So Trump’s senior economic adviser, Gary Cohn, is resigning because of Trump’s announcement of steel and aluminum tariffs. The tariffs are likely a bad idea—unless you think Trump is merely making this move as part of his “art of the deal” strategy, and will end up with some trading partners altering their behavior and trading rules. Perhaps it will work out this way. It wouldn’t surprise me if it does. But why anyone should be surprised at Trump’s announcement is a mystery: the one issue where the protean Trump has been consistent for 30 years is trade. And it is highly entertaining to see the New York Times cope with its cognitive dissonance over this, such as the column Monday entitled “Don’t Worry About Trump’s Tariffs.” Heh.

Cohn, however, was an odd choice for Trump, for one simple reason: Cohn is a Democrat, who according to all accounts was angling hard to be the senior economic adviser in a Hillary Clinton Administration. As the former head of Goldman Sachs (have you noticed that this now marks the fourth administration in a row where a Goldman Sachs person is at the center of economic policy?), it didn’t matter to him whether Trump or Hillary won the election.

Who will Trump pick to replace Cohn? I’d prefer Larry Kudlow, who supported Trump early and loudly, and who had considerable input into the tax reform legislation. But Larry is adverse to trade protectionism, and also favors a strong dollar, and it is not clear whether Trump favors a strong dollar. (A weak dollar supposedly helps American exports, of course. On the other hand, a strong dollar would mitigate some of the cost increase on imported steel that the tariffs will cause.) According to some inside sources of my own, Trump picked Jerome Powell over John Taylor (the long time conservative favorite) to be the new chair of the Federal Reserve because Powell favors low interest rates, as does Trump. And low interest rates will hold down the value of the dollar, as well as help real estate interests, which is what Trump knows best.

One further note: a lot of people have been noting that Reagan often instituted specific tariffs and trade protectionist measures, despite being a free trade cheerleader. Quite true, and equally problematic: his own economic advisers produced estimates of the net job losses and higher cost to consumers of his trade moves. However, what is lost in memory is that Reagan often instituted trade protections to head off much worse protectionist legislation from Congress, where there was a bipartisan consensus for many protectionist proposals. Reagan used his veto to stop several protectionist measures that did reach his desk, but in other cases he compromised to keep his vetoes from being overridden. In other words, Reagan consented to something bad to prevent something worse. A reasonable choice for any statesman under the circumstances. But right now there is very little support in Congress for the kind of tariffs on steel and aluminum that Trump is proposing.

As usual with The Trump Show, stay tuned for the next episode. . .


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