Trade wars: US says China is playing ball as White House doubles down

One of the main reasons for increased financial market and global economic uncertainty is how President Donald Trump is running the White House.

The new buzz word phrase is “White House volatility” caused by a revolving door of appointments and a more uninhibited approach to policy-making.

Commentators in the US weekend media say the Trump administration has entered a new phase, with the president said to be more “comfortable” in the Oval Office and operating much as he did in private life.

This means acting unilaterally and many times impetuously.  Largely gone are the moderating influences of his first year. These include the recent departures of economic adviser Gary Cohn, the former secretary of state Rex Tillerson and the national security chief HR McMaster.

Until recently, investors have been relatively indifferent to this new phase of the Trump presidency because it delivered all-important tax legislation. However, there is rising anxiety with how Trump 2.0 will acquit himself in the international arena.

Many will be critical as Mr Trump will be forced to decide on the fate of the Iranian nuclear agreement by May 12 while the North Korea summit with Kim Jong Un is also scheduled for that month.

The appointment of hardline diplomat John Bolton in the national security role has prompted many to dramatically increase the odds of a military confrontation – “the odds of taking military action will rise dramatically when Bolton becomes the last person a volatile American president consults,” the New York Times reports. 

More volatility predicted
Other media report the Trump style of management will intensify its volatility:

“Trump is showcasing a more unilateral executive style that relies on his own judgment and sense of what the moment requires,” reports the Wall Street Journal. He has never been shy about expressing his views but is now more apt to put those views into practice.

In short order, he has reshaped his senior staff and reconfigured the legal team defending him in the Russia investigation; agreed to the Kim summit and launched a trade offensive against China; and has taken more direct command of the messages and policy positions coming out of his administration.

A New York Times opinion writer describes Mr Trump as “the king of chaos,”  while the equally critical Washington Post says this next phase of the administration will be even more volatile and unpredictable.

“Trump has decided to fly solo ... he is making clear that he will operate independently ... he is surrounding himself with advisers more likely to reinforce his own instincts,” writes chief political correspondent Dan Balz. 

But that hasn't ended efforts to tone down the impact of starting a trade war with China.

Treasury secretary Steven Mnuchin at the weekend downplayed the China trade actions, saying it won’t have a “big impact on the economy.”

China moves to open markets
It was also reported that China is already moving to open more of its markets to competition, protect intellectual property rights and lift restrictions on foreign shareholdings in the financial sector.

This appears to back up Mr Mnuchin’s argument that the $US60 billion in tariffs are part of a negotiation between the two countries that will eventually reduce the trade deficit and improve the ability of US companies to access the Chinese market:

“We are having very productive conversations with them … I am cautiously hopeful we reach an agreement,” he was quoted as saying.

Mr Mnuchin had spoken to Chinese Vice Premier Liu He and said while China would protect its interests, both sides would remain rational and work together to resolve their differences. 

Meanwhile, top US executives, such as Apple’s Tim Cook, called for “calm heads” to prevail. Mr Cook was in China to co-chair the annual China Development Forum and urged Mr Trump to embrace free-trade policies –

“Countries that embrace openness, that embrace trade, that embrace diversity are the countries that do exceptionally.  And the countries that don’t, don’t,” the Wall Street Journal reported Mr Cook as saying.

Qualcomm chief executive Steve Mollenkopf, who was also at the forum, said talks with the Chinese government in recent days had been positive and he expected that to continue.

Elsewhere on the trade front a new US-South Korea trade deal could be imminent, with Mr Trump suggesting on Friday this could be announced within the next week.

Relations between the US and Mexico could also be better than they appear on the surface, with the New York Times reporting the two countries will soon sign the first of two dozen agreements related to border security.  

All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.