Trump Seems to Genuinely Want a Trade War With China

“No deal.” Photo: Saul Loeb/AFP/Getty Images

Donald Trump is not known for putting substance over spectacle.

Throughout his first seven months in office, the president has evinced far more interest in declaring political victories than achieving any particular policy goal. After campaigning on a promise to deliver universal health care, Trump welcomed the congressional GOP’s plan to increase the ranks of the uninsured by 21 million. In fact, Trump demanded that Republicans pass their health-care bill, even though he, himself, described its provisions as “mean” and “coldhearted.” The details didn’t matter — the point was to “win.” Or, more specifically, to have a pretext for declaring victory: When Trumpcare limped its way out of the House, the president held a Rose Garden celebration for a bill that would never become law.

This “fake it till you make it” ethos informed virtually everything the new president did. He spent his first weeks in office signing toothless executive orders that merely reiterated his campaign promises. And when Saudi Arabia orchestrated a blockade of Qatar — on the laughable pretense that Riyadh was scandalized by Doha’s connections to Islamist terrorism — Trump eagerly marketed economic warfare against a key U.S. ally as a breakthrough in his fight against radical Islam.

Give President Trump a chance to license his name to a policy “win” — no matter how superficial — and he’ll take it.

Or so the Chinese government (reasonably) thought. Last month, Beijing offered the Trump administration a commitment to reduce its steel production. The Communist nation runs its steel industry less as a for-profit business than as an employment program, allowing Chinese producers to sell the commodity below the cost of production — thereby rendering European and American steel manufacturers uncompetitive.

Throughout 2016, Trump vowed to curb Chinese steel “dumping.” Beijing gave Trump the chance to walk out of high-level economic meetings last month with a “breakthrough deal” on one of his core campaign promises. And China’s concession was actually significant enough to win the hearty approval of the administration’s trade hawks, including Commerce Secretary Wilbur Ross. All assumed the boss would be thrilled. But they assumed wrong, as the Financial Times reports:

Donald Trump last month rejected a Chinese proposal to cut steel overcapacity despite it being endorsed by some of his top advisers, as he urged them instead to find ways to impose tariffs on imports from China.

One week after the July G20 summit in Hamburg, at which Mr Trump criticised China for flooding the world market with cheap steel, Beijing proposed cutting steel overcapacity by 150m tonnes by 2022. But Mr Trump twice rejected the deal, according to several people familiar with the internal debate …

… “The president had by then decided that he wanted to do something much broader,” said the US official, who added that the Chinese proposal for cutting steel overcapacity was significant. “It was fairly sizeable amounts. But the amounts don’t really matter [since] by then the president had decided that he wanted to go in a different direction — more towards tariffs than cutting excess capacity.”

… One former official said Mr Ross looked shocked when he returned to the talks with Mr Wang after being told by Mr Trump that the deal was a non-starter.

It’s probably not quite right to describe this as a commitment to substance over symbolism, given the clear superiority of Beijing’s offer to tariffs as a matter of policy. For one thing, a cut in Chinese production would raise the price of steel worldwide, and, thus, would not put American importers of steel at a special disadvantage — but tariffs would. For another, accepting China’s offer would, obviously, not put the U.S. at risk of retaliatory actions by Beijing — but imposing tariffs would.

More fundamentally, if Trump restricted his tariffs to Chinese steel exports, they would have little effect on America’s steel industry. Right now, China directly supplies only about one percent of the steel used in the U.S. Most American steel imports come from Canada, South Korea, Brazil, and Mexico. Slapping tariffs on a frenemy like China is one thing; instigating an economic conflict with our northern neighbor is quite another (in terms of diplomatic downsides).

Nonetheless, Trump’s rejection of the Chinese proposal suggests that he is committed to a specific policy goal on trade with China — or, at least, to the specifics of his spectacle. The president has taken a similar approach to his border wall — instead of trying to rebrand border-security measures that enjoy bipartisan support as the foundation for his wall, Trump has insisted on the simple, symbolically potent, substantively indefensible policy he campaigned on.

Unlike the border wall, however, Trump doesn’t need Congress to slap tariffs on China — he can do so unilaterally, on “national security” grounds.

But he hasn’t. And in the weeks since Trump walked away from Xi Jinping’s offer, Beijing has cut back on steel production, anyway. This, combined with the fact that China is now consuming more of the steel it produces, has sparked a recovery in global steel prices, and with them, America’s steel industry.

So, one might dismiss Trump’s tariff talk as yet another example of the president’s bark outstripping his bite. But Trump has repeatedly suggested that his trade war with China is but a dream deferred. Last month, he told The Wall Street Journal that he was “waiting till we get everything finished up between health care and taxes and maybe even infrastructure,” before making a big move on trade policy. In an interview with FT, an administration official clarified the motivation behind Trump’s patience, saying, “The president has made clear . . . that the immediate priority is the tax bill and he is not seeking to introduce things that could create issues with the Congress regarding the tax bill.”

One way to interpret these remarks: When the legislative agenda falls away, the trade warrior-in-chief will play. Trump’s most radical actions have often been motivated by a desire to compensate for a legislative failure with executive action. If his jobs agenda stalls in Congress, it’s easy to see him pulling the trigger on tariffs. Especially when one considers the passion he’s shown in private for the policy, as Axios reported Monday:

The scene: The Oval Office, during Gen. Kelly’s first week as Chief of Staff. Kelly convened a meeting to discuss the administration’s plans to investigate China for stealing American intellectual property and technology. Kelly stood beside Trump, behind the Resolute desk. In front of the desk were U.S. Trade Representative Robert Lighthizer, senior trade adviser Peter Navarro, top economic adviser Gary Cohn, and Trump’s former chief strategist Steve Bannon.

Trump, addressing Kelly, said, “John, you haven’t been in a trade discussion before, so I want to share with you my views. For the last six months, this same group of geniuses comes in here all the time and I tell them, ‘Tariffs. I want tariffs.’ And what do they do? They bring me IP. I can’t put a tariff on IP.” (Most in the room understood that the president can, in fact, use tariffs to combat Chinese IP theft.)

… “John, let me tell you why they didn’t bring me any tariffs,” he said. “I know there are some people in the room right now that are upset. I know there are some globalists in the room right now. And they don’t want them, John, they don’t want the tariffs. But I’m telling you, I want tariffs.”

This anecdote could be a semi-fictional Bannon leak. But the fact that the ex-chief strategist will be beating the drums of trade war in the right-wing press will also build momentum for tariffs. Trump is already convinced that he needs to distance himself from the GOP Establishment, and deliver more symbolic “wins” to his base.

It’s possible that the president’s fear of disrupting the relatively favorable economic conditions he inherited will restrain him. But this week’s reporting paints a new nightmare scenario for congressional Republicans — one in which a renegade president compounds the political costs of their legislative failures by sabotaging the economy, just before the midterm elections.

Trump Seems to Genuinely Want a Trade War With China