While one of Trump's recurring campaign promises was that he would "punish" China and other key US trade counterparties if elected, for taking advantage of free-trade by imposing steep tariffs and duties on foreign imports to "level the playing field", the President's stance changed drastically after the election, U-turning following his amicable meeting with China's president Xi Jinping in March, but mostly as a result of pressure by his ex-Goldman advisors to keep existing trade arrangements in place and not "rock the boat."
Now, all that may be about to fall apart.
According to Axios, behind the constant media scandals, "one of the most consequential and contentious internal debates of his presidency unfolded during a tense meeting Monday in the Roosevelt Room of the White House" where with "more than 20 top officials present, including Trump and Vice President Pence, the president and a small band of America First advisers made it clear they're hell-bent on imposing tariffs — potentially in the 20% range — on steel, and likely other imports."
In other words, Trump - true to his campaign promises - is set to launch a global trade wars after all, one where then main country impacted would be China, however the collateral damage would extend to Canada, Mexico, Japan, Germany and the UK.
And what may be even more striking is that Trump overruled his cabinet, as "the sentiment in the room was 22 against and 3 in favor — but since one of the three is named Donald Trump, it was case closed." Axios adds that while "no decision has been made, the President is leaning towards imposing tariffs, despite opposition from nearly all his Cabinet."
Needless to say, if Trump follows through, the outcome would have a profound effect on U.S. economic and foreign policy; Trump will formalize his decision in the coming days.
What is also notable, is that this is the first time - so far off the record - in which Trump has openly defied his Wall Street establishment advisors, while siding with the Bannon "populist" front:
In a plan pushed by Commerce Secretary Wilbur Ross, and backed by chief strategist Steve Bannon (not present at the meeting), trade policy director Peter Navarro and senior policy adviser Stephen Miller, the United States would impose tariffs on China and other big exporters of steel. Neither Mike Pence nor Jared Kushner weighed in either way.
Everyone else in the room, more than 75% of those present, were adamantly opposed, arguing it was bad economics and bad global politics. At one point, Trump was told his almost entire cabinet thought this was a bad idea. But everyone left the room believing the country is headed toward a major trade confrontation.
As Axios adds, the reason why Trump defied the guidance of his Wall Street-derived advisors is Trump's base "which drives more and more decisions, as his popularity sinks — likes the idea, and will love the fight."
This, more than anything, should send shivers down Wall Street's spine, because for all his bluster and outrageous media outbursts, Trump had largely been in Wall Street's pocket so far.
Not anymore, and with Trump's base hell bent on punishing the 1% (which includes Wall Street), if Trump indeed launches global trade war, his future decisions will become increasingly market unfriendly.