Trump must change trade-war strategyBusiness | Andrew Wong 19 Nov 2018
As I wrote last week, US President Donald Trump must care about Wall Street, a factor that has some influence on whether the Sino-US trade issue can be resolved.
White House trade adviser Peter Navarro accused Wall Street's "globalized elites" of trying to pressure Trump on Sino-US trade, an accusation which was attacked by White House economic adviser Larry Kudlow, who said "Peter Navarro's statement does not represent the president or the government."
First of all, Kudlow's comments do not mean that the United States is bowing to China because Kudlow also pointed out that a deal with China would have to be an agreement in the interests of the United States. In other words, Kudlow just disagrees with Navarro's criticism of Wall Street, not that the United States is about to make big concessions to China.
In the 2016 presidential election, most of Wall Street's political contributions were given to Trump's rival Hillary Clinton. Even in the recent mid-term election, Wall Street's political contributions also went to the Democrats, but it doesn't mean Trump is on bad terms with Wall Street. On the contrary, the White House's relationship with Wall Street is even better than when Obama was in office.
The Wall Street Journal reported last year that after the first six months of Trump's presidency, the amount that financial regulators fined Wall Street was not only less than in the same period in 2016, but also the least for the whole year since 2010. In May, Trump also signed the biggest rollback of financial regulation, which substantially liberalized The Dodd-Frank Act passed in 2010, reducing regulation of the US financial sector.
It follows that Trump's policies have actually been tilting toward Wall Street.
When Trump was elected, the Dow Jones index was at the 18,800-point level. Two years later, the Dow Jones industrial average rose nearly 8,000 points, hitting a 26,700-point high in September, which was also touted as a major Trump achievement. But when US stocks fell recently, he blamed it on the Fed's interest rate policy and on the fact that the Democrats won the majority of seats in the House of Representatives in the mid-terms. All that further reflected that Trump cares about Wall Street.
So why does Trump care so much about Wall Street? Regardless of any conspiracy theories, his reason for starting a trade war is to strive for the best interests of the US economy.
But we should know that the tertiary industry occupies almost 80 percent of gross domestic product and among the tertiary industry in the United States, the financial industry, shipping, insurance, and business services accounted for the largest proportion of GDP, so if a trade war ultimately hurts the US financial markets, upsetting Wall Street, why would Trump continue the trade war?
As the New York Times pointed out in September, Wall Street's hopes of wooing China and the United States to negotiate on trade issues failed, but the paper quoted former US trade representative Robert Zoellick as saying only a sharp drop in the stock market would prompt Trump to consider changing his mind.
That's the case now, so Trump has to change his trade-war strategy.
Andrew Wong is an independent commentator.