Gary Cohn: Tariffs Have Failed, Trump Should Ease Up on China for a Win

Former White House chief economic advisor Gary Cohn said President Donald Trump is losing the trade war and urged him to cut an easier deal with China to score “a big win.”

Cohn, the former president of Goldman Sachs who served as President Donald Trump’s first director of the National Economic Council, also attacked Peter Navarro, director of the National Trade Council, and Commerce Secretary Wilbur Ross in an interview with Steven Dubner for the “Freakonomics” radio show broadcast Wednesday.

Cohn argued that while he supports President Trump’s stance against China’s theft of intellectual property, forced technology transfers, and closed market, the administration’s strategy of using tariffs was not effective.

“Tariffs were used as a threat. Did it hurt the Chinese at all? We had record trade deficits,” Cohn said.

Most China watchers would disagree. Trump’s tariffs have given the administration credibility in the trade dispute, demonstrating that it is willing to take steps that no prior administration has. Those tariffs have weakened the Chinese economy and forced China to seriously negotiate over U.S. demands for reform.

“China’s economic expansion languished to its slowest pace in nearly three decades last year, as a bruising trade fight with the U.S. exacerbated weakness in the world’s second-largest economy,” the Wall Street Journal reported in January.

Last month, China’s industrial production fell to the lowest level in 17 years, according to data released Thursday.

Cohn also claimed, without evidence, that tariffs were raising prices on consumer goods.

“Tariffs don’t work. If anything, they hurt the economy because if you’re a typical American worker, you have a finite amount of income to spend,” Cohn said. “If you have to spend more on the necessity products that you need to live, you have less to spend on the services that you want to buy.”

Consumer prices are up just 1.5 percent over the last 12 months, below the Federal Reserve’s target of 2 percent. There is no evidence that American workers have had to spend more because of tariffs.

Although Trump said Wednesday that he is in no rush to reach an agreement with China, Cohn said in the interview that the “U.S. is desperate for an agreement.”

“The president needs a win. The only big open issue right now that he could claim as a big win that he’d hope would have a big impact on the stock market would be a Chinese resolution. Getting the trade deficit down I will never say is easy, but of the issues on the table, that’s relatively easier,” he said.

Cohn also goes on the attack against Secretary Ross and Navarro, supporters of the president’s economic nationalism, accusing them of secretly setting up a meeting between the president and executives from the steel and aluminum industry.

“What happened in the White House is we got to a point, unfortunately, where one or two people decided that they were going to no longer be part of a process and a debate,” he said.

Dubner asked if it was Navarro and Ross who set up the meeting.

“Yes. Those are the two people. When the process breaks down, then you’re, sort of, in my mind, living in chaos. I don’t want to live in a chaotic organization,” Cohn said.

Cohn said that he does not mind disagreement so long as there is a fair process for debating different positions. That is at odds with reports that Cohn misled the president about jobs data, hid from the president a letter that would have initiated the U.S. exiting NAFTA, and ordered Chief of Staff John Kelly not to follow the president’s order to get the Justice Department to block the AT&T acquisition of Time-Warner.

Cohn said that being known as a globalist was one of his greatest accomplishments in the White House, crediting Breitbart with the notoriety of his views.

“Thank you Breitbart for putting little globes next to my name every time you print my name,” he said.