Donald Dossier: Watch the Dow

Donald Dossier: Watch the Dow

By Daniel Malloy


Because Trump’s short- and long-term interests are diverging.

By Daniel Malloy

When Donald Trump strode into the National Cathedral in Washington last week, launching a million ridiculous takes about his body language with past presidents, the nation was in the midst of honoring former President George H.W. Bush. Aside from paeans to Bush’s civility and even temperament — often veiled shots at Trump — “41” was eulogized by friends and celebrated in the media for some real achievements: managing the end of the Cold War; a swift, decisive and, yes, prudent Gulf War; signing the Americans with Disabilities Act.

Perhaps Trump wondered how he would be remembered one day in such a forum. Perhaps he wondered how Bush lost re-election in the face of such wins. Four seats away, the man whose hand Trump did not shake (scandal!), Bill Clinton, could have reminded him: “It’s the economy, stupid.”

After a boffo 2017, the zigzagging Dow Jones Industrial Average sits about where it did on New Year’s. The “Trump bump” for stocks has been a source of pride that the president often touts in campaign rallies as evidence of his success. But analysts increasingly see storm clouds hovering over the U.S. economy that could let loose just in time for 2020, as the benefits of the tax cuts fade and the trade war with China looks ever more serious.

Keeping the stock market humming helps win votes, but so does keeping his promises to take on trade foes. 

Trump, who gave himself the nickname “Tariff Man” last week, surely knows he’s on shaky ground. Wall Street doesn’t like the trade conflict. Neither do agricultural producers nor automakers — as the recent General Motors plant closures show.

But Trump remains convinced that a tough line can win concessions on issues that Americans have been complaining about since China joined the World Trade Organization (WTO) in 2001: China’s theft of U.S. firms’ intellectual property and forced transfer of technologies in exchange for access to the world’s most populous country.

The problem is how it’s bringing Trump’s long-term goals in conflict with short-term politics — the latter typically his preference, with a freewheeling and unorthodox style that has driven friends and foes batty. Witness the Dow last week: It soared on the news that after dining with Chinese President Xi Jinping, Trump delayed new tariffs by 90 days, but then crashed after the arrest of Huawei Technologies Chief Financial Officer Meng Wanzhou on fraud charges related to Iran sanctions. The White House says Trump was caught unawares by the arrest, and media reports have indicated he was privately furious.


Meanwhile, National Economic Council Director Larry Kudlow went on CNBC on Friday to say Trump would consider extending the 90-day tariff deadline if U.S.-China trade talks go well … shortly before Trump trade policy adviser Peter Navarro went on CNN to say 90 days is a hard deadline.

It’s a West Wing tug-of-war playing out in the media (first one to Fox & Friends wins!), with uncertain political and policy consequences. Sure, keeping the stock market humming helps win votes, but so does keeping his promises to take on trade foes. Sure, there are no winners in a trade war, but forcing China to play by WTO rules would be transformative for U.S. businesses in the long run. 

In the meantime, Trump has to keep an eye on some key numbers. Gross domestic product growth for the year should be a strong 3 percent, and unemployment remains a historically low 3.7 percent. But economic growth is slowing, and Trump’s attacks on the Federal Reserve for interest rate hikes indicate his unease.

There’s plenty to worry about in the White House as the campaign lurches into gear. Robert Mueller’s investigation or whatever else subpoena-happy House Democrats dig up could strike a major blow, and a strong economy didn’t save Republican fortunes at the ballot box this year. But presidents are mostly judged, to an unfair degree, on the economy.

Effecting lasting change on China’s trade rule-breaking is a laudable goal that, if successful, would merit inclusion in obituaries and eulogies one day. But will it cost Trump a second term?