Nativist Trump makes noise while Globalist Trump makes progress

By TORY NEWMYER | The Washington Post | Published: January 12, 2018

Nativist Trump is dominating the headlines Friday morning for the acid-laced invective he directed at immigrants from the developing world on Thursday. And on another critical policy front, Globalist Trump may have quietly won the day again.

Just Friday morning – after The Post reported that the president asked lawmakers in a meeting Thursday why the United States needed to accept immigrants from "shithole" countries, referring to Haiti, El Salvador and unspecified African nations – Trump tweeted that while his language was "tough," it wasn't the language reported. It was unclear what part of the reported language the president denied.

Trump tweeted "The language used by me at the DACA meeting was tough, but this was not the language used. What was really tough was the outlandish proposal made – a big setback for DACA!"

Yet in a wide-ranging interview with the Wall Street Journal, his first of the year, the president signaled a new dovishness toward renegotiating the North American Free Trade Agreement. He said he would terminate the pact barring the willingness of Canada and Mexico to agree to different terms – "a Trump deal" – but will put off any final call until after the Mexican presidential election, set for July 1.

"I understand that a lot of things are hard to negotiate prior to an election," Trump told the newspaper. "They have an election coming up fairly shortly. I understand that makes it a little bit difficult for them."

The evidence suggests that President Trump's attitude doesn't spring from some newfound magnanimity toward our northern and southern neighbors (which together account for nearly a third of our trading activity) but rather the successful appeal by free traders in his orbit to a priority he values even more than protectionism: preserving the stock market rally. The Washington Post's David J. Lynch and Damian Paletta report:

"When President Trump met with six Republican senators last week to talk about trade, the lawmakers issued a stark warning: Implementing an unrestrained 'America first' agenda – such as withdrawing from the North American Free Trade Agreement – would endanger stock prices that have soared since his election.

"Just steps from the Oval Office, the president listened as Sens. Cory Gardner, Colo., and Pat Roberts, Kan., depicted the potential fallout if Trump follows through on his threats to quit NAFTA.

"The talks, which will resume later this month in Montreal, have been stalled over U.S. demands for significant concessions from Mexico and Canada. The impasse has prompted treaty proponents to search with growing urgency for any argument that might sway the president, leading to the new emphasis on investments."

The argument that an attack on our trading relationships could spook investors got fresh ammunition Wednesday.

A Reuters report that Canadian officials are increasingly convinced that Trump will pull out of NAFTA prompted a sell-off; the S&P 500 and the Nasdaq posted their first losses of the year; and General Motors shed $2 billion in just 90 minutes. Recall that last month, Trump suggested investors file a class-action suit against ABC News, blaming a report on the Russia probe it later retracted for a market dip:

Trump tweeted "People who lost money when the Stock Market went down 350 points based on the False and Dishonest reporting of Brian Ross of @ABC News (he has been suspended), should consider hiring a lawyer and suing ABC for the damages this bad reporting has caused – many millions of dollars!"

Since Trump has replaced his basement-dwelling poll numbers with soaring stock prices as his preferred scoreboard for his presidency, invoking the market's performance plucks at his vanity. And last week's meeting wasn't the first time that free traders have made use of the tactic. "In early December, during a similar session with another group of senators, Sen. Joni Ernst, R-Iowa, showed Trump a chart demonstrating that his April threat to exit NAFTA caused pork futures to sink, according to a third executive briefed on the closed-door meeting," David and Damian write.

The president is hearing it closer to home, as well. Jonathan Swan of Axios reported last month that Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn have made the same pitch in stereo against the rash imposition of trade barriers: "They're telling him the stock market is at an all-time high, and that new tariffs on whole industries like steel and aluminum would hurt it."

Last spring, administration officials used another appeal to Trump's self-interest to forestall a precipitous pullout from NAFTA. Back in April, with his mind apparently made up to follow through on his campaign pledge to withdraw from the pact, he met with Agriculture Secretary Sonny Perdue, who brought out a prop, per reporting by The Post at the time:

"A map of the United States that illustrated the areas that would be hardest hit, particularly from agriculture and manufacturing losses, and highlighting that many of those states and counties were 'Trump country' communities that had voted for the president in November. 'It shows that I do have a very big farmer base, which is good,' Trump recalled. 'They like Trump, but I like them, and I'm going to help them.' By Wednesday night, Trump – who spent nearly two years as a candidate railing against the trade agreement – had backed down, saying that conversations with advisers and phone calls with the leaders of Canada and Mexico had persuaded him to reconsider."

The case for the market's fragility isn't airtight. As Damian and David write, "there is no iron link between global trade and the stock market."

"The S&P 500 index, the broadest measure of the U.S. stock market, has risen about 50 percent since the beginning of 2014 despite a decline in global trade volumes over that period, according to World Trade Organization statistics.

In continuing to climb through 2017, stocks also shrugged off a surge of Commerce Department trade enforcement actions. The Trump administration in 2017 opened 79 anti-dumping and countervailing-duty investigations – a 52 percent increase from the previous year.

But industry representatives who favor the status quo argue that a NAFTA collapse would so disrupt North American supply chains, especially in the auto industry, that it would trigger a market sell-off. Farmers are worried about losing export sales to Mexico if NAFTA ends. The beef industry has warned that Mexico would place 25 percent tariffs on U.S. exports."

That said, Trump was on wobbly ground in his Thursday interview with the Journal when he asserted, "the American market would go up if I terminated NAFTA and renegotiated a new deal." The claim, made just moments before he committed himself to forbearance, underscored again the president's changeability. But his shocking comments on immigration later in the day point to his gut preference for walling the country off.

The struggle between the nativist and the globalist continues.

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