White House Backs Off Tough Trade Stance as Tax Fight Dawns

The Trump administration’s tough line on trade may be a casualty of its tax reform efforts.

Although Republicans have long called for tax cuts and reform of the tax system, the White House has decided it needs to soften its stance on trade in order to preserve Capitol Hill Republican votes for tax reform. Administration officials insist that the softening is only temporary.

“What we don’t want is to do things that will unnecessarily irritate the Senate, because we need the votes there,” Commerce Secretary Wilbur Ross said Friday in an interview with CNBC. “It’s a very fragile margin, so it’s a question of timing more than it is direction.”

CNBC’s Kayla Tausche explains the dynamic of the Trump administration caving to free-trade Republicans to win votes on tax reform.

A long-delayed investigation into Chinese steel dumping is on hold; the calls to withdraw from NAFTA have quieted; and the criticism of the existing free-trade deal with Korea has been snuffed as the Trump Administration actively works to preserve Republican votes for tax reform, the sole issue that unites the party ruling both ends of Pennsylvania Avenue.

Looking at the rosters for the House Ways & Means Committee and the Senate Finance Committee, “the vast majority are free-traders,” said one senior administration official, acknowledging particularly hawkish trade actions — like withdrawing from NAFTA or slapping tariffs on steel — wouldn’t sit well with that group.

While administration officials frame the trade backdown as only temporary, it remains to be seen whether the tougher stance will make a comeback. One reason to be skeptical: why would free-traders on Capitol Hill agree to cooperate with the administration in exchange for a mere pause in trade policy? It is more plausible that they would demand reassurances that the administration’s softening will be longer lasting.