true concessions.

When Mr. Lighthizer senses that anyone — even Mr. Trump — might be going a little soft on China, he opens a paper-clipped manila folder he totes around and brandishes a single-page, easy-reading chart that lists decades of failed trade negotiations with Beijing, according to administration officials.

Bob’s attitude toward China is very simple. He wants them to surrender,” said William A. Reinsch, a former federal trade official who met him three decades ago when Mr. Lighthizer was a young aide for former Senator Bob Dole of Kansas. “His negotiating strategy is simple too. He basically gives them a list of things he wants them to do and says, ‘Fix it now.’

Mr. Trump’s selection of Mr. Lighthizer last month to lead the talks initially spooked markets, which viewed the China skeptic’s appointment as an ominous sign. It also annoyed Chinese officials, who had been talking with the Treasury secretary, Steven Mnuchin, a more moderate voice on trade and the primary point of contact for Liu He, China’s top trade negotiator. Mr. Mnuchin has urged the president to avoid a protracted trade war, even if that entails reaching an interim agreement that leaves some issues unresolved.

Mr. Mnuchin, who attended the G-20 dinner, helped Mr. Trump craft an upbeat assessment declaring the Buenos Aires meeting “highly successful” in the presidential limousine back to the airport, according to a senior administration official.

The disparate views among Mr. Trump’s top trade advisers have prompted sparring — both publicly and behind the scenes.

During an Oval Office meeting with the trade team the fall of 2017, Mr. Lighthizer accused Mr. Mnuchin and Gary D. Cohn, the former National Economic Council director, of bad-mouthing him to free-trade Republican senators.

The argument grew so heated that the White House chief of staff, John F. Kelly, quickly pulled the combatants into the nearby Roosevelt Room and away from the president, where the argument raged on for a few more minutes, according to two witnesses.

Emily Davis, a spokeswoman for the United States trade representative, disputed the account.

Mr. Lighthizer has since worked to increase his own face time with Mr. Trump. He has joked to colleagues that he has more influence with Mr. Trump during winter months because he is able to hitch a ride on Air Force One during the president’s flights down to Mar-a-Lago, which is several miles from Mr. Lighthizer’s own $2.3 million waterfront condo in Palm Beach, Fla.

He used that access to argue to Mr. Trump that the United States has never had more leverage to extract structural reforms on intellectual property, forced transfer of technology from American companies and cybercrime. But while Mr. Trump has jumped at the chance to claim victory in changing China’s ways, experts say that what Mr. Lighthizer is demanding would require significant shifts in how Beijing’s central government and its manufacturing sector coordinate their activities, and that might simply not be possible in the short term.

“Good luck with that,” Mr. Scissors said.

Those who know Mr. Lighthizer say he will try to force concessions through a combination of pressure tactics, like tariffs, and public condemnation. Mr. Lighthizer — who described his own negotiating style as “knowing where the leverage is” during a 1984 interview — typically presents few specific demands during initial talks while publicly bashing efforts by the other side.

He used that approach during recent talks with Canada and Mexico to revise the North American Free Trade Agreement, criticizing foreign counterparts as intransigent and characterizing complaints by American businesses as pure greed.

Mr. Lighthizer’s unsparing view of China comes, in part, from his childhood in Ashtabula, Ohio, an industrial and shipping town on the Great Lakes hit by the offshoring of steel and chemical production. For much of his career, Mr. Lighthizer was a lonely protectionist voice in a Republican Party dominated by free traders, alternating between jobs in government and a lucrative private law career representing large American corporations like United States Steel in trade cases against China.

Mr. Lighthizer found his way into Mr. Trump’s orbit through his work in the steel industry, where he gained prominence by filing lawsuits accusing Japan and China of dumping metals into the United States, in violation of trade laws. In 2011, Mr. Lighthizer caught Mr. Trump’s eye with an opinion piece in The Washington Times, in which he defended Mr. Trump’s approach to China as consistent with conservative ideology and compared the future president to Republican icons like Ronald Reagan.

Taciturn in public and self-deprecating in private, Mr. Lighthizer sees himself as a serious player on the world stage: Two recent guests to Mr. Lighthizer’s Georgetown townhouse were greeted by the stern visage of their host staring down at them from an oil portrait on the wall.

The trade adviser is guarded around Mr. Trump, often waiting until the end of meetings to make his points and quietly nudging the president away from actions he views as counterproductive, current and former officials said. That was the case in mid-2017 when he cautioned the president against withdrawing unilaterally from the World Trade Organization, adding for emphasis, “And I hate the W.T.O. as much as anybody.”

He does not always get his way. In the wake of a new trade agreement with Mexico and Canada this fall, Mr. Lighthizer urged Mr. Trump to consider easing steel and aluminum tariffs on those countries and replacing them with less burdensome quotas. Mr. Trump rejected his plan, according to negotiators from all three countries.

A poker-faced Mr. Lighthizer broke the news to his Mexican and Canadian counterparts by declaring the proposal was inoperative, one of the officials said.

The president also ignored Mr. Lighthizer’s advice in early December when he announced that he intended to begin the six-month process of withdrawing the United States from Nafta in order to pressure House Democrats into passing the new United States-Mexico-Canada Agreement.

That threat undermined months of quiet negotiations between Mr. Lighthizer, labor groups and Democrats like Senator Sherrod Brown of Ohio and Representative Nancy Pelosi of California to try to win their support for the new trade deal. Mr. Trump has yet to follow through on his threat, and Mr. Lighthizer continues trying to work with Democrats to get the new trade deal approved.

Bob is trying to provide stability and focus in a completely chaotic environment,” Mr. Brown said. “I can’t speak for Bob, but I am certain he is frustrated. How could you not be frustrated as the U.S. trade representative for a president who knows what his gut thinks but hasn’t put much of his brains into trade?

 

How Special Interests Hide the True Costs of Tariffs

Consider how easy it was for Mr. Trump to get a 25 percent tariff on steel imports. His administration simply concocted a fanciful national-security narrative about why the steel industry needed protection from foreign steel imports — this despite the industry’s enjoying a 70 percent share of the United States steel market and despite the Department of Defense finding no national-security harm from global steel imports.

.. For example, for the projected impact of the steel tariffs, numbers produced by the Commerce Department show that they may increase employment in the metals industry by 14,000 jobs. But the report also says that a significantly larger number of jobs will be destroyed, as a result of these tariffs, in industries downstream from metal production.

.. Under the current system, if Commerce Secretary Wilbur Ross decides to protect his friends and business interests in the steel industry, he can ignore the damage that his own data show the tariffs will inflict on some of the 6.5 million workers in America’s steel-consuming industries. His sole lawful obligation is to demonstrate that the economic fortunes of the 140,000 steel employees will be promoted by the tariffs.

.. when I.T.C. commissioners make their determinations in such cases, they’re actually forbidden by statute from considering the impact of these so-called trade remedies on downstream industries — those consumers of goods and services hit by the tariffs.

.. The good news is that there’s an easy fix: Change the statutes so that commissioners are required to consider the effects of trade restrictions on downstream industries and consumers.

.. Today, steel executives have an iron grip on the White House thanks to the deep ties of the president’s advisers to the industry.

  • Mr. Ross made his fortune buying and selling steel companies and was sitting on a steel company’s board until his confirmation as commerce secretary.
  • Robert Lighthizer, a private lawyer who represented the steel industry for years, is now the United States trade representative.
  • The upper levels of both the Office of the United States Trade Representative and the Commerce Department have predictably been populated by other individuals with close ties to Big Steel. And the
  • trade adviser Peter Navarro’s 2012 documentary, “Death by China,” was funded by one of the top beneficiaries of these tariffs — the steel producer Nucor.

This cronyism explains how the steel industry is directly involved in deciding which companies do or don’t receive exemptions from the steel tariffs and why so few exemptions have been granted.