On the table are new tax cuts, a fresh push for final approval of the new North American trade pact and increased pressure on the Federal Reserve to lower interest rates. In what officials describe as an “all hands on deck” initiative, Trump and top aides — including son-in-law and senior adviser Jared Kushner — have phoned business leaders to update them on the state of China trade talks and other economic efforts in an attempt at reassurance.
Trump has instructed aides to have plans ready to roll out this fall in case the economic warning signs take a turn for the worse.
At the same time, the President has taken new and at times confusing steps to project confidence on the issue he knows will likely determine his chances for a second term. And there are concerns time is running short.
The new scramble reflects a reality setting in at the White House: The humming economy Trump has ceaselessly touted during his time in office may not last until Election Day in 2020.
The irony is that much of the recent warning signs showing up in the economy are the result of the President’s own trade war. New rounds of tariffs announced on China in the past few weeks have spooked markets and heightened uncertainty amid what were already declining levels of business investment.
On Friday, the government announced US companies added 130,000 jobs in August, a solid number but one that was still below expectations. While wages continued to rise, the total number of jobs added during the previous two months were revised down by 20,000. The economy has gained jobs for 107 consecutive months, but the pace of hiring has slowed recently.
Eager to project confidence, Trump on Thursday tweeted “Really Good Jobs Numbers!” — despite the monthly jobs report coming out 24 hours later. The message was later explained away by aides as a reference to a separate report which showed private employers’ payrolls growing, though initially officials admitted they weren’t sure to what Trump was referring.
The episode carried echoes of his claims a week earlier to have held phone conversations with Chinese officials that didn’t happen in the way he claimed — a boast aides were initially confused by, and later admitted was meant to boost markets.
Not budging on Chinese tariffs
Even as Trump presses aides to develop plans to strengthen consumer confidence, there is little sign he is willing to take the one step that could have the greatest effect: easing the trade war with China. Instead, he’s insisted the US is well positioned to prevail in the standoff, even as there are emerging signs of trouble.
Numbers out this week showed American manufacturing shrank for the first time in three years this summer. Although one month is not a trend, it was yet another data point that suggests a steady downturn at American factories.
The trade war’s latest victim: Manufacturing 02:37
On Wednesday, US and Chinese negotiators spoke by phone to arrange the next round of talks, now expected in early October. It was taken by Wall Street as a sign of progress, even though the negotiations were originally meant to happen a month earlier. The development came after weeks of apparent stalemate, with neither side able to settle on dates or terms for the next meeting.
Trump has pressed his trade team to make headway in the talks, even as he’s shown no willingness to cede to China’s demands that he lift tariffs. Instead, Trump has privately raised the idea of drastically increasing duties on China in a bid to force the country’s hand, according to people familiar with the conversations.
Even some of Trump’s aides tacitly acknowledge that ending the trade standoff would be the single biggest step toward reinforcing the economy. In private, Trump has begun acknowledging that the protracted trade war may not be a winning political strategy, but is nonetheless the right thing for the country, according to a person who has spoken to him.
But there are few people left in the President’s inner circle willing to warn against escalating the trade war, according to current and former administration officials, leaving the loudest voices — like trade adviser Peter Navarro — with the most influence.
Those who opposed a tariff regime, like then National Economic Council chairman Gary Cohn or Council of Economic Advisers chairman Kevin Hassett, have departed. Kushner and Treasury Secretary Steven Mnuchin, who have taken a moderate position in internal debates over China, are now more likely to temper their arguments in front of Trump, according to people familiar with the matter.
“I think there is also a sense of reality that you can’t change the opinion of someone on something they’ve believed for 30 years and isn’t really interested in listening to facts,” one former senior administration official said.
Trump now finds himself pulled in separate directions on China: either cede to a lesser deal and appear weak, or remain firm on tariffs and cause further economic uncertainty. Both options could be politically damaging, which has led Trump to order up other ways of boosting the economy.
“You’ve got to notch some wins and give stability to the economy in other ways, but stay with China until you get it right,” said Clete Willems, a former White House trade official and partner at Akin Gump.
Impatient over NAFTA replacement
The problem is that many of those wins require an act of Congress. That’s true with the President’s renegotiated North America trade deal, the United States-Mexico-Canada Agreement (USMCA), which has been awaiting congressional ratification for months.
Republican allies and congressional aides have privately expressed hope that amid economic uncertainty, Democratic members in districts Trump won will pressure House Speaker Nancy Pelosi to advance the new North American trade pact after lawmakers return from recess.
Inside the White House, there is a growing consensus that unless the measure is passed before November, 2020 political concerns will forestall any movement until Election Day.
“I think the longer we wait, the harder it gets,” said Phil Cox, co-chair of the bipartisan Trade Works for America, which has worked to pressure lawmakers on USMCA’s passage. “We certainly want to avoid getting into the heart of the presidential campaign, which means we need to get it done in the next few months and certainly before the end of the year.”
For much of the year, White House aides have said the passage of USMCA is their top legislative priority — only to see the agreement languish in a Democratic “working group” as members pore over provisions they don’t like. White House aides view successful passage of USMCA as an easier win than striking a trade deal with China — and believe it could provide leverage with the Chinese talks by demonstrating Trump’s negotiating prowess.
Fed Focused
Still, while Trump himself advocates for the North American trade deal periodically, it’s without the same fervor as his public comments about trade with China. That’s intentional, according to people familiar with the matter, who said having Trump as the public face of the agreement would likely alienate the very Democrats needed for its passage.
Instead, Trump has spent his time criticizing the Federal Reserve and intensifying his war with its chairman as markets fluctuated wildly in August.
“Where did I find this guy Jerome?” Trump tweeted Friday of his Fed chairman, Jerome “Jay” Powell, who came recommended by Mnuchin in the fall of 2017. “Oh well, you can’t win them all!”
Trump has demanded the Fed cut interest rates further, and the central bank will have an opportunity to do so at its next meeting in mid-September — which could buy Trump some time as his team works through ideas to stave off a slowdown.
Everything is fine
Among those ideas is a new tax plan, though one more focused on the middle class. After the 2017 tax cut was cast as a boon for the wealthy, Trump has insisted any new steps be seen as more beneficial for working people.
That’s led some advisers to explore a payroll tax cut, which would have a greater impact on working Americans. Trump hasn’t signed off on the move, but has been engaged on debates over whether the cut might be necessary in the coming months.
Aides have also weighed a proposal by Sen. Rick Scott, the Florida Republican who suggested reducing taxes by the same amount taken in from tariffs on China. But the specifics of that measure aren’t final, and like other steps that would seek to reduce taxes on working Americans, would likely request congressional approval.
While this all gets hashed out, the White House continues to project a public sense of “What, me worry?” when it comes to the economy.
“We have no immediate urgency,” Larry Kudlow, the chairman of the National Economic Council Kudlow said on Friday. “There’s no anti-recession policy-making because we don’t see a recession.”