Washington, DC—The future of the global economy is becoming less and less predictable. Free trade and economic integration have traditionally been viewed as a means of ensuring peace since the close of World War II and the key to economic growth worldwide. But as more economies have become competitive and the effects of today’s complex economic interdependence have bled across borders and into spheres of national security, the adequacy of open and free trade has been called into question. Though President Donald Trump’s latest trade tariffs toward China are viewed as both protectionist and simulating Cold War brinkmanship practices, Larry Kudlow, Director of the United States National Economic Council, argued at an Axios “News Shaper” event last week, that the president is a free trader and shares a collegial relationship with the Chinese. At the press event, Kudlow expressed that China’s history of breaking WTO laws is the cause of present Sino-American trade disputes, asserting to “blame China, not Trump” for rising trade tariffs. Recognizing that the president possesses arrows of negotiation, tariffs, and sanctions in his quiver to combat unfair and illegal trading practices, Kudlow commended President Trump’s deployment of such fighting-fire-with-fire and brinkmanship tactics to re-establish the international free trade that China disrupted, but also noted a developing relationship between the two nations’ leaders. Kudlow ultimately forecasted that the prevailing trade dispute will be resolved due to a growing “bromance” between President Donald Trump and President Xi Jinping. “I think the time is right for China to make changes they should’ve been making the past 15–20 years,” Kudlow commented. Though Kudlow predicted a Sino-American trade resolution, he attached his statement with a qualifier: “I don’t know if [the deal] will be to our liking or the president’s liking, but I think there’s going to be a lot of movement and I think we’re going to see it very soon.” This statement likely foreshadowed the recent decision to place the U.S.-China trade war “on hold” this past weekend, following the statements of Treasury Secretary Steve Mnuchin. Currently, the “bromance” seems to be beating out brinkmanship as both sides have lowered tariffs. As a corollary discussion, Axios’ co-founder and executive editor, Mike Allen, questioned Kudlow about Trump’s tweet pushing the Commerce Department to reinstate ZTE (a Chinese telecommunications company) back into business in the United States from a previous ban for selling to North Korea and Iran and consequently breaking U.S. trade control laws. Kudlow explained the ZTE controversy is under congressional jurisdiction and an issue of enforcement rather than trade. “[ZTE] is a very poorly run company...with many internal flaws” Kudlow stated, recognizing that it has proven guilty on three different occasions. “The issue isn’t simply to let them off, but perhaps to do it in a manner that they couldn’t conceivably go back into business.” Though Kudlow skirted around the ZTE issue somewhat, his reactions reveal that Trump’s actions could unintentionally sacrifice national security to broker a trade deal with Xi and buttress the two presidents’ “bromance.” This derives from President Trump’s tendency to fuse various channels of politics, economics, national security, and law enforcement together. As the House Appropriations Committee unanimously voted on May 17 to ensure that the sanctions imposed on ZTE by the Commerce Department remain intact, the status of the Chinese company and its role in Chinese-American trade negotiations remains to be seen. The event’s third topic, President Trump’s tax cuts, relates more to the role that the new tax structure will play in the midterm elections rather than the trade dispute with China. Kudlow highlighted the tax reform’s effect on CAPEX business and investment growth, stating that capital expenditure is at about 6.5 percent, up from the capital expenditure stagnation viewed in 2015 and 2016. He anticipated that tax cuts will increase the American economy’s capacity to grow and play a positive role in the November elections. So, will “bromance” or brinkmanship win out in the global economy? The recent cease-fire between Chinese and American economies hints that the growing Trump-Xi relationship currently has the advantage over brinkmanship from incrementally raising tariffs. However, there is much uncertainty surrounding the recent tariff hold and conflicting messages from U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin continue to confuse the public on the status of Sino-American trade negotiations. President Trump’s earlier push for the Commerce Department to reinstate ZTE back into the American economy so the Chinese company can play a role in a larger trade negotiation with President Xi additionally alludes to the “bromance” overcoming an economic arms race, or rather a tariffs race. Thirdly, Kudlow’s recognition of trade negotiation meetings being respectful, constructive, and detailed-specific also shows a shift away from brinkmanship. However, trade discussions are only paused at the moment and an official and finished trade deal has not been reached, producing uncertainty whether or not the “bromance” will continue to outstride brinkmanship. The world continues to watch.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.