Fear: Trump in the White House

McMaster later signed and put out a 27-page methodical Iran strategy with two prongs. The first was engagement, which was really a subversion campaign to influence Iran’s population. The second was confrontation for their malign actions.

CHAPTER

17

During the campaign, Trump had pounded almost as hard on U.S. trade agreements as he had on Hillary Clinton. As far as he was concerned, the current U.S. trade agreements allowed cheaper foreign goods to flood into the United States, which took away jobs from American workers.

At a rally in June 2016 at a Pennsylvania scrap metal facility, he said the loss of industrial jobs was a “politician-made disaster” and “the consequence of a leadership class that worships globalism over Americanism.” The result was that “Our politicians took away from the people their means of making a living and supporting their families . . . moving our jobs, our wealth and our factories to Mexico and overseas.” He blasted Clinton “and her friends in global finance [who] want to scare America into thinking small.”

Nearly all economists disagreed with Trump, but he found an academic economist who hated free trade as much as he did. He brought him to the White House as both director of trade and industrial policy and director of the National Trade Council. Peter Navarro was a 67-year-old Harvard PhD in economics. “This is the president’s vision,” Navarro publicly said. “My function really as an economist is to try to provide the underlying analytics that confirm his intuition. And his intuition is always right in these matters.”

Gary Cohn was convinced that trade deficits were irrelevant and could be a good thing, allowing Americans to buy cheaper goods. Goods from Mexico, Canada and China were flooding into the United States because they were competitively priced. Americans who spent less money on those imported goods had more money to spend on other products, services and savings. This was the efficiency of global markets.

Cohn and Navarro clashed. At one meeting in the Oval Office with Trump and Navarro, Cohn said that 99.9999 percent of the world’s economists agreed with him. It was basically true. Navarro stood virtually alone.

Navarro took Cohn on, calling him a Wall Street establishment idiot.

The core of Navarro’s argument was that U.S. trade deficits were driven by high tariffs imposed by foreign countries like China, currency manipulation, intellectual property theft, sweatshop labor and lax environmental controls.

The North American Free Trade Agreement (NAFTA) had sucked the manufacturing lifeblood out of the U.S. just as Trump predicted, Navarro said, turning Mexico into a manufacturing powerhouse, while driving U.S. workers to the poorhouse. U.S. steelworkers were being laid off and steel prices were dropping. Trump should impose tariffs on imported steel.

Trump said he agreed.

“If you just shut the fuck up and listen,” Cohn said to both Trump and Navarro, dropping deference for the moment, “you might learn something.”

Goldman Sachs, to Cohn, had always been about research, data and fact. Anytime you went into a meeting, you should have more hard, documented information than anyone else in the room.

“The problem,” Cohn said, “is that Peter comes in here and says all this stuff and doesn’t have any facts to back it up. I have the facts.” He had sent Trump a heavily researched paper on the service economy. He knew Trump had never read it and probably never would. Trump hated homework.

Mr. President, Cohn said, trying to summarize, “You have a Norman Rockwell view of America.” The U.S. economy today is not that economy. Today, “80 plus percent of our GDP is in the service sector.” Cohn knew it was about 84 percent but he did not want to be called out for rounding numbers up. The Goldman way was to carefully round down.

“Think about it, sir, when you walk down a street in Manhattan today versus when you walked down a street in Manhattan 20 or 30 years ago.” He chose a familiar intersection from memory. Twenty years before, the four corners had been occupied by a Gap, a Banana Republic, J.P. Morgan and a local retailer.

“Banana Republic and Gap don’t really exist anymore, or they exist in the shadow of themselves. The local retailer doesn’t exist. J.P. Morgan still exists.

“Now it’s Starbucks, a nail salon and J.P. Morgan. They’re all service businesses.

“So when you walk down Madison Avenue today or you walk down Third Avenue or you walk Second Avenue, it’s dry cleaners, it’s food, it’s restaurants, it’s Starbucks and it’s nail salons. We no longer have Ma and Pa hardware stores. We don’t have Ma and Pa clothing stores. Think of who you rent space to in Trump Tower.”

“I do have the largest Chinese bank as one of my major tenants,” Trump said.

“Who’s your one retailer in the Trump Tower?”

“Starbucks,” Trump replied. “And a restaurant in the basement. Oh, and two more restaurants in the basement.”