Cohn’s departure puts U.S. business on edge
Economic adviser’s exit could signal shift toward a protectionist stance
Gary Cohn is out of the Trump administration and that’s got America’s business leaders and Wall Street wondering if U.S. trade policy is at the start of a shift away from the free flow of goods and toward a more protectionist stance.
Cohn, the president’s chief economic adviser until he announced his resignation late Tuesday, was seen as a steady hand in the chaotic White House, a seasoned financial executive trusted by Wall Street and liked by business leaders for his pro-trade views.
Cohn was instrumental in pushing through a historic U.S. tax cut late last year that should boost corporate profits by shrinking their tax rates.
His announced departure has rattled financial markets and raised questions among nervous CEOs about whether his replacement will be an advocate of free trade or favor more populist and nationalist economic policies.
When the news of Cohn’s resignation broke, the Dow Jones industrial average plunged by as much as 400 points in after-hours trading. The market jitters continued Wednesday, with the blue chip average closing down 83 points, or 0.3%, after an earlier drop of 350 points.
The big fear, according to Wall Street, is that Cohn’s departure could be signaling a hardening line on tariffs. That shift in thinking, they say, elevates the risk of a full-fledged trade war as other countries retaliate by imposing similar taxes on Americanmade goods imported to their countries.
Trump is said to be pushing his staff to finalize plans for his proposed 25% tariff on imported steel and 10% levy on aluminum — which Cohn did not support — as early as Thursday.
That swift action is what worries Wall Street, which was hoping for some kind of compromise.
“Cohn is thought of as pro-business and was against the tariffs,” says Bill Hornbarger, chief investment officer at investment firm Moneta Group. “His resignation injects a level of uncertainty in terms of who will be the most influential economic adviser and what that person’s agenda will be. That could be troublesome for the market until it is cleared up.”
Tariffs are viewed negatively by investors, who fear Trump’s “America First” way of thinking will do harm to the global economy.
Another big uncertainty is who Trump will tap to replace Cohn as head of the National Economic Council. At least four names have surfaced as potential candidates.
Trump said he has many candidates eager for the job.
White House press secretary Sarah Sanders declined to confirm candidates that Trump is considering, but said there were many.
Angst will remain high on Wall Street until the position is filled.
“Cohn’s exit raises doubts about market-friendly voices,” wrote Ian Katz, of Capital Alpha Partners. “More than anyone else in the White House, Cohn had credibility with the markets. He speaks Wall Street’s language, and the banks trusted that he would share finance-favorable positions with the president. Now that he’s out, the question is who takes the mantle?”
If Trump replaces the outgoing Cohn with another “free-market champion,” investors could get over his loss quickly, Katz wrote. But if it takes time to replace him, “investors will get edgy.”