Trump Reversals Hint at Wall Street Wing’s Sway in White House

By ALAN RAPPEPORT
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President Trump said he no longer wanted to label China a currency manipulator. Credit Associated Press 


WASHINGTON — President Trump made three startling economic policy reversals on Wednesday, stepping away from pledges he made as a candidate and even policies he supported only days ago.

The shifts confounded many of Mr. Trump’s supporters and suggested that the moderate financiers he brought from Wall Street are eclipsing the White House populist wing led by Stephen K. Bannon, the political strategist who is increasingly being sidelined by the president.

In a series of interviews, Mr. Trump said he no longer wanted to label China a currency manipulator — a week after telling The Financial Times that the Chinese were the “world champions” of currency manipulation.

In an interview with The Wall Street Journal, the president said he no longer wanted to eliminate the Export-Import Bank. And he said that he might consider reappointing Janet Yellen as chairwoman of the Federal Reserve when her term ends next year.

Yet before the election, he regularly denounced China and said that Ms. Yellen should be “ashamed” of herself because of what he said was her political bias.

Mr. Trump’s latest pronouncements suggest he is moving toward a more mainstream economic approach, although on other issues that he discussed on Wednesday, like a tax overhaul and health care, his policy and strategy appeared muddled.

Mr. Trump asserted in a Twitter post on Wednesday night that his agenda remained on track.

“One by one, we are keeping our promises — on the border, on energy, on jobs, on regulations. Big changes are happening.”

Mr. Trump began the day with an interview with Fox Business Network in which he backed away from the so-called border-adjustment tax favored by Speaker Paul D. Ryan and House Republicans.

He also backtracked on his claim last month that he was moving on from his plan to repeal the Affordable Care Act to focus on taxes. Now he is again putting health care first.

In an interview published by The Journal midday, Mr. Trump revealed his softer approach to China — the about-face coming less than a week after meeting with China’s president, Xi Jinping — and made another reversal on health care.

He said that the government would not continue to pay subsidies to health insurers under Obamacare only days after the administration said it would.

Mr. Trump said the threat to withhold subsidies was a way to force Democrats to negotiate with him over the future of the Affordable Care Act.

In the Journal interview, Mr. Trump said that “Democrats will start calling me and negotiating” because they want to avoid any interruption of the “cost-sharing” subsidies, which reduce out-of-pocket costs for seven million low-income people.

On Monday, the Department of Health and Human Services had issued a statement saying that “the cost-sharing subsidies will be funded” while a federal appeals court weighed the legality of the payments.

Mr. Trump’s remarks coincided with a letter in which doctors, hospitals, insurance companies and employers pleaded with him and with Congress to help stabilize insurance markets by authorizing a continuation of the subsidies.

“Time is short and action is needed,” said the letter, sent Wednesday by eight groups including the U.S. Chamber of Commerce, the Blue Cross and Blue Shield Association, America’s Health Insurance Plans, the American Medical Association and the American Hospital Association.

The president’s comments on Wednesday recalled his reaction when Republican leaders pulled a bill to repeal President Barack Obama’s health care law from the House floor last month.

Mr. Trump predicted then that “Democrats will come to us” in an effort to save the law, which he said was imploding. They did not.

To make the muddy waters even murkier, Mr. Trump took his plans to rewrite the tax code into uncharted territory when he threw cold water on the border adjustment tax that is the linchpin of the tax reform plan.

After months of waffling on that tax, he instead called for a new “reciprocal tax” that appears to be a different kind of levy on imports.

“I don’t like the word adjustment because our country gets taken advantage of, to use a nice term, by every other country in the world,” Mr. Trump said in the Fox Business interview. “So when I hear border adjustment, adjustment means we lose.”

He added: “I love the idea of reciprocal. You can call it a reciprocal or a matching tax or a mirror tax.”

The notion left tax experts scratching their heads. “I’m genuinely confused,” said Itai Grinberg, a tax expert at Georgetown University’s law school.

“If one imposes a tax that varies based on the country of origin of the good or service, then what one may in substance have is something akin to a country-specific tariff regime.”

What is clear is that all of the uncertainty surrounding the White House’s economic plans is causing frustration among some of Mr. Trump’s supporters, including those who helped get him elected.

Larry Kudlow, the economist who advised Mr. Trump when he was a candidate, panned Mr. Trump’s reciprocal tax idea as a nonsensical approach that would essentially raise taxes.

He suggested that the scattershot approach to economic policy coming from the White House was probably because of poor leadership at the National Economic Council, which is led by Gary Cohn, and the diminished role of the Treasury Department, which is steered by Secretary Steven Mnuchin.

“It’s complete chaos,” Mr. Kudlow said. “It sows confusion, and people lose confidence. The process is broken.”

Last Friday, Mr. Trump named Kevin Hassett, a conservative pro-immigration economist, to lead his Council of Economic Advisers. Ardent supporters worried it was an abandonment of the tough stance he took on the issue during the campaign.

Mr. Trump shared few details about how a reciprocal tax would work. It is unclear if, in his thinking, the United States would match tariffs that countries levy on certain American products against other products that those countries produce or if he wants to effectively have a value-added tax with different rates for goods and services from each country.

Either way, economists warned that economic effects could be calamitous.

“Any economist will tell you that tariffs are often, if not always, self-defeating,” said Michael J. Graetz, a tax law professor at Columbia University. “It doesn’t appear to be a sound idea as a matter of tax policy.” Howard Gleckman, a fellow at the Tax Policy Center, said, “It looks like Trump is not happy with the border adjustment tax idea for whatever reason and he’s looking for an alternative.”

With more changes apparently in store, Mr. Trump’s budget director, Mick Mulvaney, added an additional major reversal on his behalf: He said on CNBC on Wednesday that the president’s campaign promise to eliminate the national debt was “hyperbole.”

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