President Donald Trump’s aggressive trade policies are running headlong into his campaign for reelection.
As Trump prepares to run on the economy, his threat to increase tariffs on imports from China has sent the stock market diving and served to undercut a stretch of positive economic news. U.S. farmers and exporters, already bearing the brunt of China’s retaliatory tariffs, now face the prospect of an escalated trade war in which key states that Trump needs to win reelection will be in the crosshairs.
The trade war has also exposed a rift inside the White House and among the president’s allies – with some officials pushing for a quick resolution to calm the markets ahead of 2020, and others warning the president that a weak deal with China could leave him politically vulnerable.
“My warning has been, we don’t want the 2020 election year to become greatly intensified friction with China over trade issues. We want a deal that works,” said Michael Pillsbury, a China expert at the Hudson Institute who has advised the Trump administration on trade. “One way to unite all 21 Democratic primary candidates is if the president gets a quick but flawed deal that inevitably leads to friction when China is caught cheating next year.”
However, Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow are among a group of Trump aides who have encouraged the president to quickly reach a deal with China and avoid political blowback from a full-scale trade war in 2020, according to people familiar with the internal debate.
White House officials said Trump is prepared to take a hard line with China going into 2020 in part because he intends to keep his 2016 campaign promise to fix what he views as bad trade deals. Trump believes strongly in the power of tariffs to force China and other countries to negotiate and won’t sign a deal for political expediency, said two officials, who spoke on the condition of anonymity to discuss internal strategy.
The two officials also played down the extent of disagreement within the administration, saying top advisers are mostly in agreement about the need to take on China over its unfair trade practices.
- Stocks were slammed Tuesday amid worries the global economy and earnings would take a hit from a trade war between the U.S. and China.
- While many analysts still expect a deal, there are concerns that the Trump administration will unleash higher tariffs at the end of the week, hurting the global economy, aggravating tensions with China and extending the time frame for the talks.
- The stock market Tuesday took the announcement of tariffs as a sign of potentially serious problems in the trade negotiations, unlike Monday when it reacted to President Donald Trump’s tariff threats as simply a bargaining posture.
Investors are worried the U.S. and China may not find enough common ground to head off a new round of tariffs later this week that could bite into global growth, squeeze profit margins and drive down stock prices.
Trade negotiators are scheduled to meet this week in Washington, but recent tensions make it less likely a deal will be agreed to before the Trump administration unleashes a new round of tariffs. Analysts say a deal is still possible, but the risks have risen that there will be more tariffs before a deal can be agreed, and it could then take a lot longer than expected for an agreement to be hammered out.