Will the real Donald Trump please stand up?
Trump the presidential candidate bashed trading partners such as China and Mexico and threatened punitive sanctions that could trigger a damaging trade war.
But Trump the incoming president has appointed economic advisers who are staunch free traders who disagree with their future boss about sanctions. Perhaps the most vocal among them is Larry Kudlow, the TV commentator and economist Trump will supposedly nominate to chair the Council of Economic Advisers, according to another Trump aide. That would make Kudlow the top White House economist.
Kudlow, a former budget official under President Ronald Reagan and chief economist at the now-defunct Bear Stearns, is a classic supply-sider who believes low taxes and minimal regulation are the best prescription for strong growth. In that regard, he’s just another voice in the choir of Republican policymakers who seem certain to execute that part of Trump’s agenda with alacrity.
But Kudlow has major differences with Trump on trade, and he was not shy about airing them during the campaign, even as he was a top Trump adviser. He co-authored a CNBC commentary early in the campaign that equated Trump with Herbert Hoover, who haplessly presided over the early years of the Great Depression and championed the disastrous Smoot-Hawley tariffs, which deepened the misery.
This spring, Kudlow wrote, “I continue to oppose Donald Trump’s trade policies.” And several times during the last weeks of the campaign, Kudlow expressed hope during media appearances that Trump wouldn’t really disrupt trade the way he threatened to, basically suggesting that Trump was bluffing.
Other members of Trump’s economic team are on Kudlow’s side. Wilbur Ross, Trump’s nominee for commerce secretary, told Yahoo Finance after the election that “there aren’t going to be trade wars,” explaining that Trump will pursue many less-problematic measures on trade and may never resort to sanctions. And Trump’s Treasury nominee, Steve Mnuchin, is a polished banker with Goldman Sachs on his resume and a similar appreciation for the importance of open borders.
So either there’s a huge smackdown brewing between Trump and his team, or a more clever trade strategy is coming into view.
If Trump’s advisers are really out of step with the boss, problems ought to flare early in the administration, since Trump has said reshaping the North American Free Trade Agreement is one of his top priorities. But it’s also possible Trump is forming a good-cop bad-cop routine, with himself as the threatening thug and Kudlow, et. al. as the more reasonable backbenchers.
Kudlow does agree with Trump regarding certain problems with China. “The Chinese break all the rules,” he said earlier this year. “They counterfeit our goods, steal our international property rights, and cyber-hack our industries and government. Something must be done about it.”
What Kudlow wants to do is enforce existing laws, such as the right to sanction certain foreign companies, more aggressively. He also says tax cuts and regulatory relief will solve part of the problem, by making the United States a more desirable place to build products and do business in the first place, luring some industries away from China. Still, before Trump starts negotiating with China, he may have to forge a deal with his own advisers.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.