With mind-numbing speed...
President Donald Trump and his White House team have launched a breathtakingly new foreign policy – one that, despite the initial shocks, should have taken nobody by surprise; campaign rhetoric and Mr. Trump's inaugural address provided clear outlines of this new "America First" international adventure.
Initial White House moves, though, have created what can be charitably described as completely unnecessary irritants with America’s friends.
- The dust-up with Mexican President Pena Nieto over "who pays for the wall" led to the unfortunate cancellation of Pena Nieto's Washington visit.
- The roll-out of Mr. Trump's immigration and refugee order, particularly its initial treatment of Iraqis who had courageously assisted U.S. forces, set back U.S. relations with an always politically-challenged Iraqi government, helping Iran in the process.
- And despite a welcomed call by the president with Chancellor Angela Merkel, U.S.-German relations were dealt another body blow, both by the refugee executive order which deeply irritated Merkel, and by an untimely blast by the Trump team at EU currency practices.
- Add to this the evidently abrasive call with Australian PM Malcolm Turnbull and it paints a worrisome picture on policy coherence.
Some of the problems with the policy roll-outs and the early phone calls might be explained by the thinness of Trump’s foreign policy teams; but one should ask: then why the haste?
Yet even when full teams are in place, the widely previewed and anticipated Trump foreign policy vision will confront challenges far more serious than the Mexico border wall or refugee orders; think, China and Iran.
- Iran is already clearly testing the new president and his national security team; as previewed in the Trump campaign, the U.S. response has been swift -- and in fairness, probably overdue.
- But China has, so far, flown under the radar. However, if these last two weeks are a prelude, the next six months have the potential to create a set of geo-political risks that rival anything experienced during the Cold War. Trump's broadsides against China during the campaign are well known; except for the phone call post-election with Taiwan's president, we've seen little action on this front; this pause won't last long.
US-China Relations: What to Expect From Trump
Presidential authority in the field of foreign policy is broad. And on trade especially, Mr. Trump's team of Peter Navarro at the National Trade Council, Robert Lighthizer at USTR, and Commerce Secretary-designate Wilbur Ross has made no secret of its strong desire to use every executive level tool to "Confront the Dragon" (Navarro's words). Like what?
- Start with retaliatory tariffs. Even though tariffs are the purview of Congress, the president has broad authority under the Trade Act of 1974 to levy tariffs against countries he believes are trading unfairly with the U.S. Expect action soon, without waiting for WTO findings – the Obama Administration's preference.
- Trump's team can also use the same Trade Act to justify the imposition of so-called "safeguards" (tariffs by another name) to protect against domestic industries "injured" by increased imports. The fact that the WTO has ruled against every U.S. president who has tried this will mean little to the new Trump team.
- Labeling China a "currency manipulator" might be a long-shot, given the current efforts by the PRC to shore up the yuan; but don't rule it out. One can, however, forget the Trump team granting China "market economy" status, a long-held desire by Beijing.
What makes Mr. Trump's anticipated actions in this area so worrisome is the personality of Xi Jingping - a hyper-nationalist Chinese leader up for his own "reelection" later this year, facing his own internal political and economic challenges, and only too willing to push back strongly.
Add a possible military intervention into this economic brew – in the South China Sea, for example – and one quickly understands the stakes; they make the U.S.-Mexican "who pays for the wall" stand-off seem inconsequential by comparison.
President Trump is scheduled to speak with Xi shortly; he can’t wing this one.
Editor's Note
This is a research note written by Hedgeye Potomac National Security General Dan Christman. To access our institutional research ping sales@hedgeye.com.
