Treasury Secretary Steven Mnuchin talked tough on trade with China Friday.
“On the one hand, we’re willing to continue negotiations,” Mnuchin said in an interview on CNBC. “On the other hand, the president is absolutely prepared to defend our interests.”
This has been the consistent stance of the Trump administration when it comes to trade. The administration says its tariffs are aimed at getting China to drop practices such as dumping commodities on the world market and forcing U.S. companies to hand over technology in exchange for access to Chinese markets.
Yet the stock market moved sharply lower following Mnuchin’s remarks, perhaps because many equity investors were hoping the administration officials would sound less hawkish on trade than Trump himself. Last night, Trump surprised many by announcing that he would instruct U.S. trade officials to consider an additional $100 billion in tariffs as a reaction to China’s retaliation against U.S. tariffs.
Asked whether he knew in advance about the new tariff request, Mnuchin said, “Of course I did.”
In other words, this is no longer an administration divided against itself on trade. After recent departures, notably by Gary Cohn, the administration now speaks with one voice on trade.
Mnuchin described himself as “cautiously optimistic” that a deal to avoid trade barriers could be reached with China, in part because Trump and Chinese President XI Jinping “have a very good relationship.”
“But there is the potential of a trade war,” Mnuchin said.
Still, he said he was “cautiously optimistic” an agreement could be reached.
“The good news is, President Xi [Jinping] and President Trump have a very good relationship,” he said. “They speak regularly. There is clear understanding that we have mutual interest in reducing the trade deficit.”
The Dow Jones Industrial Average closed down more than 570 points, after earlier declining by more than 700 points. The Dow’s decline was good for about 2.34 percent. The S&P 500 fell 2.2 percent. The Nasdaq Composite tumbled 2.28 percent.