Who's advising Trump on trade?

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0:11Markets continued their deep swings this week. Stock and bond prices have had some up days on hope there might be some trade deals in sight. And then we've seen other days of dropping, fears that the big tariffs might be here to stay. And so perhaps the most important question for the global economy is, what's the White House's end goal for trade here? Yesterday, we analyzed the conflict within Trump himself. His desire to cut deals with other countries on the one hand, but also his taste for long-term tariffs on the other. Today, we look at how Trump's appointees are whispering in the president's ear.

0:49This is The Indicator for Planet Money. I'm Adrian Ma. And I'm Darian Woods. Today on the show, the advisors pitching the intellectual case for tariffs, including a proposal to weaken the dollar with what's been called the Mar-a-Lago Accord.

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2:40Download Grammarly for free at grammarly.com slash podcast. That's grammarly.com slash podcast. To understand what Trump's advisors are whispering to him about the trade war, we can look at two broad schools of thought. One we might call Make in America. The school of thought wants more manufacturing in the U.S. for national security reasons. The other we might call the weak dollar school. These advisors believe the playing field is stacked against the U.S. because of its strong dollar. The Make an America crowd has several members. Most extreme is senior councillor for trade and manufacturing, Peter Navarro.

3:19But the advisor closest to the president's ear right now is Treasury Secretary Scott Besant. He's kind of like the school principal. You know, he used to teach economic history. And he is super pessimistic about China. Here he is on a Tucker Carlson interview broadcast on April 4th. And Tucker, by the way, the Chinese business model and the economy are the most unbalanced, imbalanced in the history of the modern world. We've never seen anything like this in terms of their export level relative to their GDP, relative to their population. China's exports as a share of its economy is actually around the middle of the pack globally.

3:57What really makes China dominate exporting is that it has a huge population. Simon Rabinovich is U.S. economics editor for The Economist newspaper, and he says that Scott Besson's views are fairly well aligned with Donald Trump's. He effectively expresses a slightly more thought-out view similar to Donald Trump's, which is the idea that the tariffs are ultimately about bringing manufacturing back to America. Not all manufacturing, but manufacturing that's consistent with America's national security. Simon says that Scott Besant points to the early days of COVID when the U.S. couldn't even produce enough medical masks, let alone the semiconductor chips and steel that would help the country ride out an international emergency.

4:42And so his view is that kind of tariffs play into this national security need to be able to produce, you know, critical products that it needs today and that it would most certainly need were it to ever find itself in a war. That would imply these tariffs are here to stay. Certainly on whatever those critical goods are deemed to be. It could be a narrow set, like jet engines and rare earth minerals. But it could also be a broad set of things, like steel or cars. And yet, Simon says this school of thought isn't just about tariffs. Now, Secretary Besant has also been clear that he views the tariffs partly as a negotiating tactic.

5:23He's talked about the idea that tariffs are at a peak, and it's now up to countries to come up with offers to begin to bring them down. Scott Besant was asked about this recently, and he acknowledged that the 145 % tariffs on China couldn't stay that high forever, and he hinted that this was part of the president's negotiation strategy. In a closed-door meeting on Tuesday with JPMorgan Chase, he reportedly said that negotiations with China haven't started yet and will be a slog. Still, he thinks a trade deal may be possible in the next two to three years. So that's the make in America crowd. Then there's what we've dubbed the weak dollar school.

6:04Essentially, because people around the world use the dollar so much, that pushes up the dollar's value and actually hurts American exporters. So the weak dollar school wants to see the American dollar devalued. This school of thought is led by the chair of the Council of Economic Advisors, a guy named Stephen Myron. His vision is spelled out in a paper he wrote in November called A User's Guide to Restructuring the Global Trading System. And let's just say it has a lot of Greek letters in it. It's almost like an audition essay to get into the Trump administration. Totally. And Simon Rabinovich says he was successful at that.

6:40His argument is that it's not just about manufacturing, that is part of it, but that ultimately the structure of the global economy has disadvantaged America. Speaking with Bloomberg in early April, Stephen Myron called on other countries to give more to the U.S. They could say, hey, America is creating a global trading system backed by this defense umbrella, which again allows us to trade, which creates our prosperity. And we're going to help share the cost of those things. Stephen was saying that the U.S. has spent a lot on military around the world, bringing benefits that other countries are freeloading off.

7:14Also, he's saying the U.S. has provided a safe haven for money. As in, no matter whether you're in Italy or Thailand, you can invest in the U.S. dollar or U.S. government debt and be reasonably assured that your investment will maintain value. More than half the world's trade is done in dollars, even when neither country trading is the U.S. Simon boils the weak dollar school down to this. The cost for America in doing this is that you have a dollar that has been distorted. In his view, basically, this means overvalued. And that has held back American exporters. A strong dollar means that American consumers can afford to buy more stuff from overseas.

7:55And so American factories find it harder to compete with these cheap imports. And so there's different ways that other countries can begin to address this problem. They could basically agree to buy more American products. They could invest more in America. You know, one solution that he expressed, which I think is a little bit tongue-in-cheek, is that they could just send checks directly to the U.S. Treasury to basically pay them a fee for services. Or, alternatively, America could impose tariffs. The big idea in Stephen Myron's paper is that leaders of countries from around the world would descend on South Florida, make a grand deal with President Trump to help weaken the dollar, and this would be called the Mar-a-Lago Accord.

8:41You can see how it's something that appeals to President Trump. It kind of intellectualizes his instinctual view that America has been wronged. One problem, though, is that Trump can't seem to make up his mind whether he wants a strong or a weak dollar. There are trade-offs. A weakening dollar might be good for exporters, but it fuels inflation for consumers as imports get more expensive. Also, as we've seen in recent weeks, borrowing costs rise. This debate over whether a strong or a weak dollar is more beneficial to the U.S. is one of the biggest differences between Trump's advisors. Scott Besant has kind of taken the much more traditional treasury line, which is that a strong dollar is America's policy, that it's in America's interest, that it's not about to give up its reserve currency status.

9:29In fact, Scott Besant has said that he speaks for the administration's view on the dollar, not Stephen Myron, the chair of the Council of Economic Advisors. Simon recently had a conversation with Myron. And he tried to say that, well, actually, you know, I think people have misinterpreted my viewpoint. I was never saying that I want the dollar to be weak. But that really seems like kind of a post hoc change of view when he actually begins to see that in practice, this idea of reducing the dollar's reserve currency status is something that will really work against America's long-term interests.

10:04Right now, Scott Besant and his worldview seem to be winning out at the White House. But that hasn't stopped him and other advisors from being put in some pretty awkward positions trying to justify the on-again, off-again tariffs. When Trump pushed pause on a lot of those global tariffs in early April, Scott Besant said the change was Trump's strategy all along. Nothing to do with the crumbling markets. Just an hour later, President Trump contradicted Besant, saying that the pause was because of the falling bond market. And this goes to show the limitations of whispering in this president's ear.

10:40No matter how much global economic history you can sweetly cite, what ultimately matters to Trump is his gut. This episode was produced by Lily Kiyos and engineered by Kweisi Lee. It was fact-checked by Tyler Jones. Cake & Cannon edits the show and The Indicator is a production of NPR.

11:01Thank you.