What Trump is doing with DACA and trade could backfire badly

Washington Post

 

President Donald Trump's protectionist streak is back in full force, and it threatens to derail the U.S. economy, one of the few bright spots for the Trump administration so far.

The business community is railing against Trump's move to potentially deport nearly 800,000 young, undocumented immigrants by ending the Deferred Action for Childhood Arrivals program. Over the weekend, he also threatened to pull back on trade with South Korea and even China. Many CEOs and Wall Street investors see these moves as anti-business and another example of Trump being unable to focus on what actually needs to get done to lift economic growth and wages.

"With approximately 700,000 DACA recipients working for all sorts of businesses across the country, terminating their employment eligibility runs contrary to the president's goal of growing the U.S. economy," said Neil Bradley, senior vice president at the U.S. Chamber of Commerce, America's largest business lobby.

The concern is that Trump's latest actions could cause CEOs and Wall Street to hit the "pause" button on new spending and investment because they see too much chaos and uncertainty in Washington. That would slow the economy down at a moment when the United States is already dealing with a big economic blow from Hurricane Harvey. The storm's bite is expected to be short-lived as long as Congress and the White House get more financial aid to Texas soon, but that isn't a given with all that Congress has to do in September. Now the White House is shoving more issues like DACA toward Congress.

"This environment under Trump is more uncertain than what the Obama administration created because the president and his own party aren't even on the same page," says Mark Hamrick, senior economic analyst at Bankrate.com.

The stock market sold off heavily Tuesday, with the Dow falling than 234 points and volatility, measured by the VIX index, spiking nearly 30 percent. Investors are concerned about a potential war with North Korea and the president's inability to focus.

Uncertainty has been an issue since Trump's first days in the White House, but there was hope Trump would move full steam ahead on tax revision and on avoiding a government shutdown or default in September. There was reason to believe Trump would set aside his protectionist agenda to erect trade barriers and cut immigration this fall, especially after senior Trump adviser and outspoken nationalist Stephen Bannon left the White House and Trump's other trade threats didn't lead to action. Hurricane Harvey seemed to pull the country together, giving Trump an opening to get quickly finish some of the "must do" items of a lengthy September agenda.

Instead, Trump kicked off September by threatening a trade war with China and South Korea and pushing to deport young people at a time when businesses are struggling to find enough workers to fill all the available jobs.

It puts him at odds with the business community and members of his own party in Congress.

"The United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea," Trump tweeted Sunday, aiming his comment at China, a country that accounts for almost $650 billion in U.S. trade a year. While Trump often points out the United States buys more from China than it sells to China, curbing trade with China would have consequences. It would probably trigger a global trade war, and it would mean the loss of up to $185 billion in American exports to the world's second largest economy.

So far in Trump's presidency, his threats on trade just turned out to be hot air. He said he would pull out of the North American Free Trade Agreement with Canada and Mexico. Instead, his administration is renegotiating it. He talked repeatedly of putting tariffs on steel and aluminum imports this summer, but it was repeatedly put off and Trump now says it's behind several other major items on his agenda. The China rhetoric may turn out to be more of the same, but businesses are on edge amid news this weekend that Trump had instructed his senior staff to draft the documents that would end the U.S.-South Korean trade deal.

"President Trump's threat to withdraw from the U.S.-Korea free trade agreement at this moment is nothing short of bizarre," says Daniel Griswold, a trade expert and senior research fellow at the Mercatus Center at George Mason University. "It vastly complicates the deadly serious work of coordinating our security and diplomatic response to North Korea's nuclear threat."

Republicans in Congress, including Rep. Kevin Brady, R-Texas, a key ally of Trump's on tax revision, reiterated their support for the South Korea trade deal on Tuesday. The House Ways and Means Committee, which Brady chairs, put out a statement saying, "we must not withdraw from the agreement."

The U.S.-Korea trade deal was negotiated under both President George W. Bush and President Barack Obama. It has bipartisan support because it's not just about economics, it's about containing North Korea and China's influence in Asia. If Trump cancels the deal now, it sends a message to South Korea to deepen its relationship with China. It also plays into North Korea's hands by causing a rift between South Korea and the United States.

Some U.S. industries have also come to rely on easy trade with South Korea. U.S. beef exports to South Korea exceeded $1 billion for the first time in 2016, making it the second-largest destination for American beef after Japan, according to the U.S. Meat Export Federation. Cattle ranchers, most of whom are located in states that went for Trump, would feel an immediate impact if Trump cancels the deal.

On Tuesday, the Trump administration announced it would end DACA in six months, although it left the door open for Congress to take action to prevent the deportation of these young people, who have grown up in America and done nothing wrong except being the children of undocumented immigrants. The White House argues these immigrants are in the country illegally and that they take jobs away from native-born Americans. But that argument doesn't hold up economically. The U.S. has 6.2 million job openings, a record level. Plenty of companies are hiring, and unemployment is at the lowest level since 2001.

"250 of my Apple co-workers are #Dreamers. I stand with them. They deserve our respect as equals and a solution rooted in American values," tweeted Apple CEO Tim Cook on Sunday, using "dreamers," a popular term for young people who are part of the DACA program. Apple has more than 600 good-paying job openings at its corporate headquarters in California alone, far more than the number of Dreamers working at the company.

To qualify for DACA, an undocumented immigrant has to have completed high school or be actively working toward a degree. Many Dreamers go on to college. Five percent of Dreamers have bachelor's degrees, according to the Migration Policy Institute, and another 30 percent are enrolled in higher education or have completed some college. The vast majority of those who enrolled in DACA end up working after their education.

Trump has been touting how well the economy is doing lately. Unemployment is at a 16-year low, the stock market is soaring, and growth hit 3 percent in period between April and June. In a very encouraging sign, even business investment was finally picking up a bit. But Trump is putting that momentum in jeopardy by angering business leaders yet again.

"There's little of the president's recent actions which seem to be helpful for the economy," Hamrick says.

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