Feb 25, 2018 - Politics & Policy

Inside the White House trade fights

Trump cabinet

From left: Secretary of State Rex Tillerson, Defense Secretary James Mattis, President Donald Trump, Commerce Secretary Wilbur Ross and Transportation Secretary Elaine Chao. Photo: Mike Theiler-Pool / Getty Images

Bloomberg scooped on Friday that Trump wants the Commerce Department to seek the harshest maximum tariffs on global steel imports: 24 percent.  

I’m told that’s accurate, but with one small tweak: Sources tell me the president has told confidants he actually wants a *25* percent global tariff on steel because it's a round number and sounds better.

The big picture: Also, an official with knowledge of the trade discussions told me the White House is preparing to impose tariffs on a "shit ton" — meaning, potentially hundreds — of Chinese products. They'll avoid going through the World Trade Organization — which Trump doesn't trust — and instead use Section 301 of the Trade Act of 1974 to unilaterally retaliate against China for stealing Americans’ intellectual property.

  • Timing: Two sources told me Trump has been impatient and wanted these 301 tariffs done yesterday, but the team still hasn't settled on which Chinese products to attack. The team hasn't presented its recommendations to Trump.
  • The free traders — think Steven Mnuchin, Gary Cohn, Kevin Hassett, and Everett Eissenstat — only want tariffs on Chinese products that many other countries also produce (including uranium, consumer electronics and LED light bulbs.) They're trying to blunt any impact on American consumers.
  • However, a former top government trade official told me: "This is how trade wars start. There is zero chance China does not retaliate against us in painful ways..."

What's next: The much bigger fight inside the Trump administration concerns whether they'll put massive tariffs on steel and aluminum imports, as Wilbur Ross' Commerce Department "found that the quantities and circumstances of steel and aluminum imports 'threaten to impair the national security'." That was part of what’s called a Section 232 investigation.

  • Sources with knowledge of the discussions tell me James Mattis, Gary Cohn, Rex Tillerson, and Kevin Hassett all think Wilbur Ross did a terrible job on Commerce’s 232 investigation and strongly disagree with his recommendations. (This is the continuation of an ideological battle that's played out throughout the Trump administration between the free-traders and the protectionists.)
  • One official told me Ross' report doesn’t properly account for the negative impact of these tariffs on downstream jobs — for example, auto suppliers and other U.S. businesses that import steel and aluminum to make their products.
  • Mattis' Defense Department pushed back officially against Ross' recommendations: "DoD continues to be concerned about negative impact on our key allies regarding the recommended options within the reports."
  • The same report conceded that "imports of foreign steel and aluminum based on unfair trading practices impair the national security." But the phrase "unfair trading practices" — and Mattis' subsequent singling out of China — is a clear indication that the Defense Department doesn't support broad tariffs.

The pushback: When I shared these harsh criticisms with the White House and agencies, only Rex Tillerson's team would go on the record to deny our reporting:

  • From Tillerson's team, a State Department official said: "Secretary Tillerson has not expressed this sentiment and wouldn’t speak negatively about another cabinet member."
  • From the White House, Raj Shah said: "We are not responding to rumors and will not get ahead of the President. The process is ongoing, the President is reviewing the report and nothing is confirmed until he’s made a decision... The President’s team at the White House is leading a process that will ensure the President has all the information necessary for him to make a decision in the best interests of the American people."
  • From the Pentagon, spokesman Adrian Rankine-Galloway emailed: "The Department of Defense provides its best military advice to the President. Ultimately, it is the President who decides how his policies will be implemented."

Finally, a Commerce Department official pushed backed against the assertion that Ross didn't properly analyze the impact on the overall economy.

"DOC modeling has not shown any substantial impact on the overall economy as a result of the proposed steel tariffs," the official said. "This is consistent with the finding of the International Trade Commission that the Section 201 (in 2002) had negligible effects on the overall economy...While these were different products than those covered in the 232, they are all steel, and the ITC is an empirical source."
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