The Washington Post - 07.08.2019

A18 EZ RE THE WASHINGTON POST.WEDNESDAY, AUGUST 7 , 2019

ball threats in other circum-
stances, including a recent tangle
with Mexico over border security,
seemed to get at least some
results, even if they scared inves-
tors in the short term, said the
people familiar with the matter.
This has left aides, many of
whom would have preferred the
president to be more patient, to
scramble to complete directives
issued by Trump. Stocks have
whipsawed as Trump and China
have escalated the trade conflict.
Democrats, some of whom sup-
port a more adversarial eco-
nomic relationship with China,
have nonetheless criticized
Trump’s penchant for making
impulsive moves that have en-
raged farmers and businesses.
The practical implications of
Treasury Secretary Steven
Mnuchin’s move to label China a
“currency manipulator” on Mon-
day were limited. It begins a
process of discussions with the
International Monetary Fund
about ways to address China’s
behavior. But it represented the
most concrete Trump adminis-
tration broadside in a week that
had previously been marked by
twin attacks from Beijing.
First, China’s currency had
weakened against the U.S. dollar,
something White House officials
suspected was directed by the
Chinese government. And sec-
ond, Chinese officials s ent signals
that they would not be ramping
up purchases of U.S. agriculture
products, as Trump had long
promised they would.
Both steps made clear that
Chinese leaders did not plan to
make quick concessions to the
White House following Trump’s
surprise announcement last
week that he would impose a
10 percent tariff on $300 billion
in imports from China. Several of
Trump’s advisers had warned
against this, nervous that it
would provoke only retaliation
from Beijing and could damage
the U.S. economy.
“We’re learning that maybe
China has a higher pain thresh-
old than we thought here,” said
Stephen Moore, who was an eco-
nomic adviser to Trump during
the 2016 election and remains
close to the White House. “They
don’t seem to care that this is
having extreme negative effects
on their economy. It’s kind of a
mutually assured destruction
ga me right now.”
Trump has frequently relied
on his own judgment in navigat-
ing trade disputes with other
countries, a tactic that has yield-
ed mixed results. South Korean
leaders agreed to revise their
trade agreement with the United
States after Trump threatened to
withdraw from a pact. Similarly,
Canada and Mexico agreed to
revise the North American Free
Trade Agreement, although U.S.
lawmakers have still not ap-
proved the changes.
But Trump has also tried to
take charge of sensitive trade
arrangements with Japan, India
and the European Union, and he
has made little progress so far.
And none of those relation-
ships is as complex or inter-
twined with the U.S. economy as
China’s.
Trump had promised during
his 2016 campaign to label China
a currency manipulator, but he
backed down once he took office

TRADE FROM A

amid pressure from top advisers. Then-National Economic Coun- cil Director Gary Cohn and oth- ers warned Trump about the economic implications of attack- ing China without a strategy in 2017, and Trump instead focused on passing a large tax-cut law and growing the domestic economy. But Trump pivoted sharply toward following through on his trade threats in 2018, and Cohn left s hortly thereafter. Trump still has a number of senior advisers on his economic team, but he frequently ignores their advice. He has been frustrated that Mnuchin and U.S. Trade Repre- sentative Robert E. Lighthizer have not been able to extract more concessions from China since trade negotiations began in December, and he increasingly relied on his own impulses to lead the battle with China, said the people familiar with the matter. On July 26, Tr ump said publicly for the first time that China probably would not cut a trade deal until after the 2020 election, as he surmised that its leaders wanted to wait and see if he lost reelection. He repeated that view on July 29. But on July 31, he stunned Wall Street investors and even some White House advisers when he announced he was proceeding with tariffs on $300 billion in Chinese goods. Trump and National E conomic Council Director Larry Kudlow suggested later in the week that the tariffs could be lifted if China agreed to purchase agriculture goods, but their comments left the process open-ended. Some White House officials had thought that negotiations with China had begun to pick up again and show some promise, but China on Monday made clear that it was not prepared to back down from the stance that it would not negotiate under pressure in a way that makes Beijing look weak.

Trump’s behavior with China “is probably based on personal experience... and whatever his instincts tell him is the right thing to do,” said Bonnie Glaser, director of the China Power Project at t he Center for Strategic and International Studies. “He will do things via tweet that maybe no one else in the administration knows about, and they have to scramble.” Trump’s economic team has thinned since the beginning of his presidency. Commerce Secre- tary Wilbur Ross is not as heavily involved in China decisions as he was in the first year, according to people briefed on the process, and a number of Mnuchin’s senior advisers have left in the past few months. Top trade adviser Peter Navarro remains influen-

tial inside the White House, but he is often at odds with Mnuchin and Kudlow. White House officials were not caught off-guard by China’s response on Monday, three senior administration officials said, and they expected to respond. They have not specified, though, how they plan to act next. Mnuchin’s action to label China as a currency manipulator begins a formal process of discussions with the IMF and other bodies, but it doesn’t necessarily make it easier to mobilize an international con- sortium to pressure China to change its behavior. That has left the White House — and top Trump advisers — to

move swiftly, shattering n orms in the process. The Treasury De- partment issues a report twice a year in which it explains its review of foreign currencies and whether they have been improp- erly influenced. The most recent report was issued in late May, a nd it did not find China to be a currency manipulator. Of note, Treasury’s designation of China as a currency manipulator invoked a 1988 law, but it did not find that China’s behavior had met an updated criteria from 2015 that the Treasury Depart- ment has been directed to use. Those criteria were not men- tioned in the brief Treasury announcement on Monday eve- ning. Business executives, econo- mists and former government

officials have said the worsening conflict between the White House and China was damaging the U.S. economy. Business in- vestment contracted in the sec- ond quarter of 2019, and a number of White House officials are worried that the economy is beginning to slow. “Unfortunately, the tariffs placed on Chinese goods are now starting to bite into U.S. economic growth and prosperity,” former treasury secretary Henry Paulson said in a statement on Monday. Outside advisers and China experts have encouraged the White House to resume negotiations with Beijing, but it is un-

clear how Trump plans to proceed. He often announces his decisions in Twitter posts, sometimes after consulting with aides but sometimes based on his own view on how to proceed. Trump’s willingness to rip the process away from his senior advisers has been building for months. One glimpse came in February, when Tr ump publicly rebuked Lighthizer during an Oval Office meeting with Chinese Vice Premier Liu He. Lighthizer was trying to negotiate an agreement with the Chinese that would take the form of a detailed “memorandum of understand- ing.” Trump dismissed the legal construct as toothless. “I don’t like MOUs because they don’t mean anything,” Trump said in front of Lighthizer, He and the assembled media. “To me, they don’t mean anything. I think you are better off going into a document.” Lighthizer attempted to clarify himself. “A n MOU is a contract,” he responded. “It’s the way trade agreements are generally used.” It appeared the conversation would move on, but Trump wasn’t done. “By the way, I disagree. I think that a memorandum of under- standing is not a contract to the extent that we want,” Trump said. Then, just last month, Kudlow tried to assure the public that the White House had ruled out the possibility of intervening in the U.S. dollar as part of the currency war. Kudlow said in a CNBC interview that top White House advisers had met and decided not to intervene. Several hours later, Trump told reporters that this was not true and that he reserved the right to intervene if he wanted to. “I could do that in two seconds if I want to,” Trump said two weeks ago. “I didn’t say I’m not going to do something.” [email protected]

BY GERRY SHIH AND JONNELLE MARTE

beijing — China responded with
angry rhetoric after the United
States labeled Beijing a currency
manipulator but maintained a
relatively measured stance in the
markets on Tuesday, signaling a
desire not to jeopardize economic
stability.
In the morning in Asia, the
Chinese central bank nudged the
yuan’s daily price target slightly
weaker but not past the symboli-
cally significant 7-per-dollar
threshold that it allowed the cur-
rency to tumble beyond on Mon-
day.
Chinese authorities also an-
nounced they would sell yuan-de-
nominated debt in Hong Kong
next week, a move seen as prop-
ping up the currency.
The moves seemed to calm U.S.
markets Tuesday, which were
poised to bounce a day after Wall
Street had its worst showing of
the year on news that China al-
lowed its tightly controlled cur-
rency to slide to an 11-year low
against the dollar.

The currency shift elicited a sharp response from the White House, as a weaker yuan theoreti- cally makes Chinese exports cheaper for U.S. consumers and American products more expen-

sive in China. It a lso sent the three major U.S. markets reeling Mon- day. The Dow Jones industrial average plunged 767 points, or 2. percent, for its fifth down day in a row. The Standard & Poor’s 500

index fell nearly 3 percent, and the tech-heavy Nasdaq compos- ite, the index most vulnerable to a trade war with China, tumbled nearly 3.5 percent. The U.S. Treasury Department

declared China a “currency manipulator” a fter Monday’s market close, even though Chinese authorities had recently been prop- ping up the yuan against market forces rather than suppressing it. China’s Foreign Ministry con- firmed Tuesday that the country had stopped buying U.S. agricul- tural products after President Trump on Thursday had announced plans to raise tariffs on Chinese goods, stunning Beijing amid a week of negotiations. A promise to buy U.S. crops had been a key Chinese concession in trade talks. Meanwhile, the People’s Daily, the Communist Party’s mouth- piece, fumed in a new editorial about the United States “deliber- ately destroying international or- der.” “To inject stability and certain- ty i nto the world... is the respon- sibility of great powers. Certain people in America do the oppo- site,” t he People’s Daily said. Markets across Asia were down Tuesday by roughly 1 percent, while the yuan traded weaker than the 7.0 barrier against the dollar. A higher number indicates a weaker yuan. Main European markets nudged higher in early trading. Analysts said market forces were pressuring the yuan to weaken further. But they down-

played the likelihood that Chi- nese authorities would intention- ally let that happen — that sce- nario would potentially open a full-scale currency war with the United States, to devastating con- sequences. Victor Shih, an expert on the Chinese political economy, said the yuan’s dip this week was probably approved by a central Communist Party commission chaired by President Xi Jinping, but more steep devaluations were not likely because China holds $800 billion in dollar-denominat- ed debt. “Devaluation will force these debtors to pay billions more in renminbi to service their dollar debt,” Shih said, adding that Chi- na would also have to pay far more for food given its heavy reliance on imports. Renminbi is another name for China’s currency. The suspension of U.S. crop imports and the currency move suggest China is hardening its position in trade negotiations and feels little incentive to make additional concessions, said Ta o Wang, chief China economist at UBS. There is a growing risk that trade talks planned for Septem- ber may be called off, Tao said. [email protected] [email protected]

Impatient Tr ump convinced hardball tactics will pay o≠, aides say

EVAN VUCCI/ASSOCIATED PRESS Larry Kudlow, the president’s top economic adviser, said Tuesday the White House “would like to negotiate” with China in the currency and trade dispute. The United States will begin discussions with the International Monetary Fund about ways to address China’s behavior.

Amid political turmoil, China favors currency stability

TOSHIFUMI KITAMURA/AGENCE FRANCE-PRESSE/GETTY IMAGES Tokyo stocks opened Tuesday down nearly 3 percent following the U.S.-China trade war escalation. Asian markets lost about 1 percent overall, but U.S. stocks rebounded after their worst day of the year.

Beijing bristles at claims, but its moves seem to calm U.S. markets

“We’re learning that maybe China has a higher

pain threshold than we thought here. They don’t

seem to care that this is having extreme negative

effects on their economy. It’s kind of a mutually

assured destruction game right now.” Stephen Moore, informal economic adviser to Trump

BY JOHN WAGNER

President Trump and the Repub- lican National Committee filed two lawsuits Tuesday against California officials challenging a new law that would bar Trump from appearing on the state’s primary ballot next year if he declines to disclose his tax returns. The federal lawsuits, which were threatened last week when Gov. Gavin Newsom (D) signed the bill into law, argue that the measure requiring presidential and guber- natorial candidates to release five years of tax returns runs afoul of the U.S. Constitution. The RNC suit, which includes the California Republican Party as a plaintiff, alleges a “naked political attack against the sitting president of the United States.” Newsom responded on Twitter to the lawsuits filed in U.S. District Court in Sacramento, writing: “There’s an easy fix Mr. President — release your tax returns as you promised during the campaign and follow the precedent of every president since 1973.” Trump broke with decades of tra- dition during the 2016 election by not voluntarily releasing his tax returns. His administration has re- buffed efforts by the Democratic-led House to obtain the documents from t he Internal Revenue Service. California’s primaries are sched- uled for March 3, the day known as Super Tuesday because of the large number of delegates at s take. Both lawsuits filed Tuesday argue that the California law illegally add- ed a new constitutional require- ment for eligibility for office. In a tweet, RNC Chairwoman Ronna McDaniel chided D emocrats for passage of legislation that might inspire other Democratic-led states to follow s uit. “It certainly doesn’t bode well for Democrats heading into 2020 that their best bet for beating @realDon- aldTrump is to deny millions of Cali- fornians the ability to vote for him,” she said. “This stunt by Democrats is unconstitutional and, simply put, desperate.” In a statement, Jay Sekulow, Trump’s personal attorney, said he was confident that the president would prevail in court, claiming that California was attempting to “circumvent t he U.S. Constitution.” “The issue of whether the president should release his federal tax returns was litigated in the 2016 election and the American people spoke,” h e said. In a statement made when he signed the legislation into law last month, Newsom said that given its size, California has “a special re- sponsibility to require this informa- tion of presidential and gubernato- rial candidates.” “These are extraordinary times and states have a legal and moral duty to do everything in their power to ensure leaders seeking the high- est offices meet minimal standards, and to restore public confidence,” h e said. If the law stands, the implications for Trump are unclear. Absent the emergence of a credible Repub- lican primary challenger, he could opt not to appear on California’s ballot and still win the nomination. [email protected]

Trump, RNC

challenge

Calif. law on

tax returns

The Washington Post - 07.08.2019

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