Wilbur ‘Killer’ Ross Isn’t Worried About the Trade Wars
(Bloomberg Businessweek) -- One morning in October, a smiling Wilbur Ross, President Trump’s commerce secretary and most visible trade warrior, enters the lobby of an Embassy Suites hotel in Washington. Clad in a blue suit, white shirt, and red tie, which upon closer inspection turns out to be decorated with tiny beavers, Ross greets members of a national association of business leaders who’ve been enlisted by the department to help promote exports of American goods. They’re eager to have their picture taken with him. Then it’s downstairs to a ballroom, where Ross will do some promoting himself—in this case, of the president’s trade policies—as the keynote speaker at the association’s yearly export symposium.
At 80, the diminutive Ross isn’t exactly gladiatorial. His head hangs at about 11 o’clock. He speaks in a soft, cooing voice. When he talks about the administration’s “America First” trade policies, his patrician demeanor and slow, methodical delivery make him sound much less aggrieved and vindictive than when the president himself articulates them. Standing at the podium before an audience of about 100 people, Ross acknowledges that there’s been some “nail-biting” on the part of his listeners over Trump’s decision to impose billions of dollars of tariffs on foreign goods, mainly from China, to say nothing of his inflammatory words about U.S. trading partners. As a result, many of these exporters now have to deal with retaliatory tariffs on their products in other countries. Ross assures them they have nothing to fear. “As you can remember, I suggested, don’t judge the president by his tactics,” he says. “Judge him by his results. And I think it’s becoming increasingly clear that his trade policies are working very well.”
Ross notes that the U.S. recently struck a new agreement with Mexico and Canada that will replace the North American Free Trade Agreement. “Nafta, rest in peace,” he says, drolly. “Bless your soul.” He raises his left hand as if to offer a priestly benediction. Now, Ross says, leaders of other countries are coming to the table to negotiate new deals and join the U.S. in its campaign to stop what he describes as the “evil practices of China.”
The prospect of a showdown between the U.S. and China unsettles a lot of people, but Ross talks about it as if it’s no big deal. “There’s never a perfect time for a trade spat,” he tells the exporters. “But right now, as our economy is so strong and other economies are sputtering, it’s got to be as close to a good time for having a little face-off as any.”
An audience member from Ohio asks what the endgame is in this escalating conflict Ross has described so casually. “Is this trade war part of a bigger strategy against China’s political and economic aggression?” the man says. “Or is it just a method to correct China’s malpractices in economic and trade policies?”
The overhead light sparkles on Ross’s wire-rimmed glasses and accentuates the deep lines on his face. “That’s obviously a very politically motivated question,” he chuckles. “Thank you for phrasing it so delicately.” The audience laughs politely, too. Ross tells his questioner that the Trump administration just wants China to play more fairly when it comes to trade. In two days, though, Vice President Mike Pence will deliver a broader condemnation of China, linking its trading practices with its military expansion in the South China Sea and its suppression of religious freedom, enraging Chinese leaders and further fraying relations between the two superpowers. Which means Ross was being coy. His office works closely with the vice president’s, so surely Ross would’ve known in advance about the administration’s real intentions regarding China.
The secretary of Commerce isn’t usually among the most prominent members of a president’s cabinet, especially when it comes to trade. He or she presides over a large international trade division with employees in U.S. embassies throughout the world, but it’s the U.S. trade representative—presently Robert Lighthizer—who reports to the president and is the official negotiator on trade matters. The Treasury secretary and the director of the White House National Economic Council tend to get involved in trade, too. Then Commerce secretaries have their hands full with the rest of the department, which includes the National Oceanic and Atmospheric Administration and the U.S. Census Bureau. “It’s not a key or an important post if you want to have policy influence,” says Derek Shearer, a professor of diplomacy at Occidental College and a former Clinton administration deputy undersecretary in the department. Shearer has written that Commerce should be broken up and its parts scattered throughout the federal government.
Ross either skipped Shearer’s articles or simply had other ideas. He’s become the most high-profile Commerce secretary in decades. Before taking the job, he was already known as an affable billionaire vulture investor who showed up frequently on CNBC’s Squawk Box and in the pages of business magazines such as this one. He even looked the part, with his bald head, predatory gaze, and pinstripe suits. But Trump obviously saw something more. When he tapped Ross in late 2016 for the position, the president-elect called him “a killer” and promised Ross would be a key adviser in the crusade to throw over the chessboard when it comes to America’s trade relationships. “Wilbur’s at all the meetings,” says Larry Kudlow, director of the White House National Economic Council. “All the meetings. He’s been a big player in the Trump administration.”
Ross has also drawn attention for less flattering reasons. His impromptu naps during meetings have been much discussed in Washington. Media outlets, including Bloomberg News, stripped him of his cherished status as a billionaire after he declared himself little more than a centimillionaire in his confirmation process. The U.S. Office of Government Ethics has chided him for his tardiness in shedding assets. He’s being sued over the proposed inclusion of a citizenship question in the 2020 census. And his inability at times to keep his mercurial boss happy on trade issues has been one of the Trump administration’s more colorful subplots.
Ross toils in a high-ceilinged office on the fifth floor of Washington’s Herbert C. Hoover Building, named after the most famous American commerce secretary. The room is so large you could toss a football around. (Ron Brown, Bill Clinton’s first commerce secretary, did.) On a day in September, Ross is sitting at a long wooden table with a pile of briefing documents and a large glass of ice water. CNN, his boss’s least favorite news network, plays noiselessly on a TV beside the fireplace.
In person, Ross is witty and engaging. He jokes that now that he’s in charge of NOAA, which safeguards the nation’s fisheries, he spends an inordinate amount of time on ichthyological issues. “You cannot imagine how many congressional inquiries we get about fish,” he says. “I mean, you’d almost think the fish were registered voters, with the amount of attention they get. It’s incredible.”
When asked, he’s happy to flip through some of the large charts leaning in the corner. Ross takes them to Capitol Hill when he testifies before Congress, mostly to show how the U.S. has suffered economically with the rise of China. He says that’s about to change now that Trump has shown he’s willing to wield tariffs to get his way. He says the administration’s actions could even lead to a recession in China. “Their economic growth will be meaningfully slowed,” Ross says, tapping his pile of papers with a fat Department of Commerce pen. Granted, a Chinese recession would surely be felt in other countries, including the U.S. He isn’t worried. His mantra is that the American economy is so strong, thanks to Trump’s tax cuts and deregulatory efforts, that it can withstand whatever China dishes out in response.
Ross grew up in North Bergen, N.J., and attended Yale College and Harvard Business School. In 1976 he joined the boutique investment banking firm Rothschild Inc., where he became a star bankruptcy adviser known for helping bondholders recover their investments in troubled projects. One of them was the Trump Taj Mahal, an Atlantic City casino that went broke in the early 1990s. Although Ross and Trump traded insults in the press, a deal was eventually struck and the two became friends. “He conducted himself in a totally moral and totally aboveboard fashion,” Ross says of Trump.
In 2000, Ross started his own buyout outfit, WL Ross & Co. He made his most memorable score when he purchased several bankrupt American steel mills and sold them several years later to an Indian billionaire for $4.5 billion, reaping a $2.5 billion profit for his company and $300 million for himself. It didn’t hurt that the George W. Bush administration decided at about the same time to place a 30 percent tariff on foreign steel. “Wilbur sat in my office a number of times,” says Grant Aldonas, an attorney in Washington who was the commerce undersecretary for international trade under Bush. The prosperous vulture also became a bon vivant, going to parties almost every night with his third wife, Hilary Geary, whom he married in 2004. Because of Ross’s late hours, says a former WL Ross executive, he habitually fell asleep at business meetings: “That’s nothing new,” the ex-colleague says.
Ross was one of Trump’s early supporters in 2015 when his old sparring partner announced his presidential candidacy, donating $200,000 to the Trump Victory PAC. “I thought he was the only one who really understood what was on most Americans’ minds,” Ross says. He wrote a white paper for the campaign with Peter Navarro, a Trump adviser and fervent China critic, that referred to Beijing as “the biggest trade cheater in the world.”
Ross luxuriated in bipartisan praise at his confirmation hearing in January 2017. “Now in recent years, the commerce secretary post has not been one of the most-sought or one of the most-appreciated positions in Washington,” said Senator Bill Nelson, a Florida Democrat. “I have a feeling that that’s about to change in a big way.” Other senators lauded Ross for promising to shed more than 90 percent of his holdings, unlike his boss, who refused to sell anything.
If only Ross’s early months on the job had gone as smoothly. Thanks to the Trump administration’s disarray and resistance from Senate Democrats, many of the department’s senior positions went unfilled for months. Former aides say Ross tried to compensate by micromanaging. Concerned about cost overruns with the 2020 census, for example, he personally reviewed and renegotiated all contracts with outside vendors.
In the early months of the new administration, Ross was also the president’s primary negotiator on trade while Lighthizer’s nomination languished in the Senate. The secretary was present at Trump’s Florida club, Mar-a-Lago, in April 2017 when the president held his first meeting with Chinese President Xi Jinping. Two former administration officials say Ross was so intent on dominating the discussion that he kept Kenneth Juster, then Trump’s deputy assistant for international economic affairs, out of the meeting. (A Ross spokesman called this account “fabricated and illogical.” Juster, now U.S. ambassador to India, couldn’t be reached for comment.) Yet it was soon apparent that Ross himself might be ill-prepared for the task. The following month he was ready to unveil the early results of his discussions with China. The Chinese had agreed, among other things, to loosen restrictions on imports of American beef, and the Trump administration would permit more Chinese poultry to be shipped to the U.S. Administration officials warned Ross not to make too much of these incremental deals. Instead he called the preliminary results “herculean” at a White House press conference. The announcement, or rather Ross’s self-aggrandizement, was jeered by trade experts.
That didn’t bode well for a visit the following July by a Chinese delegation for further talks. Ross was eager to strike a deal that would reduce China’s excess steel production, which was enabling the country to flood the rest of the world with cheap material. The Chinese were amenable; they’d already offered to cut back production during the Obama administration, and now they were willing to move up the start date a year. Ross hosted a celebratory dinner for Chinese and U.S. officials at his Washington home. The next day he visited the White House to sell the steel deal to Trump. The president had heard about the agreement and thought it was an embarrassment. He told Ross as much before a group of onlookers, relieving his former killer of his duties as the administration’s chief China negotiator.
Trump was still displeased with Ross during a presidential trip to Beijing in November 2017 for a meeting with Xi. Ross came along, but Trump wouldn’t let him in the room with the Chinese president, a slight that didn’t go unnoticed in the administration.
Around the same time, Ross, who had previously been estimated to be worth almost $3 billion, was removed from the billionaires lists at both Bloomberg and Forbes. During his confirmation process, he’d declared only about $700 million in assets; according to Forbes, he attempted to explain the discrepancy by saying he’d placed an additional $2 billion in a family trust, but he wouldn’t provide documentation. On Nov. 5, the New York Times and other news organizations reported that documents known as the Paradise Papers, leaked from a Bermuda law firm, showed that Ross remained an investor in a shipping company called Navigator Holdings Ltd. One of Navigator’s largest customers was Russian energy company Sibur Holding PAO, whose owners included the son-in-law of Russian President Vladimir Putin. Six Democratic senators called for the Commerce Department’s inspector general to investigate. (A spokesperson for the IG said, “The matter is under review, and it is the policy of the inspector general not to comment on open matters prior to their conclusion.”)
Ross treated the Navigator disclosure as if it were a minor distraction, saying he’d done nothing wrong and had already been whittling down his stake. “I’ve been actually selling it anyway, but that isn’t because of this,” he assured Bloomberg TV.
Ross seemed more sure-footed when it came to restoring his relationship with Trump. In January 2018, Commerce completed lengthy investigations of steel and aluminum imports, concluding there was indeed a national security justification for imposing tariffs. The reports gave Trump a choice: He could target what it described as bad actors such as China, or he could go after all imported steel, even if that meant punishing allies such as the European Union. The challenge for Ross was overcoming opposition from anti-tariff forces in the White House.
February passed without action. In early March, with Trump’s blessing, Ross invited a group of U.S. steel and aluminum company chief executive officers to the White House. When the executives showed up, they had to wait while Ross fended off a last-ditch effort by Treasury Secretary Steven Mnuchin and Gary Cohn, then head of the National Economic Council, to scuttle an announcement of the tariffs. Right before noon, Trump strolled into the Cabinet room with a press contingent and announced that he would be imposing the tariffs—and that they would be global rather than targeted. Prompted by reporters, Trump said there would be duties of 25 percent on steel and 10 percent on aluminum. “There were people inside who disagreed, but Wilbur pushed it through and convinced the president,” Kudlow says. Cohn quit soon after, which is why Kudlow has his present job.
A victorious Ross appeared on CNBC later that week with a can of Campbell’s soup he said he’d picked up at a nearby 7-Eleven. “I knew it would get people talking,” he recalls. And it did. Ross made the case on CNBC that most Americans would barely notice the tariffs. Holding up his prop, he said it contained a mere 2.6¢ worth of steel. “If that goes up by 25 percent, that’s six-tenths of one cent,” Ross said. “Who in the world is going to be bothered by six-tenths of a cent?”
In May, Ross was part of a delegation that went to Beijing for high-level trade negotiations in China. It didn’t produce much, but it showed that Ross was back in favor with Trump. The same month, he announced a new tariff investigation, this one involving imported cars. The possibility unnerved America’s allies. In a lively exchange this spring, Cecilia Malmström, the EU’s chief trade official, asked Ross to pursue a less adversarial U.S.-Europe trade pact; as a first step she wanted the Trump administration to eliminate the threat of steel and aluminum tariffs, which had not yet gone into effect for EU countries. “I don’t think the president will grant you absolution for this,” Ross said, according to someone familiar with the discussion.
“He’s not the pope,” Malmström said. “He’s more like the Russian mafia we have in Sweden. They say, ‘Give me money, or I’ll burn down your house.’ ”
There were plenty of Americans who didn’t care for the tariffs either. Ross’s staff had spent months on the steel and aluminum investigations but hadn’t developed an adequate plan to address the concerns of U.S. companies that depend on certain kinds of steel that aren’t made in sufficient quantity by domestic producers. Commerce had anticipated receiving 6,000 so-called exclusion requests from such companies. It ended up getting almost 50,000.
One manufacturer in need of tariff relief is Independent Can Co., a family-owned business in Belcamp, Md., that makes decorative cans for customers such as Starbucks and Kraft Foods. Independent Can CEO Richard Huether says he uses imported tin-plated steel because American companies can’t produce it with the same quality and reliability. He says the company has actually had to file 40 separate requests for different specifications of tinplate because that’s how the department’s system works. Some of Independent Can’s exclusion requests have been granted, but not all of them, and Huether has had to raise his prices 12 percent. He says he’s losing business. “Wilbur Ross is saying a can of soup only costs six-tenths of a cent more,” says Lewis Leibowitz, a trade lawyer in Washington. “That’s not the equation. The equation is: If you make tin cans, you’re screwed.”
Republicans and Democrats confronted Ross with similar complaints about businesses in their states when he appeared before the Senate Committee on Finance in June for a hearing on the tariffs. Ross, as usual, had come with charts, which showed that the exclusion process was working, albeit slowly. He didn’t win over many skeptics. “Mr. Secretary, your charts notwithstanding, America’s small businesses believe that they are being held hostage in a bureaucratic twilight zone,” said Oregon Senator Ron Wyden, a Democrat.
The same month, the Office of Government Ethics released Ross’s financial disclosure report, in which he claimed to have discovered, much to his surprise, that near the end of 2017 he still owned some investments he’d promised earlier to sell. Ross’s attorney, Theodore Kassinger, says the commerce secretary came to Washington without fully understanding the financial disclosure regulations or having his paperwork in order. Not everybody is satisfied with this excuse. “This is a man who wants people to think he’s this wealthy, savvy, brilliant investor,” says Delaney Marsco, ethics counsel for the Campaign Legal Center, a nonpartisan watchdog that’s called for an investigation of Ross’s finances. “But at certain times, he also wants us to believe that, like, you know, whoops, I forgot about millions of dollars of stock.”
Ross is also under scrutiny for his decision in March to ask Americans about their citizenship in the 2020 census, outraging immigrants’ rights groups, which sued the department. Initially, Ross said he added the question at the request of the U.S. Department of Justice so it could better enforce the Voting Rights Act of 1965. In June, during discovery in the litigation, his department released emails showing that Ross had consulted with Kris Kobach, the Kansas secretary of state and anti-immigration hardliner, who argued that such a question should be asked so the government could weigh reducing congressional representation in areas with large undocumented populations. A Commerce Department spokesman says the disclosures should have no effect on the case, which went to trial on Nov. 5. Still, a defeat would be embarrassing to Ross.
If the Democrats take back the House, they’re likely to probe more deeply into these controversies, which could curtail Ross’s time in Washington. In the meantime, he continues to enjoy the limelight. Toward the end of the summer he traveled to North Dakota. With the midterm races approaching, it seemed a good time for the chatty commerce secretary to assure farmers and cattle ranchers that Trump’s tariffs were getting results. Seated in the front of an auditorium at the North Dakota State College of Science in Fargo with a bottle of water and some papers in front of him, Ross, tieless for a change, boasted about how the tariff threats had gotten the attention of European Commission President Jean-Claude Juncker. “I tried 14 times to get the EU to respond to the Trump administration,” he said. “They always had an excuse: ‘Well, it’s the German elections, or it’s this, or it’s that.’ Once the president said, ‘You know what? Maybe I’m going to put a 25 percent tariff on your cars,’ all of a sudden, President Juncker got on a plane and came to Washington.”
Now, Ross said, the EU countries are joining the U.S. in its showdown with China. “They were afraid,” he said. “It’s just like a bully in the schoolyard. A bully’s a bully if all the other kids say, Oh, my God, that’s the bully. We have to give in to whatever the bully wants. Bullies are only bullies if the other kids are willing to let them be bullies. Let two little kids gang up on the bully, beat him up a bit, and, you know what? That’s the end of the bully.” Ross said this calmly enough, but his hypothetical schoolyard brawl sounds like something that could have dire consequences.
Some of his listeners seemed uneasy about the retaliatory tariffs they face because of Trump’s actions. One of them was a soybean farmer. “You hear a lot of people say, ‘Well, it’s going to be fine. China has to buy our beans,’ ” he told Ross. “That’s a terrible answer. They don’t have to.”
But most of the people in Fargo sounded as if they were OK with the escalating trade war, especially when Trump had promised them $12 billion in aid to ease the pain. Kenny Graner, president of the U.S. Cattlemen’s Association, liked what he was hearing from Ross. “The cattle producers out there, they really support the Trump administration getting out there on trade, getting it right,” he told the secretary. “We’re going to hang in there with you. We’re in this to win.”
“If that’s people’s attitude,” Ross responded, nodding his head, “we will prevail.” —With Andrew Mayeda and Peter Martin
©2018 Bloomberg L.P.