Inside Donald Trump’s Economic Team, Two Very Different Views

‘It is the supply-siders versus the zero-sum crowd’; trade policy seen as a particularly divisive issue

President-elect Donald Trump has blamed bad trade deals for the loss of U.S. jobs. Above, Mr. Trump at a rally in Manheim, Penn., in October.
President-elect Donald Trump has blamed bad trade deals for the loss of U.S. jobs. Above, Mr. Trump at a rally in Manheim, Penn., in October. PHOTO: MANDEL NGAN/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Updated Nov. 20, 2016 7:31 a.m. ET

Longstanding tensions are coming to a head within Donald Trump’s economic team over a fundamental question: Will the economy benefit most from more carrots or more sticks?

Longstanding tensions are coming to a head within Donald Trump’s economic team over a fundamental question: Will the economy benefit most from more carrots or more sticks?

Mr. Trump captured the presidency with a small coterie of heterodox advisers whose views diverge sharply on several fronts, most vividly on the president-elect’s stance on trade. Personnel decisions over coming weeks will reveal which side prevails as Mr. Trump assembles his White House team.

One group, which appeared ascendant in the closing weeks of the campaign, largely rejects mainstream economic thinking on trade and believes eliminating trade deficits should be an overarching goal of U.S. policy. That camp views sticks—tariffs on U.S. trading partners and taxes on companies that move jobs abroad—as critical tools to reverse a 15-year slide in incomes for middle-class Americans.

The opposing camp is closer to the traditional GOP center of gravity on taxes and regulation and includes many policy veterans staffing the transition team and advising Vice President-elect Mike Pence.

Those advisers have long championed supply-side economics and reject the hard-line position on trade that one side’s gain must come at the other’s expense. By offering more carrots—slashing red tape and taxes to make the U.S. the top destination for businesses—they say stronger growth will obviate any need for trade protectionism.

“It is the supply-siders versus the zero-sum crowd,” said Andy Laperriere, political strategist at research firm Cornerstone Macro LP who closely watches such policy developments.

A third group of advisers are mostly business associates of Mr. Trump who aren’t particularly ideological.

The question is which direction Mr. Trump will go. The coming weeks of personnel decisions and policy briefs have taken on even greater importance to markets and industry because Mr. Trump hasn’t held elective office, honed a consistent political ideology or cultivated a bench of trusted advisers. His campaign didn’t issue the types of detailed policy papers typical of past presidential campaigns.

Mr. Trump has blamed bad trade deals for the loss of U.S. jobs and promised to renegotiate and potentially quit the 1994 North American Free Trade Agreement with Canada and Mexico, calling it the worst trade deal “maybe ever signed anywhere.” He called the 12-nation Trans-Pacific Partnership, completed last year but not yet approved by the U.S., a “continuing rape of our country.”

As Indiana governor, Mr. Pence had supported the TPP but reversed his support for the pact and earlier free-trade agreements after Mr. Trump tapped him to join the ticket.

David Malpass, the economist handling the economic portfolio for the transition effort, declined to comment. Other advisers have dismissed talk of strains.

“What we’re seeing is a very orderly group of people working on behalf of the American people,” said Anthony Scaramucci, a member of the transition team executive committee who manages hedge-fund firm SkyBridge Capital, to reporters in New York on Thursday.

Key appointments extend not only to cabinet-level positions at the Treasury or Commerce departments but also to less public but possibly more influential roles such as director of the National Economic Council and chairman of the Council of Economic Advisers.

Those picks could shape the extent to which Mr. Trump governs as a more traditional Republican focused on cutting taxes and regulation or as an antiestablishment populist who pushes ahead with more tariffs and border controls.

So far, broad agreement between the two camps of advisers over the necessity of reducing taxes and regulations have allowed them—and the broader GOP—to paper over the bigger disagreements on trade.

“There will be a balancing act,” said Stephen Moore, a top economic adviser during the campaign on taxes who disagrees with Mr. Trump on trade. “There’s going to be some disagreements even within the administration about what should be the priority…I don’t know how that will all come down.”

Advisers in both camps say Sen. Jeff Sessions (R., Ala.)—a longtime proponent of tighter trade restrictions and immigration rules—has emerged as the most influential adviser to Mr. Trump on the economy. Mr. Trump said Friday he would nominate Mr. Sessions as attorney general. The Republican senator’s former senior aide, Stephen Miller, became Mr. Trump’s national policy director.

In the final weeks of the campaign, Mr. Trump’s speeches reflected the view of advisers who share a deep skepticism of trade deals, including economist Peter Navarro, financier Wilbur Ross and steel executive Dan DiMicco, all of whom are being considered for top posts in the new administration.

Mr. Navarro, a professor at the University of California at Irvine, has written several books sharply critical of China’s trade and labor practices, including his 2008 publication “The Coming China Wars.” China’s economic advantages stem from “slave-labor conditions coupled with a potent array of unfair trade practices that violate virtually every tenet and norm of international trade,” he wrote.

Mr. Navarro learned from a television interview that Mr. Trump was a fan of his writing, and the two struck up a correspondence several years ago. Mr. Navarro became an adviser to the campaign earlier this year, though he and Mr. Trump hadn’t met in person until September.

Mr. Laperriere said markets aren’t taking seriously enough Mr. Trump’s tough talk on trade, in which he equates trade deficits with theft. While the White House needs Congress to approve tax cuts, Mr. Trump has wide authority to change trade policy unilaterally.

On a range of other policy issues, Mr. Trump sounds as if his position “could easily evolve,” Mr. Laperriere said. “By contrast, his convictions on trade appear strong.”

Lawrence Kudlow, the CNBC commentator who advised Mr. Trump earlier this year on taxes, criticized using the trade deficit as a scorecard for whether the U.S. is winning or losing from trade. “Peter Navarro, a friend, is just wrong,” he wrote on Twitter before the election. Trade deficits, he added, simply reflect capital inflows and not forgone economic gains.

Mr. Kudlow also implored the campaign to tamp down the tariff talk. By following through with tax relief for large and small businesses, “these companies won’t leave in the first place,” Mr. Kudlow told Mr. Pence in a radio interview before the election.

“My response,“ replied Mr. Pence, “is you’re exactly right.”

Write to Nick Timiraos at nick.timiraos@wsj.com

http://www.wsj.com/articles/inside-donald-trumps-economic-team-two-very-different-views-1479643204

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One Response to “Inside Donald Trump’s Economic Team, Two Very Different Views”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

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