Several Democratic candidates in last night's debate found unusual common ground with President Trump: on trade.
Two of them — South Bend, Ind., Mayor Pete Buttigieg and entrepreneur Andrew Yang — even said if elected, they would initially maintain tariffs Trump has imposed on China that economists say are effective tax hikes on U.S. workers. (See the full transcript of the debate here.)
Trump’s turbulent drive to remake the global trading system, taking on the world’s second-biggest economy in the process, has also tied business leaders, investors, farmers and manufacturers in knots. So perhaps it should come as no surprise Democratic presidential hopefuls came out all over the map on the matter.
Buttigieg said he would follow “a strategy that would include the tariffs as leverage, but it's not about the tariffs.” Similarly, Yang said he would not “repeal the tariffs on day one, but I would let the Chinese know that we need to hammer out a deal, because right now, the tariffs are pummeling producers and farmers in Iowa who have absolutely nothing to do with the imbalances that we have with China.”
Democrats who weighed in on Trump's trade war also criticized the president's erratic behavior and called out the damage the trade war has wrought on U.S. credibility abroad and the economy at home. But none challenged Trump's premise that Chinese trading abuses call for shaking up the relationship between the countries.
The Democratic square-circling points to a hurdle the trade debate poses for Trump’s opponents. They are struggling to position themselves against a Republican president who has embraced protectionism that once defined their own party’s approach. Compounding their difficulty, the politics of the issue are shifting under their feet, as the core of Democrats’ support moves from trade-skeptical union voters to wealthier suburbanites favoring freer trade.
Here was former Obama administration economist Jared Bernstein:
One problem with the current trade debate for D's is that to say you're for getting rid of tariffs on day one--very good policy, btw--has somehow become synonymous with being "soft on China."— Jared Bernstein (@econjared) September 13, 2019
And CNBC’s Washington correspondent Kayla Tausche called out the candidates’ struggles addressing the issue:
So far, no Dem has effectively tackled trade questions.— Kayla Tausche (@kaylatausche) September 13, 2019
They say they'd open negotiations w China (happening); that trade deals need to be enforced (how?); that the US has leverage (w/o saying what); and that US needs to sell its goods overseas (it is).
Of the leading candidates, Sen. Elizabeth Warren’s (D-Mass.) hostility to new trade deals arguably rivals only that of Sen. Bernie Sanders (I-Vt.). “Our trade policy in America has been broken for decades, and it has been broken because it works for giant multinational corporations and not for much of anyone else,” she said Thursday.
Addressing what leverage she would use to extract concessions from trading partners, she pointed to the lure American consumers present to foreign exporters. “The leverage, are you kidding? Everybody wants access to the American market,” she said. “That means that we have the capacity to say right here in America, you want to come sell goods to American consumers? Then you got to raise your standards.”
Following Warren, Sen. Kamala Harris (D-Calif.) presented a more moderate approach. “I am not a protectionist Democrat,” she said. “Look, we need to sell our stuff. And that means we need to sell it to people overseas. That means we need trade policies that allow that to happen.”
She called the U.S. relationship with China “complicated… They steal our products, including our intellectual property. They dump substandard products into our economy.” Yet, she said, the U.S. also needs to work with Beijing on climate change and North Korea. Meanwhile, Trump “conducts trade policy by tweet, frankly born out of his fragile ego.”
Former Vice President Joe Biden — who in the last debate disavowed the Trans Pacific Partnership he helped forge — didn’t enter the fray on the trade debate. But Sen. Cory Booker (D-N.J.) delivered the view that most squarely aligns with the Obama team’s approach. “We cannot go up against China alone,” he said. “We are the strongest nation on the planet Earth, and our strength is multiplied and magnified when we stand with our allies in common cause and common purpose. That's how we beat China.”
Booker’s answer also most closely resembles prevailing attitudes among Democratic voters. A recent Chicago Council on Global Affairs poll found that more than two-thirds of voters in both parties “say it is best if the United States plays an active role in world affairs, something the public widely sees as encompassing trade, humanitarian aid, promoting democracy and using U.S. troops to defend allies,” my colleagues Scott Clement and Dan Balz wrote last week. The survey found only 36 percent of Democrats see China’s rise as a global threat, and only 30 percent support Trump’s tariffs on China.
And a strong majority of voters in both parties now see international trade as beneficial to the U.S. From the survey:
The Atlantic's Ron Brownstein highlighted the demographic shift that helps explain changing attitudes among Democratic voters:
The counties HRC won in 16 account for 60% of all US exports (per @BrookingsMetro), though they represent less than 1/6 of all counties. Democrats are now the party of globally connected metros that drive U.S. exports-but refuse to acknowledge it or represent them #DemDebateTX . https://t.co/SECJw6XEyO— Ronald Brownstein (@RonBrownstein) September 13, 2019
“Democrats have grown far more comfortable with international trade than the candidates who want the party nomination,” Daniel W. Drezner, a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University, wrote in the Post on Thursday morning. “In a field this crowded, some of the leading candidates should gravitate toward that more popular policy position.”
— Stock market flirts with record highs. CNN Business's Anneken Tappe: "The Dow hit a seventh day of gains in a row Thursday, with stocks higher after the United States said it would delay some tariffs on Chinese imports. The Dow, which had briefly turned negative in the first minutes of trading, finished up 46 points, or 0.2%. The index has risen seven days in a row, its longest winning streak since early May, according to Refinitiv.
"The S&P 500 ended up 0.3%, and the Nasdaq Composite closed up 0.3%. Stocks picked up steam in the first half of the trading day following a Bloomberg report saying that Washington is considering an interim trade deal with China that would delay and roll back some import tariffs."
- The bigger picture. CNN Business's Paul LaMonica: "The bull market is getting a bit long in the tooth. It has gone on for more than 10 years with just a few corrections in the past decade to cool things off. Experts say the market could keep powering ahead. And if you have a long-term goal like retirement, now is definitely not the time to panic and bail on stocks. That said, some companies and sectors may fare better than others for the foreseeable future."
— European central bank gets aggressive. NYT's Jack Ewing: "The European Central Bank took unexpectedly aggressive steps on Thursday to head off a downturn before it gained momentum, but the bank signaled that it was reaching the limits of what it could do to stimulate the eurozone economy. The central bank cut a key interest rate and revived a money-printing program, but later issued an unusually strong call for eurozone governments to do more of the economic heavy lifting.
"Those countries that can afford it should stimulate growth by increasing public spending, Mario Draghi, the central bank president, said during a news conference."
Trump used to the news to attack the Fed again:
European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!— Donald J. Trump (@realDonaldTrump) September 12, 2019
— Deficit tops $1 trillion. WSJ's Kate Davidson: "The U.S. budget gap widened to more than $1 trillion in the first 11 months of the fiscal year, the Treasury Department said Thursday, the first time year-to-date deficits have topped that amount in seven years.
"Higher spending on the military, rising interest expenses on government debt and weak revenues early in the fiscal year combined to push the deficit up 19% from October through August, compared with the same period a year earlier. Government spending climbed 7%, to $4.1 trillion, outpacing higher federal tax receipts, which grew 3%, to $3.1 trillion. That brought the total deficit to $1.07 trillion so far in fiscal 2019, which started Oct. 1, or 4.4% as a share of gross domestic product."
— Trump team wants to wind down trade war: “[Trump's] top advisers are rushing to find an escape hatch for a series of tariff increases in the coming months, worried about the potential for further economic damage,” Politico’s Ben White and Adam Behsudi report.
“Many of the president's top economic officials are trying to resurrect the terms they previously were negotiating with China, a deal officials said was ‘90 percent’ done before a sudden impasse this summer, according to a person familiar with the discussions. That approach was rejected by the Chinese at the time, so it's unclear whether the new effort will overcome those hurdles and deliver U.S.-sought commitments from China on agriculture, intellectual property and technology transfer.”
- The plan: “The goal of the internal administration discussions is to forestall October tariff increases and the next tariffs set to take effect in December, with some advisers arguing that the economic hit is real and must be mitigated prior to the election year. But the discussions remain fluid and Trump has yet to endorse an approach.”
China wants to narrow talks: “China is looking to narrow the scope of its negotiations with the U.S. to only trade matters, seeking to put thornier national-security issues on a separate track in a bid to break deadlocked talks with the U.S,” the Wall Street Journal’s Lingling Wei, Chao Deng and Josh Zumbrun report.
“Chinese officials hope such an approach would help both sides resolve some immediate issues and offer a path out of the impasse, people familiar with the plan said … Chinese negotiators, meanwhile, are making plans to boost purchases of U.S. agricultural products, give U.S. companies greater access to China’s market and bolster intellectual-property protections, people familiar with their plans said. China also made public this week a series of exemptions to its tariffs on U.S. imports.”
— Business intensifies push for USMCA: “U.S. business groups are ramping up efforts to win passage of the Trump administration’s trade agreement with Canada and Mexico, even as House Democrats and other critics say the deal needs revisions before a vote,” WSJ’s William Mauldin and Natalie Andrews report. “In their effort to secure passage, business and farm groups are seeking to win over newly elected Democrats in conservative or swing districts who have an interest in working across party lines.”
— Thiel’s VC firm is focus of FBI complaint: “Mithril Capital, a venture capital firm co-founded by Peter Thiel, is fielding questions from the U.S. Federal Bureau of Investigations following a complaint by a former employee, said a person familiar with the inquiry, who asked not to be identified,” Bloomberg’s Lizette Chapman reports.
“The FBI has questioned people close to Mithril Capital in recent months regarding possible financial misconduct at the firm, according to technology website Recode, which earlier reported the inquiry. Mithril Capital has roughly $1.2 billion under management and holds stakes in more than a dozen technology companies, including Palantir Technologies Inc., which was also started by Thiel.”
— Google subpoenaed over ad business: “A coalition of state attorneys general is zeroing in on Google Inc.’s dominant presence in the digital advertising market, according to a civil subpoena,” WSJ’s John D. McKinnon reports.
“The subpoena, sent by Texas Attorney General Ken Paxton, includes more than 200 questions and demands for records. Many of the questions appear designed to solicit evidence that the Alphabet Inc. unit engaged in anticompetitive conduct in building up its powerful position. For instance, the subpoena asks for information about Google’s “business rationale” for acquiring several of the companies that have helped it build up its advertising business, including DoubleClick in 2008, AdMob in 2010 and Admeld Inc. in 2011.”
— GE CEO says assets will reap $38 Billion: “General Electric Co. Chief Executive Larry Culp said he expects asset sales to bring in about $38 billion in cash for the company as it begins paring down its large debt load, and there are signs the long-struggling power division is gaining strength,” WSJ’s Thomas Gryta reports.
“Speaking at a Morgan Stanley investor conference Thursday, Mr. Culp also said falling interest rates will increase GE’s pension benefits obligation by about $7 billion net of investment returns and its insurance reserve funding by less than $1.5 billion. Neither of the adjustments will require a cash contribution.”
— Inside Warren’s fights with the Obama administration: “... Interviews with more than 50 top officials in the Obama White House and Treasury Department, members of Warren’s inner circle at the time and Warren herself, reveal a far more combative relationship between her and the administration than she discusses on the campaign trail. Tensions between Warren and Obama were palpable to White House aides, even as she reserved her real fury for Geithner and White House National Economic Council Director Larry Summers, whom she regarded as predisposed toward big banks over families struggling to save their homes,” Politico’s Alex Thompson reports.
“The acrimonious differences between Warren and her allies and members of the Obama team led in part to her decision, with prodding from Obama, to leave the administration to run for the Senate rather than continue pursuing the leadership of the CFPB. But they never fully abated and now represent dueling approaches to Democratic economic policymaking, presenting the possibility that the next Democratic president will have ascended to the height of Democratic Party politics in part by bashing the previous one.”
Warren proposes raising Social Security benefits. NYT's Alan Rappeport and Jim Tankersley report that Warren "unveiled a plan on Thursday to give all recipients of Social Security benefits an extra $200 per month and to pay for it by raising taxes on the rich, her latest economic proposal to redistribute wealth in the United States... The proposal appeared to be targeted directly at older voters who have been gravitating toward former Vice President Joseph R. Biden Jr., who thus far is the front-runner in the primary campaign."
— Top Dem attempts to block farm bailout: “House Appropriations Committee Chair Nita Lowey (D-N.Y.) is proposing to block the White House request over its farm bailout program, according to a draft of legislation reviewed by the Washington Post, potentially imperiling [Trump’s] ability to direct payments to thousands of farmers,” my colleagues Jeff Stein and Mike DeBonis reports.
“A key Republican responded by attacking the Democrat’s move, saying it could threaten passage of key bill needed to avoid a government shutdown. The bailout has emerged as one of several unresolved issues that lawmakers still need to sort out in order to meet a deadline by the end of this month … The bailout hadn’t needed congressional approval up to this point, but now the timing of the payments is tied to congressional approval.”
— Crapo will move cannabis bill. Politico's Zachary Warmbrodt: "Senate Banking Chairman Mike Crapo says he wants to hold a vote on legislation that would enable banks to serve cannabis-related businesses, in what would be a major victory for the marijuana industry and for lenders eager to enter the space. In an interview with POLITICO, Crapo said he did not support lifting the federal ban on marijuana.
"But the Idaho Republican said he wanted to resolve legal and economic conflicts arising in the growing number of states that have allowed sales of the drug... It was the latest evidence that Congress is poised to give banks a legal safe harbor to serve the cannabis industry in the coming months."