Jun 29, 2018

Scoop: Trump's private threat to upend global trade

Photo illustration: Axios Visuals

President Trump has repeatedly told top White House officials he wants to withdraw the United States from the World Trade Organization, a move that would throw global trade into wild disarray, people involved in the talks tell Axios.

What we're hearing: “He’s [threatened to withdraw] 100 times. It would totally [screw] us as a country,” said a source who’s discussed the subject with Trump. The source added that Trump has frequently told advisers, "We always get fucked by them [the WTO]. I don’t know why we’re in it. The WTO is designed by the rest of the world to screw the United States."

Flashback: During the campaign, Trump told NBC's Chuck Todd on "Meet the Press," in July 2016: "World Trade Organization is a disaster."

Some aides have tried to explain to Trump that in their view, the U.S. does well at the WTO, given the U.S. has an army of trade lawyers and created the system:

  • The “Economic Report of the President” for 2018, which bears Trump’s signature on Page 11, states: “[T]he United States has won 85.7 percent of the cases it has initiated before the WTO since 1995, compared with a global average of 84.4 percent. In contrast, China’s success rate is just 66.7 percent.”

But Trump is unmoved by those arguments, according to sources with direct knowledge:

  • Trump’s economic advisers do push back in the moment when he raises the idea of withdrawal.
  • But they’ve never put in place a policy process to take the idea seriously, according to four sources with direct knowledge of his private comments.
  • That dismissive attitude in the face of Trump’s insistence could ultimately prove to be a mistake — as history has shown with other policy ideas of which aides do not approve.

Between the lines: Even if his advisers put a policy process in place and try to make sure he’s well-informed on what it would mean to try to withdraw from the WTO — there is no guarantee that Trump won’t do it. History shows he doesn't care about the process.

  • Remember when Trump upended his globalist trade advisers’ carefully constructed policy process and simply announced he’d be imposing massive tariffs on steel and aluminum imports? It’s not unimaginable that the same could eventually happen with his desire to try to withdraw from the WTO.

Why this matters: A U.S. withdrawal from the WTO would send global markets into a spiral and cast trillions of dollars of trade into doubt.

  • It would also blow up an institution that for 70-plus years has been a pillar of global economic and political stability.
  • The consequences of a U.S. withdrawal are so profound that, like Trump’s senior advisers, the trade community hasn’t seriously entertained the possibility that Trump would try to withdraw.
  • A top trade lawyer in Washington said: “We think he’s nuts, but not that nuts."

The safety valve: Should Trump defy his advisers and announce a withdrawal at some point in the future, he would run into significant legal hurdles.

  • As head of state, Trump under international law could make the notification at the WTO. But the U.S. law implementing the WTO agreements states quite plainly that withdrawal from the WTO requires an act of Congress.

What’s next? Probably nothing. This move seems too extreme, even for Trump.

  • Sources with knowledge of the situation say the Trump administration will continue to call attention to various ways in which the U.S. encounters what some Trump advisers perceive is unfair and unbalanced treatment within the framework of the WTO.
  • The administration will likely continue to push the envelope on all its trade policies, fully expecting its actions will be challenged within the WTO. 

But if Trump continues to feel as if he’s being unfairly stymied by the international body, you’d be a fool to confidently declare that he won’t follow through on his desires at some point.

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