Inside Washington DC’s mad scramble to change Trump’s mind on tariffs

"America First"
"America First"

Donald Trump’s announcement on March 1 that the the US would put a massive, across-the-board tax on imported steel and aluminum jolted markets, alarmed CEOs, and sparked a chaotic scramble in Washington, DC to change his mind, though any means necessary.

That scramble claimed its first victim on March 6, when the White House announced Trump’s top economic advisor, Gary Cohn, was resigning. Cohn, who had pushed hard against the tariffs and threatened quit if they were enacted, said Tuesday it was “an honor to serve my country,” and wished the president luck.

Meanwhile, captains of industry are phoning the White House, Congressional Republicans are openly criticizing the decision and quietly discussing taking away some presidential powers, and foreign leaders have been ringing Trump directly. Some have promised to retaliate. Tariffs would destroy five US jobs for every one they create and could set off a global trade war, critics warn.

The flurry of activity in Washington has been accompanied by an existential crisis. Some trade experts, advisors, and diplomats here are wondering whether anything they do will matter, given the president ignored his top economic advisor and steel CEOs on the issue. “Even the steel producers have asked Trump to exclude Canada from the tariffs” because that’s their biggest export market, said Jorge Guajardo, a former Mexican ambassador to China who now advises companies on Latin America and China issues from DC. “And it didn’t matter,” he said.

The main driver for the announcement cannot be easily reasoned away, adds Guajardo: “It makes Trump feel good to say he’s going to impose big tariffs.” The president, who reportedly thrives on chaos around him, is simply doing what Guajardo describes as “his New York real estate deal posturing and chest-thumping.”

Appeals from Congress

Congressional aides tell Quartz that legislators have discussed writing laws to rein in the president’s powers to set tariffs, including a provision in the spending bill due later this month. (The fact that the president has oversight of trade tariffs at all is something of an anomaly— Congress, after all, sets taxes, and tariffs could be considered a tax on imported goods.) Cohn’s departure may now force their hand.

Congress members in Trump’s own party have expressed surprise and dismay at the tariff plan, and spent the past week trying to negotiate with the president in calls and televised statements. “I think the best way to characterize where most Republican senators are right now, including myself, is genuine concern that this not escalate into something much broader,” senate majority leader Mitch McConnell said Tuesday afternoon.

The metals tariffs were “too broad,” house speaker Paul Ryan said March 6 and could be targeted at China. Texas Republican Kevin Brady, chairman of the House Ways and Means committee, said yesterday that the committee was “staying engaged” with the president to tailor the tariffs.

NAFTA negotiations are making good progress, said Brady, who was just on a two-day trip to Mexico with a bipartisan team. Threatening trade steel tariffs doesn’t provide “any more incentive for Mexico, Canada to stay at the table,” Brady said. On March 7, over 100 Republicans in Congress sent a letter to Trump expressing their “deep concern” on the issue.

Big business comes begging

Trump seems to hold CEOs in much higher regard than economists, strategists, or most of his fellow Republicans. But because Trump’s bitter battle with Cohn was well-known, and US trade representative Robert Lighthizer was in Mexico City working on NAFTA talks, industry representatives puzzled over whom to address at the White House this week. They made their feelings known through television appearances and public statements, and sending lobbyists to meet members of Congress on Capitol Hill.

“We’re looking to [White House] advisors with industry expertise first to talk about the nitty gritty,” said one trade group representative, who pointed to other people on the National Economic Council as his first point of contact. Most industry leaders were trying to figure out whether the trade tariffs could be limited in some way. “We don’t know from [Trump’s] bark how bad his bite will be,” he said.  “We don’t know from his bark how bad his bite will be.”  

Canada, which would be hit hardest by steel tariffs, should be exempt, United Steelworkers Union president Leo W. Garard wrote in a public message.

Cohn had organized a meeting on Thursday between industry executives who would be hurt by the decision, including automakers, and Trump, Bloomberg reports. That meeting is now cancelled.

It may not have mattered—Trump has acted against CEOs’ wishes before, others point out. “The automakers hate his proposal on NAFTA, and they’ve told the president that they hate it and there has been no indication that the administration is willing to back away from it,” said Edward Alden, a senior fellow at the Council on Foreign Relations.

“They’re arguing against a deep-seated view that he’s had for decades,” said Patrick Chovanec, the chief strategist at Silvercrest Asset Management. But while Trump has said he won’t back down on the tariffs, CEOs speaking out against them could “cause him to extemporize and wait rather than acting,” he said.

Phone calls from foreign leaders

British prime minister Theresa May expressed her concern about the tariffs in a Sunday phone call that was scheduled to discuss the war in Syria. “The prime minister raised our deep concern at the president’s forthcoming announcement on steel and aluminium tariffs, noting that multilateral action was the only way to resolve the problem of global overcapacity in all parties’ interests,” a spokeswoman said.

Canadian prime minister Justin Trudeau called Trump on Monday night. Trudeau “emphasized that the introduction of tariffs would not be helpful to reaching a deal on NAFTA,” according to a readout of their call released by the Canadian government. “The leaders undertook to stay in touch.”

Whether Trump is listening or not is unclear. The White House said Trump and May discussed Trump’s “efforts to ensure fair and reciprocal trade” but didn’t elaborate. In its description of its call with Trudeau, the White House repeated one of Trump’s mistaken beliefs on what causes trade deficits, saying “President Trump emphasized his commitment to a NAFTA agreement that was fair to all three countries, noting the current agreement leaves the United States with a trade deficit.”

What to watch for

Like the “Muslim Ban” that was written without the aid of administration immigration experts, and then suspended by US courts, or Trump’s pledge to cancel NAFTA immediately, which then morphed into long-running talks, there’s plenty of speculation in DC that the steel and aluminum threats are just part of a Trump’s now-familiar “talk loudly, carry a tiny stick” approach.

But one little-considered factor is how well they play in Pennsylvania’s 18th District, a steel-manufacturing bulwark that’s having a special election later this month. The Democratic candidate, Conor Lamb, is pulling ahead in a race that Trump won by 20 points in 2016, and Trump is scheduled to go there on Saturday.

“If he goes to Pennsylvania and makes a strong sale, and it resonates there as it should, he’s going to come back to Washington emboldened to keep up this discussion on tariffs,” predicts David Bozell, the president of ForAmerica, a conservative think tank.

Trump insisted Tuesday afternoon that “trade wars aren’t so bad,” adding “We’re doing tariffs on steel.” This morning he tweeted that the US’s $800 billion trade deficit last year was a result of being “bad policy and leadership.”

How the markets react to Cohn’s departure may influence his final tariff decisions. Dow Jones Industrial Average jumped 336 points on Monday, plummeted over 120 points Tuesday morning and then recovered by mid-afternoon, in part because of uncertainty about whether the tariffs would happen or not, market strategists said. Early signs show US markets today will open sharply down.

“We cannot dismiss the risk of a destructive trade war breaking out, forcing us to downgrade our outlook for the U.S. and global economy,” Chovanac said in a note to investors March 6. “The risk of a trade war, along with inflation and rising interest rates, casts a shadow of uncertainty over the market.”

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