Moneybox

Trump’s “Tariff Man” Rant Was Nonsense, but Thankfully an Actual Adult Is Leading Trade Talks With China

US President Donald Trump (C), US Secretary of the Treasury Steven Mnuchin (2-R), US Trade Representative Robert Lighthizer along with members of their delegation hold a dinner meeting with China's President Xi Jinping (out of frame) at the end of the G20 Leaders' Summit in Buenos Aires, on December 01, 2018. - US President Donald Trump and his Chinese counterpart Xi Jinping had the future of their trade dispute -- and broader rivalry between the world's two top economies -- on the menu at a high-stakes dinner Saturday. (Photo by SAUL LOEB / AFP)        (Photo credit should read SAUL LOEB/AFP/Getty Images)
Trump and his trade team.
Saul Loeb/Getty Images

If you spent any time paying close attention to the negotiations between the U.S., Canada, and Mexico over the new and debatably improved North American Free Trade Agreement, chances are you noticed a basic routine emerge.

Representatives of each country would meet. They’d make progress on a key issue. Or maybe they wouldn’t. But in the meantime, Donald Trump would provide color commentary, usually by tweeting or ranting about Canada. He frothed obsessively about Ottawa’s dairy protectionism and poked fun at imaginary shoe smugglers from Ontario. After striking a preliminary two-way deal with Mexico, he delivered a surreal press conference where he threatened to cut Canada out of the final pact entirely while targeting its car exports with tariffs.

Trump’s outbursts created the appearance that he really, truly might be about to scrap NAFTA entirely—or that he would at least try to, if discussions didn’t go his way. But in the end, everybody reached a deal, one that made a few significant changes to NAFTA, but left most of its basic architecture in place. This happened in part because, while the president was publicly fulminating like a drunk Jets fan watching the game on Sunday, his delegation, led by Trade Rep. Robert Lighthizer, pressed ahead with somewhat normal negotiations. By the end, it became clear that Lighthizer, a respected trade lawyer and lobbyist known for his protectionist streak, was pretty much running the show.

I do not know if this was all an intentional good-cop-bad-cop routine on the part of the White House, an attempt to practice the mad-man theory of international statecraft, or simply the byproduct of Trump truly wanting to kill NAFTA for good while his aides sought to reform it. But it ended in a deal. And if you squint, it seems like the administration is getting ready to repeat the same basic song and dance with China.

Up until now, trade talks with Beijing have been rocky, to say the least. There have been rounds of tariffs and countertariffs on hundreds of billions of dollars worth of goods, leaving Chinese leaders caught off-guard and unsold American soy beans piling up in storage. In part, this is because the fundamental conflicts between the countries run more deeply than they do between NAFTA’s members. There are legitimate disputes over issues like intellectual property protection and industry subsidies, not to mention national security tensions. But another factor has seemingly been basic disorganization within the administration. Its trade team has split between moderates—lately, that’s meant Treasury Secretary Steve Mnuchin—and hardliners of varying degrees, including Lighthizer, Commerce Secretary Wilbur Ross, and White House trade adviser Peter Navarro. These factions have jockeyed for influence, leaving the the Chinese with no idea who was in charge.

Over the past few days, that seems to have changed. After Trump and Chinese President Xi Jinping met over dinner at the G20 meeting in Argentina, the two countries announced a holiday-season cease fire in their trade war, giving themselves a few months to broker a wider deal. Here is how the New York Times described the agreement:

In a significant concession, Mr. Trump will postpone a plan to raise tariffs on $200 billion worth of Chinese goods to 25 percent, from 10 percent, on Jan. 1. The Chinese agreed to an unspecified increase in their purchases of American industrial, energy and agricultural products, which Beijing hit with retaliatory tariffs after Mr. Trump targeted everything from steel to consumer electronics.

The countries set an ambitious deadline of 90 days to reach a broader trade agreement, with the White House warning that if they did not come to terms by then, Mr. Trump would raise the existing tariff rate to 25 percent.

On Monday, the White House announced that Lighthizer would lead the U.S. effort, just as he led NAFTA talks, a decision which some suggested could “rattle” Beijing, since he’s one of the administration’s China skeptics. Then, on Tuesday, Trump helped send the stock market plunging while launching a whole lot of middling Twitter jokes (mine particularly) by declaring that he was a “Tariff Man.”

There are a few notable things about these tweets. For one, Trump is yet again misleadingly suggesting that tariffs are a tax paid by foreign countries or companies who sell goods into the United States. This is not true. Tariffs are paid by importers, which is to say, U.S. companies, who sometimes eat the cost themselves, or pass it on to consumers. In some cases, American buyers will force their suppliers in China to offer discounts, so that they end up indirectly bearing the cost of the tariff. But it’s not like we’re collecting a toll directly from factories in Shenzen. As usual, Trump’s public statements suggest he doesn’t really understand the nuances of the policy tool he’s embraced.

On the other hand, there’s also nothing really different in Trump’s comments from, say, what the New York Times has reported. Lighthizer is leading a team that has 90 days to broker a deal before new tariffs kick in (though, of course, these deadlines often turn out to be flexible). Trump just added a bit of bellicosity, while reminding the world that he lacks even a remote amount of subject-matter expertise.

If you’re the sort of person who wants to see the conflict with China resolved, this should all be good news. Lighthizer might be a China hawk. But he’s also the administration’s only real high-ranking official with the skills or staff to steer these talks. Mnuchin is a wealthy Wall Street journeyman who ended up Treasury Secretary because he did fundraising for Trump’s campaign; Ross is an tone-deaf private equity mogul with a habit of inflating his own wealth; and Navarro is an ideologue without a formal policy role. Lighthizer, on the other hand, has been dealing with trade issues since he was in the Reagan White House, where he used tariff threats to get the Japanese to cut steel shipments to the U.S. He’s the only adult who was ever going to walk into the room, and as long as he’s there, it may not matter much if Trump actually knows how a tariff works. Try to tune out the outbursts.