This weekend, Steve Mnuchin is in Buenos Aires for the G-20 meeting, and much like his first trip to the summit earlier this year, he’s under pressure to defend the Trump administration’s adversarial approach to global trade.
It’s a tough sell, to be sure. Trump is effectively trying to roll back decades of progress on globalization and free trade. As BofAML’s Michael Hartnett recently put it, “new tariffs are set to boost US protectionism to highest level since mid- 1970s”.
“U.S. Treasury Department officials have gone from economic diplomats to trade warriors, a shift that leaves Secretary Steven Mnuchin once again exposed to broadsides from global counterparts at a multilateral summit”, Bloomberg writes on Saturday, adding that “the Treasury Department is increasingly focused on economic sanctions rather than international affairs and diplomacy [and] Mnuchin has said repeatedly that he spends more than half his time working on sanctions, which the Trump administration has at times imposed unilaterally.”
Even if Trump’s Peter Navarro-inspired trade posturing was defensible, it’s by no means clear that Mnuchin is the man for the job. After all, the Treasury Secretary has clashed with Navarro on any number of occasions, including what some reports suggested was a profanity-laced shouting match in Beijing that ultimately led to Navarro being sidelined from trade negotiations with China.
With Navarro out of the picture, a comparatively rational Mnuchin struck a truce with Chinese Vice Premier Liu He in May. Mnuchin then told Fox News that the trade war was “on hold”. Navarro and Steve Bannon (who started running his mouth to Bloomberg about Mnuchin selling out America) were furious, and the backlash from the isolationist contingent caused Trump to change his mind. The trade war was back on.
In a series of truly ridiculous comments representing a victory lap, Navarro told CNBC in June that Trump is a “courageous visionary” for his efforts to confront China on the way to upending global trade and commerce.
Subsequent reports suggested Mnuchin had taken a literal vow of silence as a way of protesting the administration’s trade stance. Recall the following from Bloomberg:
Treasury Secretary Steven Mnuchin is signaling his displeasure with President Donald Trump’s trade war with China by saying nothing at all.
Mnuchin decided silence was his best option after losing an internal White House battle [in May] to protectionists as the president considered the China tariffs, they said.
Silence is Mnuchin’s way of balancing loyalty to the president while preserving his personal credibility with financial markets, without publicizing disagreements among administration officials, the people said. They asked not to be identified describing his thinking.
When it comes to “credibility with financial markets”, let’s not forget that this is the same Steve Mnuchin who weaponized the stock market in the service of cramming through Trump’s deficit-funded tax cuts last year and also the same Steve Mnuchin who, upon landing in Davos in January, immediately attempted to jawbone the dollar lower as part of the administration’s then-nascent trade war.
In any event, the point is this: Steve Mnuchin isn’t 100% on board with the protectionist push so he isn’t the best envoy for Trump at the G20 and this weekend, he’s under even more pressure thanks to the President’s attacks on Jerome Powell’s Fed and Friday tweets about currency “manipulation” on the part of China and European Union.
In an interview with Reuters, Mnuchin effectively delivered a warning to China and suggested the U.S. may label Beijing a currency manipulator in October. That interview was conducted in Sao Paulo, Brazil, and now that Mnuchin is wheels down in Buenos Aires, his first task is to try and dispel the notion that Trump is trying to encroach on the Fed’s independence.
“Donald Trump isn’t trying to interfere in the currency market”, Mnuchin told reporters in Buenos Aires, adding that as far as he’s concerned, short-term movements in the dollar aren’t relevant.
Someone tell that to Trump, who clearly thinks short-term moves in the greenback are relevant, especially to the extent those moves end up effectively cushioning the blow from his tariffs on America’s trade “competitors”.
As for the Fed, Mnuchin said this:
I fully support Fed independence as does the president. I have enormous confidence in Jerome Powell.
Just as Mick Mulvaney’s attempts to suggest the President didn’t say what the President actually said about the Fed fell on deaf ears Friday, so too do Mnuchin’s reassurances. This horse has left the barn.
The only question now is this, as posed Saturday morning on Twitter by BNP’s Paul Mortimer-Lee:
The pressure Powell and [the] FOMC will come under as the economy slows will be immense. The key question is whether the Fed will ignore the pressure or, fearing a permanent reduction of independence, bow to it temporarily.
If The Fed bows to pressure out of fear, then it ain’t really all that independent then, is it?