Trump Is Beginning To Fold On His Trade Agenda

Since Trump began implementing tariffs on a wide range of nations in March 2018, his commitment to actually seeing through his trade agenda, even in the face of economic and political harm to himself, has been questioned. Indeed, it was widely reported that Trump pressured his economic advisers to wrap up negotiations to help the economy when the stock market suffered a large decline at the end of 2018. In recent weeks, however, clear signs have emerged that Trump is beginning to fold on achieving real concessions in his trade conflicts, in the face of economic and political costs ahead of the 2020 election. The first, and extremely significant, move in this direction by Trump was unilaterally cancelling the March 1 deadline for higher tariffs on Chinese goods , even though no concessions had been made by China. The tariff escalation if a deal had not been made was promoted by the Trump administration as creating significant leverage on the Chinese because of its significantly harmful economic effects, and yet it became clear that Trump was not willing to incur his own domestic economic hardship and simply backed down. Second, new reporting over the past several weeks has shown that US demands for Chinese reforms continue to be watered down, whether that be accepting weaker Chinese IP protections for pharmaceuticals than exist in the US or largely abandoning demands for China to reform industrial subsidies to state-run enterprises.

Why has Trump changed his tune so significantly, when his promise to be tough on America's trading partners was such a big part of his campaign? Probably because he has begun to encounter significant political and economic opposition at home that has him fearful for his 2020 election hopes. On the political front, his trade agenda has encountered increasingly strong opposition from both Democrats and Republicans. Over the weekend, Republican Sen. Chuck Grassley said that the USMCA was dead in Congress unless Trump repealed his steel and aluminum tariffs, while bipartisan bills giving Congress a check on the President's national security authority for imposing tariffs are moving through the House and Senate. On the economy, meanwhile, Trump has seen the large negative effects on the stock market and business confidence that his trade wars have created, and realizes that a strong economy provides probably the only potential path to a 2020 victory. As a result, he's unwilling to repeat the stock markets declines of late 2018, which were caused in large part due to fears of escalating trade conflicts with China and the EU. For all of the bluster and attacks on key US allies, then, what has Trump's trade strategy achieved for Americans? A weakened manufacturing sector and the loss of thousands of jobsseverely worsened relations with our allies in Europe and Asia, and few if any meaningful trade concessions. You can read more about NDN's work challenging Trump's tariffs here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.