Donald Trump has put power back into his tweets. His recent announcements on technology exports and trade have sent markets lower. The tweets are backed by Executive Orders and by follow-up action from the relevant departments of government. It reminds us that something has changed in the Trump administration. The President has found a team of senior officials who largely back him and who carry out his wishes, as they struggle to get the US government machine to keep up with the twists and turns of Trump’s international negotiations and pronouncements.
In the early months of his Presidency, Donald Trump struggled to work with senior people he had appointed. Some commentators started claiming there was a “grown-up” official government run by the main office holders of State who behaved well in a conventional way, and there was a President who tweeted things they often did not like that were just the President playing to his gallery. This was the background to the fast revolving Administration door, with many sackings of top people. President Trump appointed a number of Generals in his early days to give a sense of solidity around the Commander in Chief. John Kelly, second Chief of Staff, Jim Mattis, Defence Secretary and Herbert Mc Master, National Security Adviser, all left office in due course. The President is on his second Secretary of State following the removal of Rex Tillerson, and he dismissed Reince Priebus, his first Chief of Staff as well.
A calmer White House
There might be more sackings in store, but today there is a much greater sense of common purpose and loyalty to the President from the main office holders. The President looks much more in charge. We do not read so much about the views of the government opposed to the views of the President. Many governments are in office but are not in power, as they battle to get anything done in a complex world of bureaucratic control, international rules and treaties and political rows within administrations. Quite a lot of governments often lack a clear sense of purpose and decisiveness over what they want to do. The Trump Administration is rewriting the rules. The President knows what he wants to do, and follows the agenda he put to the voters in 2016 consistently. Most wise commentators assumed his trade war rhetoric was just words, and doubted his ability to carry the large tax cuts and deregulations he proposed. He is determined to prove them wrong. The President used Republican control of Congress to pass his tax laws whilst there was still a Republican majority, and is now using Executive Orders and the right of the President to lead international negotiations to pursue the trade agenda. He is also keen to push US power outside the US, and to work round or deny the power of international treaties and institutions.
This leaves markets increasingly unsure of what comes next. On the European side of the Atlantic there are many investors and commentators who dislike President Trump’s words and actions who let this colour their judgement about his likely economic impact. In the US itself, Democrat commentators cannot stand the man and look forward to his early downfall, whilst more Republicans now see him as the salvation of their party and buy into the rhetoric of America First. We need to get beneath all this noise and assess what he is likely to do and what economic and market impact that may have. In the first year or so, we thought Trump of the tax cuts, seeking to promote faster growth, was broadly bullish. More recently we have become worried that his rough approach to trade in general and his new attack on China in particular is bearish, allied as it is to no decisive Fed move to relax money and credit any more. What looked as if it was a push back prior to a general deal with China late this month has become a wider battle between the world’s number largest and second-largest economies. What was just a trade-focussed row has widened into a geopolitical set of disputes over everything from mobile technology to deployment in the Arctic, from the South China Sea to China’s Belt and Road initiative.
Iran in the sights
The Trump policy has also become wrapped in a more aggressive stance about Iran and the terrorist groups that are related. The Abraham Lincoln carrier strike force has just held a joint exercise with the amphibious group under USS Kearsarge close to the Gulf, as the President tweets warning Iran not to threaten the US and its interests and allies in the Middle East. The world is dividing more sharply into a US led coalition of foreign policy and commercial allies, and a China/Russia group. Mr Trump’s new technology bans move the world towards a digital iron curtain, with different China-led and US-led systems.
Our view is still that the main motivation behind President Trump’s actions is to win a second term. To do so he is likely to give primacy to domestic matters over international, and to want settlements on trade that he can present as good for the US and for jobs. His advisers at State and the Pentagon need to use him whilst they have his attention on matters such as Iran and the longer term strategic threat from China, as one day he might move on and do a deal. In the meantime, the government seems to be working as one, and its actions are no longer bullish.
The above article was previously published by Charles Stanley on 14th May 2019