President Donald Trump's hardball negotiating strategy is high-risk but could pay dividends, likely bringing trade deals with the European Union and North American Free Trade Agreement partners and freeing up the U.S. to press for better commercial terms with China, said Anthony Scaramucci, Trump's former White House Communications Director.
In a July 25 interview with S&P Global Market Intelligence, Anthony Scaramucci, a former White House communications director and Skybridge Capital's current co-managing partner, said President Donald Trump is playing with fire by punishing trading partners with hefty tariffs, but speculated that he will "surprise people," cutting deals on NAFTA and in other trade negotiations. This conversation occurred less than two hours after Scaramucci spoke with Trump following his meeting with European Commission President Jean-Claude Juncker to discuss trade, with the EU reportedly making concessions. What follows is an edited and condensed version of the interview.
S&P Global Market Intelligence: Tell me about the course correction you advised in a recent Financial Times article on trade tariffs, that is to not push so hard with them or risk a damaging trade war. It was in context of other course corrections the president made that you thought were the right moves.
Anthony Scaramucci: I'm trying to appeal to the common sense facets of how you create the best outcomes for everybody. Get the outcomes the president wants, but maybe rethink tactics and strategy. I don't know if you caught what happened [July 25] in the White House.
Yes, the meeting with [European Commission] President Jean-Claude Juncker.
I talked to the President [after the meeting] and he's very happy and in a very good mood about the conversation that he had with Juncker. I think that is better tactics for us because that market with our market is 46% of the world's GDP. Now if we get it right with them or at least press the pause button until we do, we can deal with the Chinese.
As I pointed out in the article it's tough to go after elected leaders, because they're not business people. You can't expect the same outcome. Now what Trump would say if he was on the phone with you is that putting the tariffs up was an effective cudgel to get the Europeans to come back to the table and negotiate more fairly. And it's hard to refute that.
Do you think the tariffs are an effective cudgel?
You get this big powder keg at the end of a very long fuse.
National security, Section 232, actions that are hard to swallow for Canada and others.
Right. So you strike a match. The fuse is burning. And the big powder keg says trade war on it. But what's starting to happen, what always happens, is the doctrine of unintended consequences. I'm paraphrasing what Churchill once said about war: You've got to be very careful once you initiate the war because all the things that you expect to happen, they don't happen, and all these new things happen that you didn't expect to happen.
General Motors Co. just reduced its outlook. And you're getting a big hurt on with the farmers. So what he's doing with the US$12 billion (to aid farmers) is he's trying to add more fuse to the powder keg. He's trying to keep the farmers at bay. [Other countries are] retaliating in a way that's going to hit him right in the heartland; right in the buckle of the belt of people that the president needs in the midterm elections.
Others have made similar moves, with Canada promising support to metal producers, for example.
You don't want to do that, because it creates all these unnatural market forces. So, by declaring an impasse, a ceasefire, a break in the action, a pause with the EU, I think that's super positive.
You brought that up earlier. You said you spoke with the president July 25. Did you raise your view on trade with him?
At the end of the day the president has his own mind.
I say to every reporter my conversations with the president are generally generic and have to be privileged. I don't want you to insinuate that I think there's any causal relationship between what I'm suggesting and what actually is happening. At the end of the day the president has his own mind.
Who in the administration would be driving the advice to turn to Section 232? It's a controversial cudgel but effective in the sense that countries have a kind of carte blanche to use it to protect trade.
What I would say is that the president and his team recognize that we can't totally have a situation where we've completely [lost] steel and aluminum production in the United States. We know that throughout world history, and in our contemporary history over the last 150 years, allies become adversaries and adversaries become allies. Look at our relationship with Japan and Germany today versus 75 short years ago. The notion that you have no steel or aluminum manufacturing in the U.S. is probably something from a national security perspective that would concern people. And, I'm exaggerating, but you can understand why there could be some protective ring-fencing around those industries and you could understand why someone would cite national security reasons.
I think he's going to surprise people.
Do you see him employing a similar tactic with a cudgel on NAFTA in negotiations with Mexico and Canada, or is it hard to say?
What I would say is I think we're close on a deal with NAFTA. I think he's going to surprise people. I think he's going to cut a deal with NAFTA. I think he's going to cut a deal with the South Koreans, a bilateral deal. I think he's eventually going to get the situation with the EU correct. And then I think you turn towards China and see if we can negotiate something with China that evens the playing field.
There is an irony there. The Trans-Pacific Partnership, which the U.S. withdrew from, was in part aimed at reining in China's influence by defining things like state-owned enterprises.
The president's issue as a candidate as it related to TPP was that, because we're the big boy on the block, we are the ones that are typically making the most concessions. And I think he felt because there was a multilateral transaction the U.S. was making too many concessions. And that's why he wanted to rip it up.