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The Nationalists Take Over

Irwin M. Stelzer

Moving forward while backing down is no small feat. But the president managed it last week. On live TV.

Donald Trump pushed ahead with plans to impose tariffs of 25 percent on steel and 10 percent on aluminum, sounding as injured by the trade practices of our partners as at any time in his grievance-strewn presidency—and as tough as his core supporters could want. “If you don’t have a steel industry you don’t have a country,” he proclaimed, which will come as a surprise to a lot of countries.

It was great television from someone who knows how to use the medium and is unburdened with excessive fidelity to the facts.

Although talking tough, the president showed what he called “great flexibility” and was, in fact, a climb-down: These tariffs will not apply to Mexico and Canada; that can be handled by the renewal of NAFTA, which he expressed confidence would be successfully negotiated. Yes, other countries can file for exemptions, and those that can show they are our friend on “trade and security” will get them. Countries that don’t treat us fairly and don’t pay their fair share of defence costs will not. Australia certainly will be exempt; China certainly won’t. The president read aloud a tweet from Elon Musk pointing out that Beijing taxes imports of cars from the United States at a 25 percent rate while we tax their cars at only 2.5 percent. That will end.

The European Union fails both the security and trade tests. It has not honored its commitment to devote 2 percent of its GDP to the NATO budget and it taxes imports of American cars at a 10 percent rate, almost five times the rate at which we tax theirs. Whether the Europeans will nevertheless end up in the “friends” column remains to be seen. If the European Union mounts more than a token retaliation, the president has threatened to impose a 25 percent tariff on European-made cars—or at least a “mirror tax” of 10 percent.

So with these exceptions, and fifteen days for all affected nations and companies to appeal for an exemption, or offer an acceptable alternative to tariffs, it might seem that things are not as bad as everyone originally thought.

In fact, they are far worse.

* * *

Accompanying the president during his announcement, in addition to several steel workers, hard hats tucked under their arms, were Treasury secretary Steve Mnuchin, Commerce secretary Wilbur Ross, assistant to the president Peter Navarro, and U.S. trade representative Robert Lighthizer. With the exception of Mnuchin, who is said to have wavered before signing on to these tariffs, this is the triumphant nationalist wing of the White House staff, long-time protectionists, all. They have routed Gary Cohn’s globalists, won the war for Trump’s ear, and plan more protectionist measures, not least among them a 7 percent fee on all imports.

Equally important is what this incident tells us about just how policy is made in this White House. At six o’clock on a cold evening the nationalists slipped into the White House, called leading steel and aluminum executives to a White House meeting the following day, and worked out the president’s surprise announcement of the tariffs to be levied. A chaotic way to make policy say Trump’s critics. But hoping to reform Trump policy procedures by shouting “chaos” is rather like hoping to reform a misbehaving child by offering him more candy. The president came to his office from reality TV, where ratings are the measure of success. Chaos produces ratings and keeps all eyes on the star of the show. All others are bit players, disposable, as he made clear when asked if Cohn’s departure would hurt the administration. “People . . . all want to be in the White House, so many people want to come in. I have a choice of anybody.” Pace “The Apprentice”.

Then there is the president’s love of things French. On the theory that nothing succeeds like excess, he adorns his clubs and hotels with what are variously described as Louis XIV, XV, and XVI, 17th- and 18th-century-style gilded furniture. No harm in that: chacun à son gout, Trump might say. It his aping of the mercantilism of Louis XIV’s 17th-century finance minister, Jean-Baptiste Colbert, that is so dangerous. Colbert believed the wealth of a nation could be built by selling abroad and spending at home, running perpetual trade surpluses. Trump, not having recently reviewed his dog-eared copy of The Wealth of Nations, agrees: He does not understand the inefficiencies in foregoing the advantages of an international division of Labour.

Finally, it is no surprise that he has chosen hard metals as his first battleground. He understands steel, aluminum, concrete—the stuff of which hotels and skyscrapers are built. He associates the workers in those trades with manliness—note his sotto voce offer, mercifully declined, to arm-wrestle with a particularly muscular steel worker imported as a backdrop for the tariff press conference.

But those are the industries of a stagnant present and a dim future. The industries of the future—the ones China is planning to subsidize and protect until they achieve global dominance—are the ones that require protection from predatory trade practices. Trump has asked China to submit a plan for cutting its record $375 billion trade surplus with the United States by $100 billion. Or else.

Were he not so eager to hold center stage in the coming trade war with China, he might have tried to lead a coalition of nations that also suffer from China’s belief that trade is a one-way street, enhancing his bargaining power with Xi Jinping (a man he so much admires).

Last week, Trump showed he is willing to put the economy’s growth rate at risk to save some jobs in the steel industry. That’s a bad bet, with bad odds. The growing American economy added 313,000 new jobs in February, drawing thousands of workers back into the workforce. Enough new jobs were created in 12 days to replace all the jobs that would be lost if the entire steel industry disappeared. Better to bet on growth than on protection, if jobs are what he wants.

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