Two weeks ago, Steven Mnuchin, the Treasury secretary, declared that the trade war with China was “on hold” and that the United States would temporarily holster its tariffs. The reassuring comments calmed markets and raised hopes that Mr. Mnuchin, one of President Trump’s most enduring and trusted advisers, was winning the internal trade battle that has gripped the White House.
Then Mr. Trump weighed in. In a one-two punch last week, the president doubled down on the trade war with China and threw in ones with Canada, Mexico and Europe for good measure.
.. The scolding laid bare the uncomfortably familiar spot that Mr. Mnuchin finds himself in: trying to be a voice of moderation and a statesman in an administration that sees diplomatic norms and protocols as signs of weakness.
He has so far managed to stay in Mr. Trump’s good graces while advocating a more free-trade approach, but that balancing act is showing signs of strain.
.. Mr. Mnuchin, unflappable in public, is privately making his case with a president
.. The internal tensions boiled over in May during a trade mission Mr. Mnuchin led to China, when he dressed down Peter Navarro, Mr. Trump’s hawkish trade adviser, by reminding him where he stood in the administration’s pecking order after Mr. Navarro confronted him about being sidelined from the talks.
.. Current and former White House and Treasury officials say Mr. Mnuchin has managed to thrive by employing a mix of assertiveness and obsequiousness, staking out his position to the president but quickly changing course to carry out Mr. Trump’s marching orders, even if his message did not win the day.
.. Mr. Trump tweeted that he was going to find a way to help put back in business a Chinese telecommunications company that had been punished for violating American sanctions on Iran and North Korea. The decision blindsided administration officials and lawmakers
.. Mr. Mnuchin, along with the commerce secretary, Wilbur Ross, was dispatched to Capitol Hill to try to calm angry Republican lawmakers and explain the rationale behind allowing the company, ZTE, to remain in business.
.. those close to the secretary say he has learned to appreciate Mr. Trump’s use of the threat of tariffs as a negotiating tool.
.. focused on the president’s desire to see the bilateral trade deficit reduced, rather than emphasizing some of the other trade barriers
.. Stephen K. Bannon, Mr. Trump’s former top strategist, has said that Mr. Mnuchin is in over his head in the negotiations and that he is letting Mr. Trump’s leverage slip away by failing to force China to make major changes to its industrial policy.
.. it was apparent that the Chinese government was trying to elevate Mr. Mnuchin’s role in the negotiations because they see him as the American official most likely to cut a deal.
.. “Among the possible choices, they see Mnuchin as being less hawkish than some of the other counterparts,”
.. populist voices outside the administration have already been heckling Mr. Mnuchin as inept amid reports that the United States was on the verge of making an agreement with China that was viewed as merely symbolic.
.. Mr. Mnuchin has at times found himself the subject of derision, characterized as a fawning banker who cannot tell the president “no.”
.. Last year, the Treasury secretary was scoffed at by economic policymakers from across the political spectrum for insisting that the $1.5 trillion Trump tax cuts would pay for themselves.
.. Mr. Mnuchin told members of the conservative House Freedom Caucus to “vote for the debt ceiling for me.” His plea was met with groans and hisses.
.. Last August, fellow alumni of Yale, where Mr. Mnuchin earned a bachelor’s degree, called on the secretary to resign when he defended Mr. Trump’s handling of racially inspired violence in Charlottesville, Va. A month later, Lawrence Summers, a Clinton administration Treasury secretary, called Mr. Mnuchin the “greatest sycophant in cabinet history” for supporting Mr. Trump’s criticism of football players who knelt during the national anthem.
.. points to his role in successfully steering the Republican tax cut package, which many said would never pass, through Congress.
.. Within the Treasury Department, Mr. Mnuchin has developed a reputation as a micromanager. He resisted choosing a full-time deputy for more than a year, preferring to oversee everything from carrying out the new tax law to overseeing financial sanctions.
.. When the Internal Revenue Service systems failed on Tax Day, the response to the crash was slowed because Mr. Mnuchin was in New Hampshire
.. He had required that any big decisions be cleared by him
.. Mr. Mnuchin’s closest aides describe him as a collegial and mentoring figure.
.. Despite his earnest persona on television, he is known to possess a wry sense of humor
A Trade War that China Would Win
Donald Trump says trade wars are “good” and “easy to win.” But if the shock of a US-led trade war were to force China to open up and address the distortions in its domestic economy, Trump’s tariffs may prove to be a blessing in disguise.
Trump’s Dream Come True: Trashing Obama and Iran in One Move
Trump, by taking a hard line on Iran, drew some needed attention to Iran’s bad behavior and created an opportunity to improve the nuclear deal. But to do so would have required Trump to admit that there was merit in the deal Obama had forged and to be content with limited, but valuable, fixes that our European allies likely would have embraced.
.. Instead, Trump pushed for the max, torched the whole bridge, separating us from Germany, France and Britain, undermining the forces of moderation in Iran.
.. Color me dubious that a president who has not been able to manage his confrontation with a stripper, or prevent leaks in his White House, can manage a multifront strategy for confronting Iran and North Korea and trade wars with China, Europe and Mexico.
.. Obama’s view of the Middle East was that it was an outlier region, where a toxic brew of religious extremism, tribalism, oil, corruption, climate change and mis-governance made positive change from outside impossible; it had to come from within. By the end of his eight years, Obama was skeptical of all the leaders in the Middle East — Iranian, Arab and Israeli — and of their intentions.
.. It made Obama a policy minimalist on the Middle East: keep it simple and focus on the biggest threat.
.. By lifting sanctions on Iran as part of the deal, Obama hoped Iran would become integrated into the world and moderate the regime.
.. By contrast, Trump’s team is made up of maximalists. They want to limit Iran’s ballistic missile program, reverse its imperialistic reach into the Sunni Arab world, require Iran to accept terms that would ensure it could never ever enrich enough uranium for a nuclear bomb, and, if possible, induce regime change in Tehran.
.. in almost every country the alternative to autocracy turned out not to be democracy, but disorder or military dictatorship. If Iran, a country of 80 million people, was to go the way of Syria, it would destabilize the entire Middle East, and refugees would pour into Europe.
.. Iran has projected its power deep into the Arab world. But that was not because of money it got from the nuclear deal and sanctions relief, as argued by Trump & friends. It was because of the weakness of the Sunni Arab states and their internecine fighting, which created power vacuums that Iran has filled
.. Israel gets censured for implanting settlements deep into the West Bank. Saudi Arabia and the United Arab Emirates get censured for contributing to the humanitarian crisis in Yemen. But the Iranians have gotten away with murder, mass murder, at home and abroad — with virtually no censure.
.. In Syria, Iran’s special forces and its mercenary recruits — Hezbollah militiamen from Lebanon and Shiite hired guns from Central Asia — have helped President Bashar al-Assad perpetrate a ruthless genocide against Syrian Sunnis, including the use of poison gas, in order to maintain a pro-Shiite, pro-Iranian dictatorship in Damascus.
.. “The aim … is changing the demography” of Syria by settling Iranian-backed Shiite militiamen “from Afghanistan, Lebanon and other countries in the region … to fill the demographic vacuum” left by the hundreds of thousands of Syrians who have fled their civil war.
.. Rather than scrapping the deal, he should have told the Europeans that all he wanted to stay in the deal were three fixes:
1. Extend the ban on Iran’s enriching of uranium to weapons grade from the original 15 years Obama negotiated to 25 years.
2. Europe and the U.S. agree to impose sanctions if Iran ever attempts to build a missile with a range that could hit Europe or America.
3. The U.S. and Europe use diplomacy to spotlight and censure Iran’s “occupations” of Syria, Iraq and Lebanon.
Why China Won’t Yield to Trump
China may give Donald Trump some face-saving way out from the trade war he has started, but it won’t offer any substantive concessions. In other words, Trump’s tariffs will do nothing to improve America’s external balance, output, employment, or real wages. .. some defend Trump’s actions as a shrewd negotiating tactic to impel China to adjust its trade policies, such as the requirement that foreign companies share their intellectual property (IP) to gain access to the Chinese market.
.. Trump does not understand the basics of such a negotiation: he thinks that a country with a trade deficit necessarily has the stronger negotiating position. In reality, the surplus country is often in the stronger position, because it has accumulated financial claims against its “opponent.”
.. China does not necessarily even have to sell to wield influence. With US debt expanding and interest rates on the rise, even rumors that the Chinese might stop buying Treasury securities could be enough to drive down US bond prices and accelerate the increase in US interest rates.
.. While industries and consumers in China would also be hurt by a trade war, that country’s leaders can overrule interest groups and stifle protests.
In any case, public opinion will largely back retaliation against the US.
.. The Chinese remember well the Opium Wars of the nineteenth century, when the Middle Kingdom tried and failed to resist the British campaign to force it to open its economy to opium and other imports.
.. Add to that Trump’s reputation for flip-flopping, and the odds that Chinese leaders would bother making a deal with Trump to change their country’s trade policies seem small.
.. Even if China did decide to concede something to Trump, it would not be meaningful.
.. China could export less merchandise to the US directly, instead routing products through Taiwan and other countries, where some final assembly could take place.
.. The result would be economically meaningless; but so is the concept of the bilateral deficit itself, as Chinese exports to the US contain a high proportion of intermediate inputs produced in South Korea, the US, and elsewhere.
.. What really matters is that China’s current-account surplushas been falling since 2008, and now stands at a relatively small 1% of GDP.
.. America’s external deficit is growing, but that is the result not of trade policy; it stems from Republicans’ fiscal policy, which is blowing up the budget deficit and reducing national saving.
.. As for Trump’s complaints about China’s IP “theft,” there are some valid grievances on this front. But addressing this issue requires technical expertise and negotiating skill, not blunt threats based on inadequate knowledge.
Crucially, it would also require cooperation with other partners who have similar grievances with China, ideally including pressure applied through rules-based institutions like the World Trade Organization.
Trump is pursuing the opposite strategy, arguing that neither multilateralism nor bilateral negotiations work with China. Yet such tactics have helped to compel China to allow a 37% appreciation of the renminbi in 2004-2014 and to crack down on counterfeiting of US merchandise and theft of US software.
.. Trump may also want to avoid the WTO because the US doesn’t win all of the cases it brings there. But it does have a 90% success rate. And it is not as if the US has never violated international rules