The Briefing, Vol. VII, Issue 32

  • Markets spooked over trade
  • An opportunity in Brexit
  • Republicans’ Senate picture darkens

Recession fears: The stock market took a big tumble last week on fears of further escalation in the trade war with China. 

Of course, a few traders’ jitters do not a true recession make. Yet trade wars — and tariffs in general — weaken economies, and traders are clearly spooked by them based on economic truths. In war, a time-tested strategy for naval powers has been the blockade, which weakens the enemy’s economy and makes him poorer. Tariffs are just the equivalent of a voluntary self-blockade. They do not make a domestic economy stronger.

Of course, there are tariffs, and there are tariffs. Most members of Congress in both parties would argue that tariffs against allies are a problem, but few are arguing against the tariffs against China.

China’s economy is hurting from the tariff war, and so is America’s. There are good arguments for Trump to carry this particular fight to a point. Those arguments are based on China’s status as a bad actor that steals American intellectual property and attempts to use its companies’ success in order to spy on people in the free world.

Still, there is a price to this strategy, because it most certainly isn’t good for the economy. Farmers especially are getting killed, as the Chinese are laying huge retaliatory tariffs against their products. This could have a direct political impact on Trump’s re-election prospects, especially when you look at a state like Iowa.

Bright side: Still, Trump can win a few big victories on trade if he plays his cards right. And he already seems to understand this. His USMCA trade deal would improve on many of NAFTA’s best aspects. He would also benefit immensely from a free-trade deal with the United Kingdom, made possible by Brexit at the end of October. 

Europe’s loss can easily become America’s gain. Britain is currently the biggest customer of European goods and one of the biggest providers of services. Brexit looks like it’s going to happen on October 31 — the Conservative Party will evaporate if it doesn’t, so Prime Minister Boris Johnson could hardly delay it if he wanted to. The U.S. is big enough and rich enough to fill the vacuum both as a supplier and as a consumer if Europe follows through and tries to kneecap Britain for leaving the European Union. Such a trade relationship would make both countries wealthier, and in this particular relationship, there’s no question of cheap labor undercutting U.S. workers.

There’s also the matter of Brazil, a much larger and rising economic power, which like Britain is currently being led by a natural Trump ally. Although politics will likely prevent too much progress in promoting free trade in agriculture, a deal covering all other industries is certainly possible, and Trump has said that a deal with Brazil and its South American neighbors is very much on his radar.

Trade 2020: President Trump’s fortunes in 2020 will probably rise and fall with the economy. If we’re in for a recession, as some say, then he’s in trouble. China holds this fact against him as leverage, since its regime is not democratically accountable and can at least try to push the limits of what people will tolerate for longer periods.

Yet with most economic indicators (aside from the inverted yield curve) still looking reasonably good, and the labor market quite strong, Trump may yet have opportunities to right the ship and calm everyone’s jitters over the next six to ten months. 

The more he does to open other markets, the less his increasingly intense fight with China will sting. At the moment, it seems like a minor miracle that things aren’t already much worse. 

When Trump first ran, he said he doesn’t oppose free trade, only bad trade deals. This is his chance to show that the distinction meant something.

Senate 2020

Recruitment success: Republicans’ Senate picture darkened considerably last week. The main reason: former Democratic Gov. John Hickenlooper finally dropped his hopeless presidential bid and instead announced he would be challenging Sen. Cory Gardner, R-Colo. It’s very early, but the only poll available so far (from Emerson, not necessarily a reliable pollster) has Hickenlooper winning by double digits. Hickenlooper’s nomination is not a sure thing — there are 11 candidates in the primary to take on Gardner — but he’d surely begin as the frontrunner.

Meanwhile, in Arizona, Sen. Martha McSally, R, looks ripe for the picking. She is already falling behind Democratic challenger Mark Kelly, astronaut and husband of former Rep. Gabbie Giffords, in early polling. Both McSally and President Trump are looking very weak in the Grand Canyon State, in fact. Recall that it was already an unusually weak state for Trump in 2016, and that makes it a potentially lose-able state for the GOP in 2020.

Prior to all this, Democrats and their aligned groups had announced their intention to spend very large sums against Sen. Susan Collins, R-Maine. Even if they can’t beat her, they may at least be able to rattle her and force Senate Republicans to fight and spend in a state where they haven’t really had to fight in some time. The silver lining is that Maine is a state trending Republican, and an older, whiter state where Democrats’ radical politics may be more of a turn-off than in other states of similar partisan composition. 

Recruitment failure? That’s the worse news. Now, the bad news: Aside from Alabama, Republicans have not been especially convincing with their Senate candidate recruitment in the few states where they might have a shot at taking over Democratic seats. 

In New Hampshire, the Trump administration seems willing to settle for Corey Lewandowski in what would surely be a steep uphill battle against Sen. Jeanne Shaheen, D. 

In Minnesota, top Trump consultants are getting behind former Rep. Jason Lewis, R. Although less of a longshot than Lewandowski, Lewis has baggage and lost a seat in 2018 that is more Republican than the state. He is, on the other hand, an unapologetic Trumpist who would be running alongside a robust presidential campaign, as Trump will definitely be playing to win in Minnesota next year. 

Worst-case scenario: The Senate is thus likely to be close in 2020. As in 2016, Republicans have their work cut out for them in defending the ground gained in a very successful 2014 campaign.

If Democrats go three-for-three in defeating Gardner, Collins and McSally, and if they somehow also manage to defeat Sen. Joni Ernst, R-Iowa, they’d have 50-50 control of the Senate in the event of a Trump loss. Yes, that’s a lot of “ifs,” but in that scenario, Democrats may try to seize unchecked power in Washington. 

They would surely try to abolish the Senate filibuster, as so many of them have publicly promised. The survival of the current system, which has long limited both sides (but especially conservatives) from making radical changes with slim majorities, could depend entirely on what Joe Manchin has for breakfast on any given day. (So far he has opposed abolition of the filibuster, but who knows?)

Abolition of the filibuster would allow Democrats to pass all manner of social and fiscal legislation. This begins with repeal of the Religious Freedom Restoration Act, and continues with passage of Medicare for All, the Green New Deal (abolishing both nuclear power and natural gas power), and the Equality Act (codifying their gender ideology in federal law).

Meanwhile, the filibuster is already gone for nominations. Democrats created an advantage for Trump in the judiciary when they abolished the filibuster for judicial nominations during Obama’s presidency. Trump has taken advantage, getting 100 district court and 43 circuit court judges confirmed since his presidency began — with 112 more vacancies to fill. Even better, many of the judges he replaced were Democratic appointments who retired when Obama was still president and Republicans controlled the Senate. And so by the time Trump finishes his first term, he could easily appoint 250 judges in four years, compared to 329 for Barack Obama in eight years. That’s very impressive.

If a Democrat defeats President Trump, then a Republican Senate would likely slow down the pace of confirmations to what it had been in the filibuster era, leaving more of Trump’s judicial legacy intact. Again, this is all assuming a Trump loss — the 2020 worst case scenario for the GOP.

In other words, Democrats foolishly gave conservatives a chance at a built-in advantage on the judiciary. But they will lose that advantage if they let Democrats gain control of the Senate and stage rapid-fire confirmations the way Senate Majority Leader Mitch McConnell has done for Trump. A Democratic Senate would give a new Democratic president the opportunity to stack the courts, and perhaps even pack the Supreme Court — another thing Democrats have openly discussed.

Silver lining: Still, Democrats have little room for error if they want to execute this maneuver. In order to win the Senate, they must go a perfect five-for-five, defeating four Senate incumbents (reasonably assuming that they lose Alabama) and defeat Trump to boot. 

This is the one thing Republicans must not allow, or else they will at least try to undo everything Trump accomplished in his presidency. Indeed, if today’s politics don’t seem divisive enough, the abolition of the filibuster could lead to a new and even more divisive chapter in American politics.