“Mary Erdoes, JPMorgan Chase,” Trump said. “They just announced earnings, and they were incredible. ...Will you say ‘thank you Mr. President’ at least? Huh? I made a lot of bankers look very good.”
The exchange may have been just good-natured ribbing. But it illustrated how a president who once railed against financial industry greed and vowed to remake the Republican Party as a “workers’ party” has prioritized corporate America’s desires.
Trump’s high-profile China deal celebration included billionaire Stephen Schwarzman, a private equity investor; Sheldon Adelson, whose company owns casinos in the Chinese territory of Macau; and Hank Greenberg, the former head of American International Group.
Numerous representatives of companies like Honeywell and Boeing that have outsourced jobs to China in recent years joined them, but no representatives of organized labor attended.
“There is precious little in this deal that addresses China’s long-standing denial of basic labor rights,” said Richard Trumka, the president of the AFL-CIO. “It is another big giveaway to Wall Street and Big Pharma and prioritizes new protections for companies that move to China, creating even more incentives for outsourcing.”
U.S. officials deny the deal will encourage the migration of additional American jobs to China, a phenomenon Trump has credited with motivating him to run for office. Hard-won protections for American trade secrets will make it harder for Chinese companies to steal job-creating innovations and lead to greater gains for workers at home, they say.
But labor’s place on the sidelines of the China negotiations stood in sharp contrast to the influential role it played throughout the development of a new North American trade deal.
Robert E. Lighthizer, the president’s chief negotiator, consulted with labor representatives from the start of talks aimed at the U.S.-Mexico-Canada Agreement. A native of an industrial port town in East Ohio, Lighthizer drew praise from Democrats and union officials for designing that agreement to steer more manufacturing work to the United States.
Unlike his Republican predecessors, the veteran trade lawyer did not cozy up to industry groups during the North America talks, instead labeling them “special interests.” Lighthizer set as a goal the development of a new bipartisan trade coalition that would unite Democratic unions with Trump’s Republican populists.
Lighthizer wrote into USMCA requirements for Mexico to improve its treatment of workers, including by guaranteeing the right to collective bargaining. Over time, that could help narrow the yawning gap between Mexican and U.S. wages, which encouraged decades of outsourcing.
The accord, a replacement for the 1994 NAFTA deal that unions blame for the loss of millions of factory jobs, devotes an entire chapter to labor issues.
The word “labor” does not appear a single time in the 86-page China agreement.
Labor’s influence in USMCA and its impotence in the China talks reflect cold political calculation. In USMCA’s case, which changed U.S. law and thus required congressional approval, the administration needed labor support to get Democratic votes in the House. The China deal did not require a vote in Congress.
“That’s why labor was in the room; they had leverage,” said Robert Scott, an economist with the Economic Policy Institute. “Labor had no leverage on this (China) deal. None.”
It also would have been far more difficult to impose political terms upon China, the world’s second-largest economy and a military power of growing stature. Securing new rights for Chinese workers would have political ramifications that China’s authoritarian President Xi Jinping would be certain to refuse.
To be sure, the “phase one” China deal does include a Chinese commitment to refrain from manipulating the value of its currency to gain a trade advantage. Union officials have long blamed an undervalued yuan for making Chinese products less expensive than American alternatives, though in recent years the Chinese government has sought to keep its currency from falling.
The deal also requires China to buy $200 billion in extra American goods above 2017 levels, which should benefit manufacturers, energy companies, services providers and farmers.
Trump already has begun touting the China deal on the campaign trail. One week before the East Room ceremony, he labeled it a “big beautiful monster” at a raucous re-election rally in Toledo, Ohio, and advised farmers: “Go buy larger tractors.”
Workers also have benefited from the economy’s continued expansion under the president. Unemployment is near a half-century low at 3.5 percent, jobs are plentiful and wages are rising, particularly for lower-income workers.
Yet labor’s share of the economic pie remains depressed. Workers’ salaries and benefits account for 77.9 percent of corporate income, according to the latest figures from the Bureau of Economic Analysis. That is improved by 1.5 percentage points under Trump, continuing a gradual rebound that began in 2014.
But workers have regained over the past five years less than half of what they lost since early 2000. Trump’s potential Democratic rivals in the November election, meanwhile, are engaged in a fierce debate about income inequality and the outsized influence of the nation’s wealthiest individuals.
If the China deal left labor almost empty-handed, Wall Street cashed in.
Helping steer the talks along with Lighthizer was Treasury Secretary Steven Mnuchin, a former Goldman Sachs partner, who remains close to the financial industry. And among Trump’s trusted outside confidants on China is Schwarzman, chief executive of the Blackstone Group, a private equity firm.
One of the agreement’s seven chapters details the ways in which China must open its financial services market to U.S. institutions.
The deal contains detailed provisions governing treatment of banks, credit-rating agencies, electronic payment providers like Visa and Mastercard, insurers, and securities firms. (The Visa and Mastercard chief executives attended the White House signing ceremony and were publicly thanked by Trump).
While China has often discussed plans to loosen restrictions on foreign financial institutions, it has never before committed to specific short-term deadlines.
“So the banks are going to be doing great,” Trump said shortly before signing the agreement.
By April 1 — little more than 10 weeks from now — Chinese officials must allow foreign companies to take majority stakes in fund management companies, insurers, futures traders and other securities firms. That fulfills a long-sought goal for Wall Street.
“It allows us to do in China what we do everywhere else in the world,” Jamie Dimon, JPMorgan’s CEO told reporters last week. “China will grow, and we’ll grow with them.”
Christopher Nixon Cox, former President Richard Nixon’s grandson, is among those eyeing potential opportunities.
“China has been talking about opening up financial services for years. It’s now happening,” said Cox, global strategist for Brightsphere Investment Group of Boston.
Prying open the Chinese market is just the latest good news for Wall Street under the Trump administration. Like other industries, big banks have profited from the president’s corporate tax cut and deregulation.
The Federal Reserve last year eased the annual stress tests that the big banks are required to take to show they can survive a financial crisis. Regulators also made less onerous the “living wills” banks must develop to show how they would be wound down if necessary.
“This administration has delivered historic levels of deregulation to the financial industry, and there’s more on the way,” said Dennis Kelleher, president of Better Markets, a non-partisan watchdog group.
The Federal Reserve and four other financial regulators in October proposed loosening the rules governing financial swaps between affiliates of the same financial parent. The revision was proposed by officials appointed by Trump and opposed by at least one holdover from the Obama administration, Fed Governor Lael Brainard.
If approved, the shift would free up $40 billion in capital held in reserve that the banks could instead put to work in profitable activities, according to Kelleher.
Last week’s East Room signing ceremony came one day after JPMorgan, the nation’s largest bank, had reported annual profits of more than $36 billion, 50 percent higher than in 2016.
On Wednesday, Trump joked with Erdoes, the head of JPMorgan’s asset and wealth management division who American Banker once called “the most powerful woman in finance.” The president said he looked forward to seeing Dimon the next day.
Since Trump took office, the bank’s share price has easily outperformed the broader stock market.
Putting the financial industry at the center of his remaking of China trade policy was not what candidate Trump promised.
At a June 2016 campaign stop in Monessen, Pa., Trump said globalization had made “the financial elite” wealthy while ruining the lives of American workers. Standing in front of a towering mound of recycled aluminum, Trump vowed to defend the country’s “amazing workers” and bring back lost factory jobs.
His attack that day on “global finance” was consistent with his promise to raise taxes on hedge fund managers whom he accused of “getting away with murder.”
Nearly four years later in the East Room, Trump still paid homage to American workers and the hard-hit middle-class. But many of the negotiating achievements he boasted of — such as new intellectual property protections — were of greater benefit to the corporate executives seated in front of him.
“Unlike those who came before me, I kept my promise,” the president declared. “I actually think I more than kept my promise.”