Trump’s hand on trade is getting weaker
I started getting emails recently from a new interest group called Americans for Farmers and Families, which publishes information explaining how President Donald Trump’s protectionist trade policies could harm the U.S. economy and kill jobs in agriculture. Members of the wholesome-sounding group, which formed in January, include corporate titans such as Walmart, John Deere and Cargill, along with regional agricultural organizations such as the Missouri Dairy Association and the Wisconsin Potato and Vegetable Growers Association. I’ve received a dozen emails from the group warning about the dangers of Trump’s trade policies in May alone, as hundreds of other journalists undoubtedly have.
This type of pop-up advocacy doesn’t exist in China, where President Xi Jinping’s Communist Party controls nearly all media and there’s little public opposition to government policies. Freedom of expression is a strength of American society, of course. But it’s a tactical weakness for Trump, at the moment, who faces potent opposition to his “America first” policies not just from trading partners, but from powerful players within his own country.
“Xi Jinping doesn’t have the same kind of political constraints Donald Trump faces, with an independent media, civil society, and independently elected national and local officials,” says Scott Kennedy, an expert on the Chinese economy at the Center for Strategic and International Studies in Washington, DC. “And currently Xi Jinping is riding high. He’s managed to seize control of the political system and appears to be popular among most of industry and the broader population.”
Trump can only wish for such monolithic support. With Trump threatening tariffs on as much as $150 billion worth of Chinese imports, a high-level Chinese delegation is in Washington this week to try to work out a deal that averts a trade war. At the same time, the US Trade Representative, a Cabinet-level position, is holding public hearings on one set of tariffs Trump has proposed, which is sure to include American farmers, small-business owners and corporate executives explaining how such tariffs—and the prospect of retaliatory tariffs from China—would jack up their costs, cut off key markets and threaten their businesses.
A reversal on ZTE
Opposition to Trump’s tariffs from farmers and businesspeople isn’t new. But it’s intensifying, as trade friction casts a pall over financial markets and an economy that is otherwise robust. And Trump may be showing his vulnerability. He recently hinted that he’ll reverse sanctions on Chinese telecom operator ZTE that his own government imposed just last month, in what seemed at the time a classic example of a tough Trump promise kept.
ZTE is a $20 billion maker of handsets, routers and other gear that got caught, and acknowledged, shipping goods to North Korea and Iran from 2010 to 2016, which violated U.S. sanctions. Then it rewarded employees who executed those shipments with bonuses. The Commerce Department, in response, fined the company $1.19 billion, and then imposed an export ban that prevented American companies from selling products to ZTE. Since the company relies on many American-made components, it has said recently that it might have to cease operations if it doesn’t get relief from the ban.
So Trump, naturally, said recently that he’ll reverse course and find a way to help ZTE. Wait? He did what? Really? That doesn’t sound like Trump. Yet it’s exactly what he said, and he’s now facing criticism for going soft, from some people who support his tough stance toward China.
The backstory explains Trump’s shifting views. Trump may lift the export ban on ZTE, in exchange for China lifting new restrictions on US imports of agricultural products such as soybeans, sorghum and ginseng. And the only reason China imposed those restrictions was to respond to steel and aluminum tariffs Trump announced in March. The echoes had to bounce off several walls, but it sounds as if those protests of America’s farmers and families are starting to work.
What gives the Chinese this leverage is American electoral politics. The unpopularity of Trump’s proposed tariffs in farm states such as Iowa, Kansas, Missouri and North Dakota has led to a backlash against Trump and his Republican party, which could help tip the scales to Democrats in the November elections. At stake is control of the House of Representatives, which could block Trump’s agenda and even vote to impeach the president if Dems take control. Suddenly, Trump’s hard-line positions on trade seem self-defeating.
The Chinese know this. They also know their own leader, Xi Jinping, doesn’t have to worry about domestic politics the way Trump does. Unlike Trump, Xi recently solidified his control of the Communist Party and the entire Chinese government, with the March removal of presidential term limits that allow Xi to remain in charge of the country indefinitely. The Chinese don’t hold every advantage in their showdown with Trump, but their leaders are far less answerable to the people than Trump is. And Trump seems like he’s just learning this.
Confidential tip line: rickjnewman@yahoo.com.Click here to get Rick’s stories by email.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman
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