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U.S. Republican presidential candidate Donald Trump holds a copy of the Wall Street Journal while speaking at a Trump for President campaign rally at the Jacksonsville Landing in Jacksonville, Florida.
Trump's treasury tussle: The search for a Wall Street-friendly populist
Donald Trump won the White House on a promise to turn around the US economy. Now, he’s struggling to appoint a lieutenant to tackle the job.
In contrast to his many hasty appointments to the rest of his cabinet, Trump has been hesitant to choose a treasury secretary. His uncertainty stems from his desire to find someone loyal to his populist economic agenda – unlike his first term treasury secretary, Steven Mnuchin, who often opposed him – but who won’t spook tariff-wary Wall Street.
Wait, what does the treasury secretary do? The treasury secretary is the economy’s quarterback, responsible for overseeing the country’s international trade policy. They direct the domestic and global economic agenda, as well as tax and tariff policies.
Who are the contenders? Trump is reportedly considering former Federal Reserve governor Kevin Warsh and Wall Street titan Marc Rowan, who emerged as possible frontrunners after financiers Howard Lutnick and Scott Bessent no longer seemed like obvious choices amid rumors they may have lost a bit of their shine. Trump accused Lutnick, who has been leading his transition operation, of manipulating the process in his favor. Bessent may still be in the running, but after a knife fight with Lutnick last week, Trump has started looking elsewhere.
He is allegedly not considering his former trade adviser Robert Lighthizer, out of fear that his open embrace of tariffs would stall the momentum on Wall Street since his victory – an indication that Trump may sacrifice portions of his tariff plans if it means keeping the financial sector happy. However, Lighthizer may still hold another senior trade or economic role. Trump’s final decision is expected to be made after he meets with the candidates at Mar-a-Lago later this week.
Graphic Truth: Trump tariffs could cook Canada
It’s not yet clear how he will follow through with that threat – mainstream economists have warned of its inflationary effects – but the president-elect and top advisers, including his former trade chiefRobert Lighthizer, are working hard on it as Trump prepares to take office in January.
What effect would a blanket tariff have on Canada, whose economy is tightly integrated with the US? Brace yourself. A recent report by the Canadian Chamber of Commerce estimated that a permanent 10% US tariff on Canada would cause US imports to fall by 10%, and knock as much as 5% off of Canada’s GDP.
Here’s a look at just how dependent Canada’s economy is on the US, and the key export categories.
Trudeau’s former right-hand man thinks Trump 2.0 ‘will be harder’
When Donald Trump shocked the world by getting himself elected in 2016, Gerald Butts was the principal secretary to Canadian Prime Minister Justin Trudeau. He was also a key member of the Canadian team that managed the tumultuous but ultimately successful negotiation of the USMCA, sitting across the table from Trump, Peter Navarro, Steve Bannon, and Robert Lighthizer. He is now vice chairman and a senior advisor at Eurasia Group, which is the parent company of GZERO Media.
This interview has been edited for length and clarity.
You were in the Office of the Prime Minister the last time Trump was elected. How is this different?
Butts: On the positive side, it’s not as much of a shock. The most salient fact of the first Trump presidency was that it happened. So everybody had to have a plan for it happening again. That’s the upside. The downside is you’re going to be dealing with a much more emboldened Trump who’s got a broader electoral mandate and whose ambitions on the economy are much more comprehensive than they were the first go-round. He campaigned in 2016 basically saying to the Great Lakes blue-collar worker that he was going to bring their jobs back from Mexico, the jobs that the Clintons sold to Mexico. And this time he’s got a much more ambitious agenda. It’s rebalancing global trade and a mass deportation plan that will make labor more expensive in the United States.
If you add those two things together, along with probably increased defense spending on an already large deficit, it’s hard to see how those things don’t cause inflation.
It seems odd that inflation is what eroded Biden’s brand, but Trump’s two key promises are both inflationary.
They don’t see it that way, of course. I think that that’s the conventional economic view. And I do think that what will inevitably be an inflated defense budget beyond the PBO’s 3% estimate is also going to be part of this, part of the inflationary pressure that Trump brings to bear.
As policymakers have learned over the past couple of years, because most of them had never had to deal with it before, inflation is a government killer. It’s the grim reaper for incumbents, and it’s mowed down governments of all political stripes all over the world.
Speaking of which, the Trudeau government generally gets good marks for handling Trump the first time, which you had something to do with. A lot of people are worried that it’s going to be a little harder this time, in part because of the relationship between the president and the prime minister. Do you think that that’s important?
Its importance is overblown. I think you’re right that it will be harder. I think that has more to do with the relative political standing of the government and the time of the mandate. If you’re dealing with Trump at the end of your first year, when you’re in the 40s in the polls, with almost a 50% approval rating, that’s one thing, because those two things add up to political capital that you have to invest.
If you’re dealing with it in year 10, when you don’t enjoy those polling numbers, that means you have less political capital to invest. And by definition, Trump is a problem that requires political capital to solve.
They have a very difficult task ahead of them, don’t they?
They really do. I never like to tell my former colleagues how to do their job, because the truth is, when you don’t have all the information they have, it’s hard to make judicious calls. Only they know how prepared they are to deal with undocumented people showing up at a Canadian border point. I don’t know that. Unless you do, it’s hard to say how you would deal with that issue either in the public or in bilateral negotiations with the Trump administration.
I do think that’s potentially the biggest problem they’re going to have to deal with because I wouldn’t say the cross-partisan consensus on immigration in Canada is gone, but it has been weakened by recent events.
On trade, what’s the best guess on whether Trump is going to exempt Canada from a new tariff policy?
I think if the best predictor of future behavior is past behavior, then he will only grant exemptions in return for something. The question is, what can the government offer that he wants that will get that exemption? And I have no idea.
Cross-border trade is high frequency and very large. We’d feel the impact of tariffs sooner, and they’d cover more of our economy than any country except maybe Mexico.
Traditionally in Canada, all governments are afraid — because of the strength of our dairy lobby — to do much about the supply-managed dairy industry. (Canada’s politically powerful dairy farmers have long exerted political pressure to protect their industry from American imports.) In this situation, do you think that that’s the kind of thing the politicians may have to think about in a new way?
That’s definitely possible. I mean, my view is if you’re going to take that kind of risk, get some bigger economic reward for it. We’ve been simultaneously having this conversation yet again about Canadian productivity. And one of the big problems with Canadian productivity is that our firms and sectors like digital services face no competition. So the companies are big, bloated bureaucracies that deliver some of the most expensive services in the world. I’d be tempted to use the crisis presented by the Trump administration to fix some things about the structure of the Canadian economy that badly need fixing.
On the energy transition, all of these big bets on battery plants in the United States are legislated tax credits that Trump cannot get rid of, but the whole managed auto manufacturing sector is losing an enthusiastic ally for EVs in Biden. What does that do to the enormous subsidies Trudeau and Champagne have put on the table for EV manufacturers?
I think that may be literally a trillion-dollar question. That’s going to be a super-challenging file to manage with Trump. It’s coming at a time where the global industry is electrifying, and that process is being led by the Chinese. The Americans think the proper response to that is to create large tariffs that will keep the Chinese out of the American market because they’re kind of running the 1970s playbook. I think the response from the Chinese is going to be: “We don’t need to be in the American market. China is twice the size of the United States auto market, and we’ll take the rest of the world while you guys double down on inferior technology that the rest of the world is turning away from.”
It’s a very complicated situation. They’re already losing out to Chinese and Korean producers, and this could just accelerate that process.
So I’d be very worried if I were working on this part of industrial policy in North America because the companies have a weaker hand to deal with than the government seems to think they do.
And for Canada, there’s an extra challenge in that the Canadian economy is so integrated with the American economy that it may not be possible to set a different course.
That’s right. It may be that the American automotive market, like the American economy itself, is so large that subnational economies like California and New York — which together are larger than Canada — can keep going the way they’ve been going, and the Canadian industry basically follows them. But I think that’s challenging. It’s super challenging for a small but important producer like Canada, especially on the parts side.
Let’s close with a little optimism. What do you see as an upside of this election for Canada?
I think it’s the persistent structural problems in the Canadian economy that are not going to be solved in the absence of a crisis. Maybe Trump is the crisis that the Canadian economy needs to solve those problems.
Donald Trump is seen here at a Jets football game next to his campaign manager Susie Wiles, on Oct. 20, 2024. The president-elect has just named Wiles his White House chief of staff.
Who will Trump’s team be?
At last count — yep, they’re still counting ballots from last week’s US election — Republicans looked set for a clean sweep: taking not only the White House and Senate but possibly the House too. With 18 House races yet to be called, the GOP is leading in seven and needs to win just four for a majority.
Attention now turns to the president-elect’s naming of names for the first cabinet of “Trump 2.0.”
Here’s what we know:
Trump has made just one appointment so far: He has named Susie Wiles as the first-ever female White House chief of staff. The 67-year-old veteran Florida political operative ran Trump’s presidential campaign, helping to secure his stunning comeback.
We also know for sure that two people won’t be in Trump’s cabinet: Nikki Haley, who served Trump as UN ambassador but also ran against him in the 2024 primary, and Mike Pompeo, who was Trump’s secretary of state during his first administration.
No other appointees have been made official, so lots of Republicans are jostling for 15 Cabinet positions and various advisory roles.
Names being floated for secretary of state, the US top foreign policy role, include Richard Grenell, former ambassador to Germany and acting DNI director; former national security adviser Robert O’Brien, former Iran envoy Brian Hook, GOP Sen. Bill Hagerty of Tennessee, and Florida Sen. Marco Rubio.
The US Treasury secretary position, which is the top financial position in the US government, is likely to go to one of five men: Robert Lighthizer, the arch-protectionist who helmed the US tariff war with China as Trump 1.0’s US trade representative; billionaire hedge fund managers Scott Bessent and John Paulson; former SEC chair Jay Clayton; and Larry Kudlow, Trump’s former National Economic Council director.
For interior secretary, which oversees management of federal lands, including their use as energy sources, the top names include South Dakota Gov. Kristi Noem, as well as North Dakota’s billionaire Gov. Doug Burgum — both were once considered veep candidates for Trump. Burgum, meanwhile, is also on the shortlist for energy secretary, along with Dan Brouillette, who held the post last time around.
We’ll be keeping an eye on official appointments for these and the other Cabinet positions, as well as for indications of what portfolios go to key supporters like Robert F. Kennedy Jr. — who may be named a White House health and wellness adviser or even become secretary of health and human services – and Elon Musk, who has himself suggested being named to helm a new department focused on government efficiency.Republican presidential nominee and former U.S. President Donald Trump works behind the counter during a visit to McDonalds in Feasterville-Trevose, Pennsylvania, U.S. October 20, 2024.
Trump threatens tariffs on China, faces campaigning woes
Donald Trump has vowed to impose tariffs on China if it blockades Taiwan. “I would say: If you go into Taiwan, I’m sorry to do this, I’m going to tax you at 150% to 200%,” he told The Wall Street Journal’s editorial board last week.
When asked whether he would use military force for Taiwan, the former president said: “I wouldn’t have to, because [Xi Jinping] respects me and he knows I’m f— crazy.” Beijing reportedly does see more upside in Kamala Harris, precisely because of Trump’s erratic behavior.
When asked about Vladimir Putin, Trump said, “I got along with him great,” but noted that he once told the Russian leader he’d hit him “right in the middle of fricking Moscow” if he invaded Ukraine.
Are Trump’s numbers fake news? Meanwhile, Trump’s campaign may not be reaching critical voters in Arizona and Nevada, where leaked data revealed nearly a quarter of door-knocks could be fraudulent. Canvassers for America Pac, a political action committee founded by Elon Musk, stand accused of falsely claiming to visit homes, potentially undermining Trump’s ground game with just 15 days to go before Election Day.
America Pac denies widespread fraud, but if true, it could be a serious setback as Trump and Kamala Harris remainneck and neck inboth states.Oysters from Prince Edward Island are displayed in a Toronto market.
HARD NUMBERS: Killer oyster parasite spreads, Canada offers tariff relief, Small batch opioid precursors pose big problem, Moscow says “no” to new US-Russia nuclear treaty
95: An oyster parasite with a kill rate of up to 95% is spreading fast on Prince Edward Island, putting the lucrative industry at risk. Canadian food inspectors say the culprit – called “multinucleate sphere X” or “MSX” – has no effect on humans who eat contaminated oysters, but it shortens the mollusks’ lifespan. Oyster exports are PEI’s third most lucrative industry, bringing in about $24 million annually. Lobsters are in first, at nearly $300 million.
25: Canada is prepared to offer firms relief from a new 25% tariff on Chinese steel and aluminum coming into effect later this month. Ottawa imposed the measure to fight what it says is “dumping” in which China, suffering low domestic demand, exports unsold commodities at ultra-low prices. After Canadian firms warned they won’t be able to adjust their supply chains quickly enough, Finance Minister Chrystia Freeland said the government will develop a “framework” in which companies can request relief.
$800: How does so much fentanyl get into the United States? In small packages, according to a Reuters report, which finds that traffickers of the chemicals used to make the drug exploit a US trade loophole that permits packages with a value below $800 to enter the US with minimal inspections. Over a two-year period, a single trafficker profiled in the report ferried small packages arriving from China with enough precursors to make 5 billion fentanyl pills.
2: With just two years until the expiration of the last major nuclear arms limitation treaty between Russia and the US, Moscow may not seek to sign a new treaty at all. Russia last year suspended participation in the 2010 pact, known as the New START treaty, because of frictions with Washington over the Ukraine war. To sign a new agreement under these circumstances, said an unnamed Russian official, “will only entertain the pride of the United States.”The tariffs strike back: Is this the end of globalization?
My political compass has been spinning lately, and not just because Robert F. Kennedy Jr. admitted to ditching a bear corpse in Central Park before finally endorsing Donald J. Trump (that one caused a bit of political vertigo). My deeper confusion stems from the political debate about protecting our jobs.
It used to be, reliably, that the conservative right supported free trade and globalization, while the progressive left wanted protectionism for local industries.
Elections were fought on this, libraries were filled with studies on it.
For Republicans, Ronald Reagan’s 1988 Thanksgiving address was considered economic theology. “One of the key factors behind our nation’s great prosperity is the open trade policy that allows the American people to freely exchange goods and services with free people around the world,” the Gipper said.
That era ended under Trump’s first administration when he used two tools to impose tariffs on a wide-ranging series of goods: Section 301 (tariffs that combat unfair trade practices) and Section 232 (tariffs that protect national security). These tariffs hit almost $280 billion of goods and, according to the American Action Forum, increased consumer costs by over $51 billion a year. By the way, Joe Biden kept most of these in place. Recently, Biden went even further, slapping $18 billion worth of tariffs on Chinese-produced EVs, semiconductors, and critical minerals, among other things. This is all part of the industrial policy he ushered in under the Inflation Reduction Act. So both sides love a good tariff.
But in this campaign cycle — it’s as if a sequel titled “The Tariffs Strike Back” has been released — we must wonder: Is this the beginning of the end of globalization and the rise of a new age of tariffs?
Both Republicans and Democrats are making tariff-happy promises. Trump has mused on the campaign trail that he would like to impose a 10% tariff on all goods coming into the US.
“When companies come in and they dump their products in the United States, they should pay automatically, let’s say, a 10% tax … I do like the 10% for everybody,” the former president explained.
And it is not just in the US. Tariffs are being used everywhere.This week, Canadian Prime Minister Justin Trudeau aligned with the US andannounced tariffs on Chinese-made EVs starting Oct. 1, and another 25% tariff on Chinese steel and aluminum.
“Actors like China have chosen to give themselves an unfair advantage in the global marketplace,” Trudeau said, “compromising the security of our critical industries and displacing dedicated Canadian auto and metal workers.”
He’s not wrong. China does have widespread, unfair trading practices. Using tariffs to rebalance against factors like low-wage workers or weak environmental standards is useful, as they can be to deal with trade imbalances. But it’s a slippery slope. Tariffs beget tariffs, and that starts a trade war where everyone loses.
Tariffs were critical to Trump’s first administration, especially as he renegotiated the NAFTA agreement with Mexico and Canada. But economists at places like the CATO Institute concluded that tariffs cost taxpayers anywhere from $50 to $80 billion in higher prices. “American consumers (both firms and individuals), not foreigners, paid for — and continue to pay for — the tariffs,” the experts wrote.
So why are they back? If Trump 1.0 taught politicians across the spectrum anything, it's that there are no votes in supporting globalization. Most states and provinces have lost jobs and plants to cheap labor in places like China and Mexico, and protecting jobs wins elections today, even if it means higher prices tomorrow.
And that’s exactly what it means. According to the Center for American Progress Action Fund, if Trump were to impose the across-the-board 10% tariff, it “would amount to a roughly $1,500 annual tax increase for the typical household, including a $90 tax increase on food, a $90 tax increase on prescription drugs, and a $120 tax increase on oil and petroleum products.” And there is a real debate as to whether higher tariffs, which aim to create jobs, actually do so.
A study from the US Department of Agriculture revealed that Trump’s 2018 tariffs on major trading partners like China, Canada, and Mexico cost billions due to retaliation. “From mid-2018 to the end of 2019, this study estimates that retaliatory tariffs caused a reduction of more than $27 billion (or annualized losses of $13.2 billion) in US agricultural exports,” the study said.
This is a case of Hobson’s choice: Keep some manufacturing jobs in your community, but face higher prices, lower productivity, and retaliation from other countries. After all, one tariff begets another, and the costs pile up. But the political gains are real, so protectionism is on the march again.
Trump’s VP running mate, Sen. JD Vance, recently defended tariffs and, to be fair, many countries have massive exceptions to free trade that include cutouts to protect certain industries with subsidies and quotas. In the US, national security is used extensively as a form of industrial policy — Trump, for example, imposed tariffs on steel and aluminum imports, citing national security concerns. And in Canada, banks and milk and cheese farmers in Quebec are protected.
But Vance has gone further, arguing that tariffs in principle are a net economic gain. A tariff “causes this dynamic effect where more jobs come into the country,” Vance recently said on “Meet the Press.” “Anything that you lose on the tariff from the perspective of the consumer, you gain in higher wages, so you’re ultimately much better off. You have more take-home pay, you have better jobs,” he added.
By that logic, more tariffs would keep growing the economy, so where will they stop? That is the road to end any form of free trade and globalization.
Strangely, Vance’s argument not only flies against the conventional wisdom of his own party — the GOP has long advocated for free trade and open markets — but it also parrots what the left argued for decades as they fought free trade and globalization even as they were ridiculed by people like Reagan.
During Trump’s first term, the Ronald Reagan Presidential Foundation published a piece called “Is the GOP Still the Party of Free Trade?” and concluded that they are not, especially after Trump took the US out of the Trans-Pacific Partnership. That was a multilateral trade agreement with Asian countries meant to keep a strong US presence in Asia as a hedge against China. While 191 Republicans originally voted for it, that Republican Party no longer exists. “The effective abandonment of its free trade credentials sets the Republican Party on a perilous path,” wrote Phil Levy of the Reagan Foundation.
Democrats must be delighted that an argument they once lost so publicly is being relitigated. Now, both sides are arguing for the same thing and trying to outdo each other. It will be interesting to hear what Kamala Harris says about this as she finally reveals some policy.
We have now gone from embracing concepts like “nearshoring” and “friendshoring” for critical supply chain products like medicine and AI chips to picking winners and losers across the economy. This is 1970s industrial policy, and the distinction between the left and the right on this has become minimal.
Is this how globalization dies, one tariff at a time, in a series of trade wars and spats, Brexits and exits, until finally, the trade walls are back up, productivity plummets, and prices rise? Or is there a happy medium, where these global fights lead to a rise in both labor and environmental standards in places like China and Mexico and the cliched expression “fair trade, not free trade” actually becomes a reality?
Either way, it won’t be quick and, in the meantime, brace yourself for higher prices as your political compass keeps spinning wildly out of control.
People walk in front of BYD Auto company and Autotorino store in Milan, Italy, March 20, 2024.
It’s about to be “Trade War Summer” in Europe!
The EU is expected to slap tariffs on Chinese-made electric vehicles this week, citing a months-long investigation into Beijing’s subsidies for EV manufacturers.
The move comes amid wider EU-China trade tensions over green technologies like EVs, solar panels, and batteries, where China has become a major low-cost producer whose exports often undercut those of Western competitors.
The EU says China is unfairly subsidizing producers and “dumping” goods in Europe that it can’t sell at home because of weak consumer demand.
China says it’s being unfairly punished for being too good at producing precisely the products the West claims it wants to meet its climate goals.
Experts doubt the tariffs will be big enough to dent sales. Chinese EVs are relatively cheap in the EU, starting at around $32,000.
But China could retaliate against EU industries. Chinese media say local firms want Beijing to consider EU subsidies for European brandy, dairy products, and pork.
If the Europeans try to unplug Chinese EVs, expect Beijing to clap back fast with tariffs of its own on those industries, upping the ante in a trade dispute between the world’s largest exporter (China) and the world’s largest advanced consumer market (the EU).