Trump’s tar­iffs tax pa­tience of his al­lies

GOP of­fice­hold­ers, typ­i­cally foes of trade bar­ri­ers, fear los­ing a ‘high-stakes poker’ match against China.

Los Angeles Times - - FRONT PAGE - By Don Lee, Noah Bier­man and Jennifer Haberkorn

WASH­ING­TON — With a grow­ing econ­omy at his back and lit­tle re­sis­tance from Repub­li­cans, Pres­i­dent Trump has been free to im­pose tar­iffs on Amer­ica’s trad­ing part­ners with few po­lit­i­cal reper­cus­sions.

Yet his pro­tec­tion­ist ap­proach — par­tic­u­larly his heavy-handed tac­tics with China, as well as with tra­di­tional al­lies Canada and the Eu­ro­pean Union — presents a high-stakes gam­ble for him and other Repub­li­cans in the 2020 elec­tions.

So far the pres­i­dent has been able to keep skep­ti­cal Repub­li­cans from re­belling by stok­ing his voting base and promis­ing to sub­si­dize soy­bean farm­ers and oth­ers hit hard by the trade conf lict with China.

And Trump has bi­par­ti­san sup­port in Congress to try to com­pel Beijing to change or halt poli­cies that many in Wash­ing­ton see as en­dan­ger­ing U.S. eco­nomic and se­cu­rity in­ter­ests.

But with new tar­iff dead­lines loom­ing as early as Satur­day, the pres­i­dent is test­ing the pa­tience of some of his staunch­est al­lies in Congress, many of whom have long billed them­selves as op­po­nents of trade bar­ri­ers and skep­tics of gov­ern­ment

sub­si­dies meant to al­ter the mar­ket.

Al­though Trump por­trays tar­iffs as some­thing paid by for­eign coun­tries — and seems to be­lieve it — Repub­li­can elected of­fi­cials gen­er­ally ac­cept the ev­i­dence that U.S. con­sumers bear most of the cost of higher taxes on im­ported goods.

“We are grow­ing tired and frus­trated of hear­ing the upand-down, back-and-forth of ev­ery­thing as it re­lates to China,” said Scott Henry, a third-gen­er­a­tion Iowa farmer and spokesman for Farm­ers for Free Trade, a non­profit ad­vo­cacy group. “We just want to see some­thing get done.”

Un­like Trump, who re­cently called tar­iffs “the great­est ne­go­ti­at­ing tool in the his­tory of our coun­try,” many Repub­li­can law­mak­ers see them as a tool to be used briefly if at all.

“I com­pletely agree with what Pres­i­dent Trump is try­ing to do — get China to abide by the rules — but this is high-stakes poker and I hope we win,” said Sen. Ron John­son, a Repub­li­can from Wis­con­sin, which de­pends heav­ily on farm­ing and man­u­fac­tur­ing in­dus­tries that could see sig­nif­i­cant im­pacts from tar­iffs.

A quick res­o­lu­tion ap­peared un­likely af­ter talks broke down Fri­day and Trump hiked tar­iffs on $200 bil­lion of im­ported goods from China. Beijing re­tal­i­ated on Mon­day by vow­ing to in­crease tar­iffs on $60 bil­lion of Amer­i­can-made goods as of June 1.

At least in pub­lic, nei­ther side showed signs of back­ing down Tues­day. Speak­ing to re­porters out­side the White House, Trump threat­ened to slap tar­iffs on all re­main­ing Chi­nese im­ported goods, or an­other $300 bil­lion, in what he called a “lit­tle squab­ble.” In Beijing, For­eign Min­istry spokesman Geng Shuang said, “China will fight to the fin­ish.”

An­a­lysts say Chi­nese Pres­i­dent Xi Jin­ping will never agree to cer­tain en­force­able changes that the U.S. side wants, in­clud­ing giv­ing up sub­si­dies to state-owned firms that are fun­da­men­tal to China’s gov­ern­ment-con­trolled eco­nomic and po­lit­i­cal sys­tem.

That leaves Trump with a painful choice, said Wil­liam Rein­sch, a vet­eran trade an­a­lyst in Wash­ing­ton and se­nior ad­vi­sor at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies, a non­par­ti­san think tank.

He can ac­cept “a weaker agree­ment than he wants, in which case the Democrats will at­tack him for be­ing soft and cav­ing,” Rein­sch said. Or he can leave tar­iffs in place in­def­i­nitely, caus­ing higher prices for Amer­i­can con­sumers, and “Democrats will ac­cuse him of be­ing an in­com­pe­tent ne­go­tia­tor, a bad closer and some­body who caused an enor­mous amount of short-term pain for what turned out to be no gain at all.”

Both coun­tries say they will con­tinue talks and have time left be­fore the lat­est vol­ley of tar­iffs kicks in. Trump said Tues­day he would at­tend the Group of 20 lead­ers’ sum­mit on June 28-29 in Osaka, Ja­pan, where he is ex­pected to meet with Xi and could re­solve their trade dis­pute. The threat of Trump’s new tar­iffs will prob­a­bly hang over those talks as well.

“They want to make a deal,” Trump said. “It could ab­so­lutely hap­pen.”

Oth­ers are less sure. “Things have es­ca­lated very quickly and we don’t know how the two sides are go­ing to get back to the ta­ble,” said My­ron Bril­liant, ex­ec­u­tive vice pres­i­dent and head of in­ter­na­tional af­fairs at the U.S. Cham­ber of Com­merce.

Econ­o­mists, con­gres­sional Repub­li­cans and even some ad­min­is­tra­tion of­fi­cials say U.S. con­sumers and busi­nesses can­not es­cape pain from the tit-for-tat tar­iff fights that Trump has started with China but also Canada, Mex­ico and the Eu­ro­pean Union.

Trump has im­posed du­ties on steel and alu­minum from Canada, Mex­ico and the Eu­ro­pean Union, all of which have re­tal­i­ated with du­ties on Amer­i­can farm and other goods.

And Trump is weigh­ing new taxes on im­ported au­tos from the EU, Ja­pan and other coun­tries on na­tional se­cu­rity grounds — a de­ci­sion that could come this week­end and is al­most cer­tain to spark a U.S. po­lit­i­cal back­lash if Trump presses ahead with it.

“Ul­ti­mately, no­body wins a trade war un­less there is an agree­ment at the end af­ter which tar­iffs go away,” said Sen. Mitch McCon­nell, the Se­nate ma­jor­ity leader, whose own state of Ken­tucky has suf­fered re­tal­ia­tory tar­iffs on bour­bon and tobacco. “Hope­fully these tac­tics will lead us to that day, and if it does I think it will be a win­ner for both sides.”

Repub­li­can and Demo­cratic law­mak­ers, as well as many pol­icy an­a­lysts, have faulted Trump for alien­at­ing al­lies with tar­iffs when the ad­min­is­tra­tion could have forged a broader coali­tion against Chi­nese trade prac­tices to in­crease lever­age in ne­go­ti­at­ing with Beijing.

“The lone-wolf ap­proach, af­ter pok­ing all the al­lies with sticks over steel and alu­minum ... has re­ally soured a lot of coun­tries on the U.S.,” said Daniel Iken­son, di­rec­tor of trade at the Cato In­sti­tute, a lib­er­tar­ian think tank.

So far, he noted, the harm­ful ef­fects of tar­iffs have been cush­ioned by a healthy econ­omy still get­ting a boost from tax cuts. But if the econ­omy weak­ens and Trump doesn’t make a good deal with China, Iken­son said, “he’s go­ing to get ham­mered” by Democrats in Rust Belt states that went for Trump in 2016.

A for­mer White House aide who spoke on con­di­tion of anonymity said even Trump’s most skep­ti­cal ad­vi­sors share his view that China re­neged on a po­ten­tial deal. The for­mer aide said Trump “was fired up” and ap­peared ea­ger for a fight af­ter China al­legedly walked back its com­mit­ments.

China blamed the Trump ad­min­is­tra­tion on Tues­day, claim­ing U.S. ne­go­tia­tors changed the terms of Chi­nese pur­chases pre­vi­ously agreed to by both par­ties.

Trump and his po­lit­i­cal team be­lieve “get­ting tough on China and trade is some­thing that’s pretty uni­fy­ing in the coun­try” and will view a trade war as a win­ning cam­paign mes­sage, whether or not it yields a deal.

But a long fight could hurt farm­ing states that Trump is de­pend­ing on in his 2020 re­elec­tion bid. For now, Repub­li­cans are stick­ing with Trump even though his moves cut against the party’s tra­di­tional poli­cies.

Rod Hunter, a part­ner at the law firm Baker McKen­zie and for­mer se­nior di­rec­tor for in­ter­na­tional eco­nomics at the Na­tional Se­cu­rity Coun­cil un­der Pres­i­dent Ge­orge W. Bush, said Trump’s po­lit­i­cal sup­port on trade cer­tainly wasn’t guar­an­teed.

“Peo­ple are be­hind it un­til the day they’re not,” he said. “That’s pol­i­tics, that has a lot to do with perceived strength. And that may change quickly.”

Sen. James M. In­hofe (ROkla.) said, “I’m not go­ing to ques­tion his judg­ment in the ag­gres­sive na­ture of what he has done be­cause ev­ery time I think that in my own mind, it turns out he’s made the right de­ci­sion.”

Still, In­hofe has reser­va­tions. The farm­ers and agri­cul­ture sup­port­ers in his state “are con­cerned about this but they also have enough faith in the pres­i­dent — I know this isn’t true in all states, but it is in Ok­la­homa.”

But Sen. James Lank­ford (R-Okla.) said Se­nate Repub­li­cans had lim­ited pa­tience for the ag­gres­sive strat­egy Trump is pur­su­ing.

“If it’s to get to low or no tar­iffs at the end — if it’s other coun­tries that have high tar­iffs on us that we put tar­iffs on to get them to the ta­ble to get to low or no tar­iffs — I’m fine with that,” Lank­ford said. “If the goal is to have high tar­iffs long term, that’s self de­struc­tive. That’s not help­ful in the long term.”

Eric Ris­berg As­so­ci­ated Press

A CON­TAINER SHIP passes the Golden Gate Bridge en route to Oak­land. Pres­i­dent Trump raised tar­iffs on $200 bil­lion of im­ported goods from China, which then vowed to hike tar­iffs on $60 bil­lion of U.S.-made goods.

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