U.S. President Donald Trump speaks during a cabinet meeting at the White House in Washington, D.C., U.S. (Photographer: Michael Reynolds/Pool via Bloomberg)

The Tale of Trump's Tariffs: Snap Move Sets Off Week of Disarray

(Bloomberg) -- President Donald Trump’s move to slap steep tariffs on steel and aluminum has been defined by a level of disorder and dysfunction remarkable even in an administration accustomed to daily chaos.

Trump has agitated for tariffs on countries he considers to be unfair trade competitors since his presidential campaign. But the delivery on his promise kicked suddenly into overdrive last week when the president surprised some of his closest advisers with his decision to impose 25 percent duties on steel and 10 percent on aluminum.

Since then the administration has scrambled to convert what amounted to an impromptu proclamation into a policy opposed by many Americans, including much of Trump’s own party.

Trump signed orders implementing the tariffs on Thursday. He exempted Canada and Mexico after lobbying by the two U.S. neighbors, which are renegotiating the North American Free Trade Agreement. The new duties take effect in 15 days.

“I’m sticking with 10 and 25 initially,” Trump told reporters at a Cabinet meeting. “I’ll have a right to go up or down depending on the country and I’ll have a right to drop out countries or add countries. I just want fairness because we have not been treated fairly by other countries.”

Congressional committees with jurisdiction over trade hadn’t been briefed on the policy as of Thursday morning. A person who has spoken with administration officials about the issue said Thursday afternoon that no one but Trump knew exactly what he planned to do.

The episode has cost Trump the services of his top economic adviser, Gary Cohn, and has reinforced notions that as the West Wing hemorrhages senior staff, the president’s decision-making process -- never quite orderly -- is further degenerating. The rollout of the tariffs has also raised concerns in Washington and on Wall Street that little now stands between Trump’s base instincts and official U.S. policy.

Last-Minute Invitations

Trump’s announcement of the tariffs presaged the tumult to come.

Trump told Commerce Secretary Wilbur Ross of his decision on Feb. 28, as much of Washington -- and the White House -- was processing the resignation of his communications director and longtime aide Hope Hicks.

Last-minute invitations were issued to industry executives for an announcement the next day. Some in the West Wing only learned that a decision was imminent after media reports late that day, including by Bloomberg News, that Trump had decided to endorse the harshest tariffs on the metals that Ross had recommended in January.

On the morning of March 1, Cohn and allies including National Security Adviser H.R. McMaster intervened forcefully, arguing that Trump should hold off from a final decision. White House officials told reporters that no announcement was expected after all. The visiting industry executives, including ArcelorMittal USA’s John Brett, Nucor Corp.’s John Ferriola and Century Aluminum Co.’s Mike Bless, instead would meet the president for a “listening session.”

The turnabout stunned some of the executives. Shares of U.S. Steel Corp., after rising more than 8 percent on news of the impending tariffs, plunged when the announcement was postponed, giving up almost the entire gain.

‘Sometime Next Week’

But the president would not be dissuaded. Trump summoned reporters to the meeting and then announced he would issue the new tariffs “sometime next week.” Reporters had to ask him how much the tariffs would be. There was no accompanying press release or other information typical for such announcements issued by the White House.

Steel and aluminum producers’ shares bounced back, even as the rest of the market slumped. Lawmakers on both sides of the aisle issued concerned statements, warning that a trade war could endanger recent economic progress.

Meanwhile, staffers from opposing camps inside the White House went on offense, looking to shape the size and scope of the president’s actions.

Ross, the former owner of a Fortune 500 steel company and a supporter of strong tariffs, went on a media blitz and announced that the new taxes on steel and aluminum would be imposed globally, without exceptions for U.S. allies and strategic partners. White House officials reiterated that message on a conference call for local news outlets Friday afternoon, as protectionists in the administration sought to harden the duties.

At the same time, Trump was flooded by phone calls from foreign leaders expressing concern, as free-traders within the administration looked to soften the penalties. He spoke with German Chancellor Angela Merkel and French President Emmanuel Macron hours before Jean-Claude Juncker, president of the European Commission, threatened retaliatory tariffs targeted at regions politically vital to Trump, including the home states of Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan.

Softened Stance

By Sunday, the administration had softened its message. Ross conceded on NBC’s “Meet the Press” that there could be exceptions for some countries and that if the president “for some reason should change his mind, then it’ll change.”

Top White House trade official Peter Navarro, appearing on CNN, said the policy would include an “exemption procedure” but didn’t explain it.

Ryan issued a statement publicly criticizing the tariffs on Monday morning, and his staff circulated a news article noting the stock market’s decline. But later in the day Trump reinforced his commitment. “We’re not backing down,” he told reporters.

Even so, he managed to muddy the waters. Trump tweeted the same day that he’d be open to lifting the tariffs for Canada and Mexico if the two U.S. neighbors successfully renegotiated the North American Free Trade Agreement. But the president’s supporters worried that by making explicit his intention to use the tariffs as leverage, Trump had undermined the legal rationale that the duties were a response to a national security threat.

Cohn was meanwhile readying a last-ditch effort to change Trump’s mind.

Cohn’s Meeting

The economic adviser organized a meeting, initially planned for Thursday, where he would gather executives of industries that consume steel and aluminum so that the president could hear from them directly. But Trump refused to attend, saying he would instead dispatch Vice President Mike Pence. The corporate executives canceled the meeting, before reluctantly agreeing to meet with Pence.

On Tuesday, a trade policy meeting in the Oval Office again sowed drama. As aides discussed the logistics of making tariffs official, Trump sought confirmation from his advisers that he had their support. He was particularly interested in Cohn.

Two people familiar with the exchange said he asked the director of the National Economic Council: We’re all on the same team, right? He then asked if Cohn supported his decision.

Cohn didn’t answer, the people said. A senior White House official disputed that Trump asked directly for Cohn’s support and didn’t recall Trump’s remark about being on the same team.

Cohn’s resignation was leaked to the New York Times later that day. Some staffers within the West Wing who worked closely with Cohn and his team only learned of the news after reporters asked them to confirm it.

Trade Leverage

At a news conference with the Swedish Prime Minister on Tuesday, Trump again indicated that he’d use the tariffs as negotiating leverage. He’d be open to repealing them for Europe in exchange for concessions from the EU, he said, adding that he was weighing dramatic new penalties on European cars in response to any retaliation for the steel and aluminum duties.

“When we’re behind every single country, trade wars aren’t so bad,” Trump said. “The trade war hurts them, not us.”

Opposition to the tariffs has grown among Trump’s political allies as the White House continues to fumble.

More than 100 Republican members of Congress on Wednesday sent Trump a letter to express “deep concern” about the prospect of the tariffs, outlining “key elements necessary to minimize negative consequences.” The warning that a crude implementation of penalties could hurt key U.S. relationships by the president’s Republican allies belied the extent to which Congress has been cut out of the decision.

“The haphazard way these tariffs were put together has caused policy to miss the mark,” Chuck Schumer of New York said on the Senate floor Thursday. “It seems no one’s at home at the White House right now.”

©2018 Bloomberg L.P.

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