The Memo: Trump dials down trade war — for now

President Trump has hit the pause button on his trade war with China, suggesting he might be looking for a way out from an approach that critics say has hit a range of interests from the stock market to farmers in politically important states.

A dinner with Chinese President Xi Jinping during the Group of 20 summit in Buenos Aires, Argentina, on Saturday yielded an agreement that the U.S. administration would not ratchet up sanctions on China, as it had threatened to do, for another 90 days.

{mosads}Little else is set in stone about the deal. That has led Trump critics to contend that the president has not wrangled much from the Chinese despite his unusually aggressive approach.

This view is vigorously contested by the administration.

Larry Kudlow, director of the National Economic Council, described the detente as “an enormous, enormous event” during a conference call with reporters Monday.

Kudlow asserted that the Chinese had “put stuff on the table that we have not seen before”; that Xi himself had gotten personally involved; and that the “chemistry” between Trump and Xi was apparent during a “remarkable” dinner.

The administration argues that the Chinese are ready to engage seriously with American concerns on issues such as the protection of intellectual property rights. 

But the Chinese have been conspicuously less explicit on that point and, even amid his affirmations of optimism, Kudlow acknowledged “maybe I’ll be wrong soon.”

Trump has also been talking up what took place in Buenos Aires. In a Monday morning tweet, he called his meeting with Xi “extraordinary.” The previous evening, he tweeted that China had agreed to “reduce and remove tariffs on cars coming into China.”

On his conference call, Kudlow said that it was his “understanding” that such a commitment had been made on auto tariffs. Later, asked about what percentage changes would be made and when, he acknowledged, “We don’t yet have a specific agreement on that.”

Perhaps more revealingly from a political standpoint, Trump said that farmers would be “a very BIG and FAST beneficiary of our deal with China.”

Farmers have felt a chill wind from some of Trump’s tariffs, perhaps nowhere more powerfully than Iowa. Soybeans are a major crop in the Hawkeye State, and China imposed tariffs on them following Trump’s initial shots in the trade war. 

Prior to that, China had been buying more than $10 billion in soybeans each year from the United States, according to data from the Farm Credit Administration.

Iowa Agriculture Secretary Mike Naig told CNBC’s “Closing Bell” in mid-September that an escalation of the trade war “couldn’t come at a worse time.”

“Our farmers understand that there are issues that need to be resolved, particularly with China,” he said. “But there is no doubt that the retaliatory tariffs are impacting our marketplace and that’s impacting our producers negatively.”

{mossecondads}Those problems may have contributed to Trump’s declining political standing in Iowa. 

Former President Obama carried Iowa in both 2008 and 2012, but Trump won the state in 2016 by almost 10 points. According to polling from Morning Consult, however, the president’s net approval rating in the state had fallen from plus 9 points around his January 2017 inauguration to negative 10 points by October.

Doug Heye, a former communications director for the Republican National Committee, said that Trump could be feeling the heat given that some tariffs have “cut into his base, like in Iowa, where people are feeling the pinch.”

But Heye also noted that the tariffs issue was one in which Trump had been able to muddy traditional partisan lines, sometimes to his political advantage. 

Then-candidate Trump’s protectionism is widely credited as one of the factors that helped him demolish the Democratic “blue wall” in Pennsylvania, Michigan and Wisconsin in the 2016 election.

The tariff issue generally, and the negotiations with the Chinese, Heye said, “gives Trump an opportunity to be the dealmaker that he says he is. … It allows Trump to play on Democratic turf on an issue where Republicans — even if they disagree with him — are not going to loudly protest.”

There are also tensions at play within Trump’s administration on trade, with hawks led by adviser Peter Navarro and U.S. Trade Representative Robert Lighthizer on one side and more moderate figures, such as Treasury Secretary Steven Mnuchin, on the other.

Lighthizer will lead the negotiations with China once the 90-day clock begins ticking, which gives heart to the hawks.

But critics on the left argue these factional struggles within the administration block the sort of actions that would help the blue-collar workers Trump himself claims to champion.

“You are seeing the internal divisions of the administration laid bare,” said Andy Green, managing director of economic policy at the Center for American Progress, a liberal group.

“You have the Wall Street wing that is very much about free trade, business investment in China, not rocking the boat. You have the other side, which is protectionist but corporate protectionist — fighting for intellectual property rights and things like that.”

But, Green insisted, “the thing that both sides are completely missing is that nothing is on the table right now that will actually benefit working families, either in the U.S. or in China.”

Trump will argue otherwise. And he’ll have a lot at stake as he tries to prove his case in the months ahead.

The Memo is a reported column by Niall Stanage, primarily focused on Donald Trump’s presidency.