Former Goldman Sachs COO Gary Cohn talks on the phone as he waits for the start of a meeting with President-elect Donald Trump at Trump Tower, Tuesday, Nov. 29, 2016, in New York. (AP/Evan Vucci)
Earlier this week, when we discussed Peter Navarro’s jarring op-ed in the WSJ in which he alleged that the persistent US trade deficit “would put US national security in jeopardy”, we said that “a better question than what is Navarro’s purpose by writing it, is why he is writing it, and does his use of a public forum like the WSJ mean that there is friction between him and Trump camp, especially since in recent weeks it appears that a core pillar of Trump’s trade policies, namely the border adjustability, appear to no longer be on the docket of actionable items.”
As it turns out, that was precisely the correct question, because as the FT reports, “a civil war has broken out within the White House over trade, leading to what one official called “a fiery meeting” in the Oval Office pitting economic nationalists close to Donald Trump against pro-trade moderates from Wall Street.”
More notably, the person at the center of this “civil war” is none other than Navarro, who as we expected is now said to be losing influence, and as a result he resorted to using the WSJ as a means to appeal directly to the general public. It may have been a prudent gamble: the WSJ op-ed may have helped Navarro salvage some of his credibility with Trump, according to the FT:
The officials and people dealing with the White House said Mr Navarro appeared to be losing influence in recent weeks. But during the recent Oval Office fight, Mr Trump appeared to side with the economic nationalists, one official said.
Facing off the “hardline group” of Navarro, and other “nationalists” such as Steve Bannon, is a a “faction” led by former Goldman COO Gary Cohn, a career globalist, who leads Mr Trump’s National Economic Council.
But what is just as important, is that if the FT is right, then allegations that Trump has “sold out” to his Goldman advisors may be premature: in fact, if anything, Trump appears to be playing off one camp, the “nationalists”, against its polar opposite, the “Goldman globalists”:
The battle over trade is emblematic of a broader fight on economic policy within the Trump’s administration. It comes ahead of a visit to Washington next week by Ms Merkel, the German chancellor, and amid preparations for a meeting of G20 finance ministers in Germany next week at which allies’ concerns over protectionism are likely to be high on the agenda.
While the White House was non-committal, providing the FT with the following brief statement:
“Gary Cohn and Peter Navarro are both valued members of the president’s economic team. They are working together to enact the president’s economic agenda, protect American workers and grow American businesses.”
… the “globalists” led by Cohn and others “have seized on Mr Navarro’s public comments — and widespread criticism by economists of his stand on trade deficits and other matters — to try and sideline him.”
That has led to discussions over moving Mr Navarro and the new National Trade Council he leads out of the White House and to the Commerce Department, headed by another Wall Street veteran, Wilbur Ross.
And, if the FT is correct, it appears that the Goldman-led faction is winning:
Cohn has also been featuring more prominently in discussions over the renegotiation of the North American Free Trade Agreement with Canada and Mexico, one of Mr Trump’s top trade priorities. After a meeting with Mr Cohn and other White House officials on Thursday, Mexico’s foreign minister, Luis Videgaray, said the goal was to wrap up talks quickly and by the end of this year. That contradicted Mr Ross, who has called for deeper and potentially longer talks that could drag well into next year.
Cohn’s sidelining of Navarro has only picked up recently, and in an attempt to alienate him from Trump, he has become “an increasingly isolated figure in the administration. He has been operating with a very small staff out of an office in the Old Executive Office Building adjacent to the White House while Mr Cohn, who has been adding staff to his NEC base inside the president’s residence itself.”
Meanwhile, Cohn has been beefing up his staffing ranks with more, like-minded “globalist” supporters, such as Andrew Quinn, a former trade official who served as a senior negotiator during the Obama administration’s push for a Trans-Pacific Partnership with Japan and 10 other countries. In other words, someone who is desperate for much more, not less, global trade alliances. The White House last month announced Mr Quinn would serve on the NEC as a “special assistant to the president” for international trade. Quinn’s appointment led to an outburst from Breitbart, which labelled the career official an “enemy within” the Trump administration earlier this month.
The bottom line, however, is that the fate of Trump’s trade policies may rest in the fate of Navarro, and to a lesser extent Bannon: the two are the last bastion to push for Trump’s initial protectionist policies; should they fade, it will be the policies of “Goldman” that end up being enacted. As the FT further notes, “Mr Navarro’s apparent sidelining have been helped ease some foreign officials’ concerns about the prospects of the Trump administration acting on campaign threats to raise tariffs and take other aggressive steps that could lead to a trade war.”
“The situation is less worrying than it was two months ago because [Mr] Navarro seems to be more and more marginalised,” said one European official. “His influence seems to be diminishing quickly.”
And while Navarro’s ultimate fate remains unclear, a new, and more interesting “civl war” may emerge should he lose all influence: American trade unions vs “Goldman Sachs.”
Thea Lee, a top trade official at the AFL-CIO, the US’s largest union, and a member of the president’s recently-appointed manufacturing council, said Mr Trump appeared to be bending to the growing influence of the administration’s Wall Street veterans and walking away from his campaign promise for a fresh approach to trade.
“At the moment it appears that the Wall Street wing of the Trump administration is winning this battle and the Wall Street wing is in favour of the status quo in terms of US trade policy,” Ms Lee said.
In retrospect, those who said Trump will ultimately do Wall Street’s bidding, may have been correct all along.
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