After his Argentine steak dinner last weekend with Chinese President Xi Jinping, President Trump announced that they had reached an “incredible deal” to temporarily suspend his trade war. But days later, Trump declared, “I am a Tariff man.”
Trump last week proposed stripping away electric-car subsidies from General Motors as punishment for the automotive giant moving to cease production at plants in the United States and Canada. But then his chief economic adviser, Larry Kudlow, said the White House would do no such thing. Targeting a single company, he explained, would be illegal.
Then there is the way Trump talks about how the economy works — imprecise at best, ignorant at worst. For instance, the president routinely says that China and other countries are paying billions of dollars to the United States because of his tariffs. But that is false. Tariffs are paid by companies, often U.S. firms, that import foreign-made products.
Once again this week, world leaders, U.S. lawmakers and jittery investors have been reminded that Trump’s words cannot always be trusted.
The whiplash nature of Trump’s economic policies and pronouncements bore tangible consequences on Tuesday, when U.S. stock markets cratered amid investor skepticism of Trump’s China talks. The Dow Jones industrial average dropped 799 points, or 3.1 percent, while the Standard & Poor’s 500-stock index fell 3.2 percent and the Nasdaq dropped 3.8 percent.
Global markets demand consistency and reliability, but Trump delivers neither. Instead, he makes knee-jerk announcements that surprise investors, lawmakers and even some of his own aides and advisers, who sometimes find themselves reversing course depending on the president’s whims.
“The words are noisy, but markets can’t wear noise-canceling headphones,” said Diane Swonk, chief economist at Grant Thornton. “You can’t delineate the noise from policy because sometimes the noise is policy. Markets like certainty. They need to know the rules of the road, whatever they are, to move forward.”
The lack of confidence in Trump’s declarations goes beyond the economy. On Tuesday, some senators received a CIA briefing they had demanded because they did not trust Trump’s equivocations about whether Saudi Crown Prince Mohammed bin Salman ordered the brutal murder of dissident journalist Jamal Khashoggi.
Afterward, Sens. Lindsey O. Graham (R-S.C.) and Bob Corker (R-Tenn.) said the CIA’s intelligence was unequivocal that the Saudi leader had ordered the killing — defying Trump as they reaffirmed their desire to punish the kingdom.
There are increased signs that investors, after hanging on any signal from Trump and his advisers about the status of economic planning, are beginning to understand that many of the statements lack any real substance.
Rep. Bill Pascrell Jr. (N.J.)., the top Democrat on the House Ways and Means trade subcommittee, criticized Trump for an “unpredictable and chaotic” approach on trade that proceeds “with no rhyme and reason, and seemingly on the whims of the president.”
“One hand doesn’t know what the other is doing. If neither investors or the public or even members of Congress know what this administration is doing, swings like this can’t be surprising,” Pascrell said, referring to Tuesday’s Dow drop. “Chaos breeds chaos.”
Trump’s aides have described the president as obsessed with the stock market’s performance, which he sees as a numerical validation of his personal performance. Trump spent much of late 2017 and early 2018 cheering big gains, which he claimed were stimulated by his presidency — in particular, his moves to cut taxes and roll back regulations.
But markets have moved wildly in the past two months, in part because of Trump’s erratic policy pronouncements — a pattern that only seems to worsen when there are signs the economy is showing signs of future weakness.
White House Council of Economic Advisers Chairman Kevin Hassett brushed aside any connection between the stock market’s performance and Trump’s economic approach. Speaking at a Tuesday event hosted by the Wall Street Journal, Hassett said weaker growth forecasts in Asia and Europe were dampening investor outlooks.
“The big change is that the Asian economies are slowing; European economies are slowing,” Hassett said, adding later that “the U.S. outlook is still very positive.”
But the U.S. outlook has actually gotten cloudier. Numerous analysts predict economic growth will slow next year, with interest rates rising and the deficit continuing to expand.
Trump often makes off-the-cuff — and sometimes inaccurate — statements related to the economy. On Thursday, Trump wrote in a tweet blasting GM for its plant closures and layoffs that BMW had “just announced a major new plant. The U.S.A. is booming!”
That was false. BMW has made no such announcement. In response to questions, BMW said it was considering building a new plant in the United States at some point in the future, but the German auto manufacturer said it had made no decisions yet.
Analysts attributed Tuesday’s market jolt to uncertainty about Trump’s dinner on Saturday with Xi in Buenos Aires on the sidelines of the Group of 20 summit. U.S. and Chinese officials have publicly disagreed over several substantive points.
Chinese officials did not confirm the White House’s initial claims that China had agreed to buy large amounts of U.S. agricultural products and remove tariffs on U.S. automobiles. Kudlow later said there was not an actual agreement for China to remove auto tariffs, though he said that he expected Beijing to eventually do it as a show of good faith.
Adding to the confusion, Trump sent tweets Tuesday threatening import penalties on Chinese products.
“President Xi and I want this deal to happen, and it probably will,” Trump wrote on Twitter. “But if not remember, I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so.”
A former White House official explained that Trump considers his unpredictability and sudden shifts a virtue because he thinks they help ensure his opponents — in this case, the Chinese — stay off balance.
“It introduces so much confusion and chaos into a situation that by the time it’s all over with he’s the only one who really knows what he thinks, including his own staff,” said the former official, who requested anonymity to candidly discuss Trump’s tactics.
Andy Laperriere, a trade specialist and head of U.S. policy research at Cornerstone Macro, said, “There is a sense that what was portrayed as meaningful progress, when you look at the fine print, doesn’t feel that way.
“In reality, China did not agree to reduce or eliminate the tariff on cars,” he continued. “They haven’t agreed to any specific purchases of agricultural products. And I think, even more importantly, China does not seem inclined to make any concessions on the big issues that would be the subject of negotiations over the next 90 days.”
Treasury Secretary Steven Mnuchin, speaking at the same Wall Street Journal event as Hassett, said: “The market is now in a ‘wait and see.’ And the market is trying to figure out if there is going to be a real deal at the end of 90 days or not.”
One reason for the confusion is the lack of any formal document or agreement from China and the United States detailing progress.
In past White Houses, officials had lengthy discussions about foreign and domestic policy changes, and they briefed lawmakers and outside allies ahead of time to ensure there would be no surprises. But in the case of the China talks, the public was left to read a White House statement and comments from Chinese officials, then interpret discordant Twitter messages from Trump.
Brian Gardner, director of Washington research at Keefe, Bruyette & Woods, said three factors are conspiring to spook investors: confusion over what was accomplished at the Buenos Aires dinner, Trump’s “Tariff Man” tweet that suggests his administration’s trade hawks may be ascendant, and signs of a possible coming recession.
“Individually, those are all negatives,” Gardner said. “Collectively, it’s an unholy trinity, and that’s what we have today.”
Erica Werner contributed to this report.