Trade plan sets up global clash

Trump’s trade plan sets up global clash over 'America First' strategy

High-stakes huddles this week are helping administration work through competing factions over erecting trade barriers.

By ANDREW RESTUCCIA and NANCY COOK

The Trump administration is quietly preparing sweeping new trade policies to defend the U.S. steel industry, a move that could reverberate across global economies and incite other countries to retaliate.

In a bid to keep his campaign promise to crack down on unfair trade practices, President Donald Trump is weighing trade restrictions on steel imports from countries like China, according to two administration officials.

The prospect of new trade restrictions has already added to the souring of the United States' relationship with international allies ahead of a gathering of the G-20 leading economies next month, heightening mounting frustration with Trump's nationalist impulses.

For months, the Trump administration had been unable to settle on a coherent trade policy on everything from NAFTA to steel imports. It’s a result of the continuing tug of war between the administration’s "America First" advisers and advocates of a more global approach that pays heed to U.S. allies. The administration has been debating the issue behind closed doors for months, including in a high-level meeting this week with the president.

The tension among Trump's aides appears to be easing, however. The president's advisers are coalescing around a tailored approach that would target the steel imports of individual countries, rather than across-the-board measures against every nation that sends steel to the U.S., according to two sources familiar with the discussions.

The administration’s more narrow approach is meant to allay the concerns of U.S. allies like Canada and the European Union, which together make up a large share of the steel imported in the U.S. Leaders from such trading partners have sharply criticized invoking national security as a means to erect trade barriers, which is one approach the administration is considering.

Yet even a tailored tariff or trade restriction could nonetheless prompt a targeted nation to attack a vital U.S. export and eventually lead to a trade war.

Whatever the final decision, the debate is giving foreign leaders and U.S. companies a greater window into the administration’s approach to trade — a cornerstone of the president’s campaign platform.

“If they go off in a sharply protectionist direction, it will upset the global apple cart and could backfire and hurt U.S. economic interests,” said C. Fred Bergsten, director emeritus of the Peterson Institute for International Economics and member of the president’s Advisory Committee for Trade Policy and Negotiations.

A White House spokeswoman, Natalie Strom, said the administration did not “comment on these types of internal deliberations.”

For months, Trump’s senior advisers have been deeply divided over trade policy priorities. The fight has pitted National Economic Council Director Gary Cohn, U.S. Trade Representative Robert Lighthizer and Agriculture Secretary Sonny Perdue against the more protectionist wing of the administration, which includes White House trade adviser Peter Navarro, chief strategist Steve Bannon and, oftentimes, Commerce Secretary Wilbur Ross.

In a bid to reach a consensus, senior administration officials have for the last three months been meeting every Tuesday morning at the White House to hash out their differences. And this week, top White House aides organized two days of high-stakes huddles aimed at drafting a final policy on steel imports, administration officials said.

The White House has long been weighing four major options when it comes to action to help domestic steel producers: across-the-board tariffs, a combination of tariffs and quotas, tariffs or quotas targeting specific countries, and enforcement measures for unfair trade practices.

This week, Trump officials discussed a pending Commerce Department report into whether to restrict steel imports to protect national security. The report, which was ordered by the president in an April memo, will likely not be released publicly this week, two administration officials said, despite Ross' earlier goal of delivering it by the end of June.

On Monday, Trump and Vice President Mike Pence met with more than a dozen administration officials. They included many of the heavy hitters in the administration whom Trump has come to rely on for policy advice, including Ross, Perdue, Lighthizer, Navarro, Cohn, Treasury Secretary Steven Mnuchin, OMB Director Mick Mulvaney, national security adviser H.R. McMaster and chief of staff Reince Priebus. The meeting was organized by White House Staff Secretary Rob Porter, who has been involved in coordinating policy across the administration.

During the meeting, Trump gave his various advisers about two minutes to argue their case, according to people who were present at the two-hour-plus meeting. At times, the tenor of the meeting turned tense.

“There are a variety of ways the president can approach this decision, and each side in the White House is very convinced their approach is the best,” said one source familiar with the meeting.

The president then instructed his advisers to deliver a comprehensive trade plan in the coming days.

A smaller group of administration officials met again on Tuesday, where they came up with a preliminary strategy that takes a more tailored approach than the across-the-board tariffs favored by the hard-liners in the administration, aides said.

That approach would not target every country that exports steel into the United States, instead allowing for exemptions. The officials also largely agreed that that the U.S. should pursue a more collective approach in which countries can work together to address unfair trade practices, according to the aides.

“We ask the G-20 economies to join us in this effort and to take concrete actions to solve these problems. But let us be clear, we will act to ensure a level playing field for all,” Cohn told reporters earlier Thursday, pointing to "massive distortions" in the international steel market.

An administration official said no decision has been made on the list of countries that could be targeted, and the official cautioned that the strategy could change over time, particularly because the Commerce Department report isn’t expected to recommend such a tailored approach.

Aides said the administration was considering other options as well, including using a separate trade law that gives the U.S. authority to sanction countries that engage in unfair trade practices.

Trump has up to 90 days to respond to the Commerce Department’s recommendation, which could give his advisers time to influence him further.

The officials said they did not expect Trump to make a formal trade announcement until after the upcoming G-20 summit in Hamburg, Germany, which begins July 7. Trade issues are slated to be a major topic of discussion at the meeting, which Trump will attend.

Still, administration officials said Trump is eager to resolve the issue because trade was such a big part of his campaign messaging, particularly to Midwestern voters in states that were once manufacturing-heavy. Unlike health care and some other policies, Trump has been deeply engaged on trade.

“I think he feels like certain promises were made during the campaign, and he wants to live by them,” one senior administration official said.

Trump bashed China repeatedly on the campaign trail, at one point suggesting that he’d impose a 45 percent tariff on goods coming out of that country. He also installed Navarro — a former economics professor and fierce critic of China who made a documentary titled “Death by China” — in the White House in a newly created trade position.

Trump warmed to Chinese President Xi Jinping after his April visit to Mar-a-Lago. But the president appears to be frustrated with the country again, officials said, adding that any trade-related measures are likely to target the nation’s steel exports.

Both foreign officials and U.S. business groups have raised concerns about any attempt to justify import restrictions on the basis of national security — a rarely used right that countries have under WTO rules.

"The [Chinese] Ministry of Commerce believes there is no evidence that steel imports threaten to impair U.S. national security," Yu Gu, a ministry official stationed at the Chinese Embassy in Washington, testified at Commerce Department hearing in May. "The United States' defense and national security requirements are clearly not dependent on imports of foreign-made steel."

Canadian, Russian and Ukrainian officials have all urged that they be exempted from any import restrictions if the U.S. invokes Section 232 of the Trade Expansion Act of 1962, which allows it to limit imports of steel and aluminum on the basis of protecting national security interests.

The Canadian government, in comments filed with the Commerce Department, said it believed “there should be no concern about steel imports from Canada having potential national security impacts on the United States.”

Canada, the U.S.'s largest trading partner, also urged the Trump administration to be certain of its facts before imposing any curbs since “there should be a very clear and direct link between any proposed restrictions and a specified national security concern.”

European Union officials, in a similar vein, have warned that they do not believe the United States can plausibly claim a national security exemption from global trade rules to restrict steel imports.

Trump’s actions could bring back memories of former President George W. Bush's decision in 2002 to slap hefty "safeguard" tariffs on steel imports to give domestic industry time to restructure. That triggered global outrage and a WTO case, which the U.S. lost.