Share This Post

Business / Business Education / Finance / Money / Personal Finance

Trump Can’t Tame The Trade Deficit, So He’ll Settle For Taming Wilbur Ross

Trump Can’t Tame The Trade Deficit, So He’ll Settle For Taming Wilbur Ross

Wilbur Ross has known Donald Trump long enough not to expect loyalty from the president, but even Ross must have be surprised by the speed and enthusiasm with which number 45 threw him under the bus after his inauguration. Ross has been a White House punching bag for months now, with the president reportedly disappointed in the results Ross had produced during trade negotiations with China last year. “Wilbur has lost his step,” the president said, per Axios. “Actually, he’s probably lost a lot of steps.”

The latest indignity for Ross is Trump’s reversal of sanctions on Chinese telecom giant ZTE, which was barred on April 16th by Ross’ Commerce Department from importing goods from the U.S., as punishment for its repeated violations of U.S. sanctions against North Korea and Iran. The import ban is not a step the Commerce Department took lightly—it was, in fact, the result of a probation violation following a 2017 deal whereby ZTE admitted to “a multi-year conspiracy” to deceive the U.S. government about its operations inside Iran. As part of the plea deal, ZTE agreed to amend its behavior and punish the employees who planned the conspiracy. But instead of punishing these workers, they were rewarded with bonuses.

As any Trump Administration cabinet secretary with an instinct for self-preservation would do, Ross came down hard on ZTE, issuing a seven-year import ban that appeared likely to put the firm and its 70,000 employees out of business. When President Trump tweeted Sunday that he had ordered Ross to reverse the decision, it came as a surprise to those who see the president as motivated by the coherent ideologies of hawkishness towards Iran and the trade deficit. But all of Trump’s policy views, even his deep-seated and irrational dislike for trade deficits, are usually mere poses he adopts to further other goals, namely the need to glorify himself and dominate others. This sometimes leads to glaring contradictions, like an announcement to end a suspension of economic sanctions on Iran on May 8th, while announcing five days later, with his comments on ZTE, that the U.S. government would only enforce those sanctions selectively.

But once you understand that Trump is primarily guided by the twin goals of affirming himself and dominating others, it becomes fairly easy to see what he’ll do next. The administration’s insistence of bilateral trade deals leaves it with few tools to shrink a trade deficit that is the result of global balances. Whether or not the President understands this, he can’t deny the fact that the trade deficit has risen steadily since he assumed office, and this has made him frantic to settle for whatever enables him to appear to be fighting a domineering trade war, while avoiding the costs of the real thing.

On NAFTA, we’ve already seen the administration abandon its most hardline positions, and it is now placing all its hopes in new rule-of-origin regulations, which trade experts argue will do little to change auto industry investment decisions. And the latest reports out of China are that the globalist Mnuchin is leading negotiations to keep ZTE in business in exchange  for lifting the threat of tariffs on U.S. agricultural exports.

This would enable Trump to claim victory, as China would be staying its hand on farm tariffs, without Trump removing his threat of tariffs on $50 billion in Chinese goods that had motivated the Chinese threats in the first place. With this deal, Trump can deliver for his farm-country fans, whom he rightly fears disappointing lest depressed Republican turnout in November leads to the Democratic Party having subpoena power over the president and his sprawling business empire come January.

It’s probably just icing on the cake that Trump’s decision on ZTE allowed him to publicly undercut the Ross, who said just last week that the decision on ZTE is an enforcement action which would be dealt with separately from trade. If the president can’t actually win a trade war, he can settle for publicly bullying and belittling the private-equity legend who bailed out the Trump Organization nearly thirty years ago.

Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.

Share This Post

Leave a Reply