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Treasury Unit Responsible For U.S. Trade Policy Will Soon Be Staffed By Just David Malpass And 8 Copies Of Navarro's 'Death By China' Book

Steve Mnuchin is losing the battle - and the war.
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There's a vociferous debate going on right now about who will ultimately "win" the trade war between the U.S. and China and if you're one of the people debating that, you might want to look at yourself in the mirror and see if there's a moron staring back at you.

Protectionism is an antiquated concept that has no place in modernity. Even if you disagree with that, your opinion is largely irrelevant because in an era of globalized supply chains and open markets, attempting to lean against the wind by rewriting the rules of trade and commerce will invariably lead to all manner of undesirable outcomes, including, but by no means limited to, lost jobs and higher prices on consumer goods.

Everyone with any sense knows this. It doesn't take an economist to come to the conclusion that if you start restricting access to your market for a key input like, say, steel or aluminum, whatever you manage to "accomplish" in terms of propping up domestic producers of those materials will be negated (and then some), by rising costs to businesses that make things which depend on those same inputs. Downstream businesses will in turn be forced to either eat those costs and spit them out in the form of lower margins and lower profits, or else pass those costs on to consumers.

In the same vein, when you slap tariffs on imports, whoever got slapped is going to slap back and that means prices will rise in far-flung end markets for goods produced domestically. Rising prices to end consumers in those markets means less demand and less demand means lower sales and lower sales will eventually translate into lost jobs.

And on, and on. That's just the reality of this situation and no amount of populist bombast is going to change it.

Again, most people understand this, including Steve Mnuchin who, like Gary Cohn before him, has been put through the proverbial wringer over the past several months as he fights tooth and nail to fend off Peter Navarro in the interest of saving the world from a catastrophic trade war.

We've documented Steve's trials and tribulations extensively here and while he scored a victory in late May when Peter Navarro was sidelined for acting like Peter Navarro, that victory would prove to be of the Pyrrhic variety, because no sooner had Mnuchin declared the trade war "on hold" after striking a truce with Chinese Vice Premier Liu, than Trump abruptly reversed course, slapping tariffs on a handful of America's allies and promising that come July 6, the war with China would officially commence.

Well as it turns out, Steve's Treasury Department is experiencing the same kind of exodus and turnover that we've all come to expect from this administration and the proximate cause is Trump's trade war. Here's Bloomberg:

About 20 career staff have quit the U.S. Treasury Department’s international affairs unit in less than a year, draining resources from a key office in the Trump administration’s escalating trade battles with China and Europe.

The wave of departures began in September, shortly after David Malpass -- a champion of President Donald Trump’s protectionist message -- took over the division. The unit employed about 200 people at the end of the Barack Obama administration.

None of that should come as a surprise, especially the bit about people getting the hell of Dodge once they heard the name "David Malpass." Bloomberg continues:

Some of the former officials decided they couldn’t support the administration’s trade policies; others chafed at Malpass himself, whom they’ve described as disdainful of some civil servants and often unprepared, according to six people familiar with the matter.


Some people say that Malpass, who was confirmed by the Senate, is mismanaging the unit. They note that Treasury Secretary Steven Mnuchin has dressed down Malpass for striking too hard a tone in public statements about China -- an episode that harmed morale throughout the unit.

Apparently, Mnuchin has also tried (unsuccessfully I guess) to keep everyone happy. The half dozen people who spoke to Bloomberg for the post linked above described Steve as a "respectful, good listener."

Yes, Steve is good at "listening", but not so good at speaking when he's distraught about the way things are going, as evidenced by the silent protest he lodged last month after losing control of the narrative to Navarro (again).

Oh well, it's too late now, Steve.

Even if you resign, you can't repair the reputational damage and it looks like we may be past the point of no return with China, so the bottom line from here on out is that no matter who "wins" the trade war, Steve Mnuchin loses.

And nobody likes a "loser" - especially Steve's boss.


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