A Gyrating Economy, and Trump’s Volatile Approach to It, Raise Alarms – The New York Times

BIARRITZ, France — President Trump has again tossed out the economic and political playbook that guided other occupants of the Oval Office for generations as the United States dominated the flow of goods and services across the world.

In the space of a few hours, he declared that his own central bank chief was an “enemy,” claimed sweeping powers not explicitly envisioned by the Constitution to “order” American businesses to leave China and, when stock markets predictably tumbled, made a joke of it.

Mr. Trump’s wild and unscripted pronouncements on Friday renewed questions about his stewardship of the world’s largest economy even as he escalated a trade war with China before heading to France for a high-profile summit with the leaders of many of the world’s other major industrial powers.

Even some of his own aides and allies were alarmed by his behavior, seeing it as the flailing of a president increasingly anxious over the dark clouds some have detected hovering over an economy that until now has been the strongest selling point for his administration. They privately expressed concern that he was hurting the economy and was doing lasting damage to his own prospects for re-election.

Mr. Trump has become one of the biggest sources of global economic instability after presiding over a period of growth and job creation. While investor and consumer confidence at first rose impressively after Mr. Trump’s election and inauguration, lately so have indicators of economic uncertainty, which could dampen the continued growth the president seeks heading into his campaign for a second term.

“Uncertainty is generally bad for the economy, as firms put off making fixed investments until the uncertainty is resolved,” said N. Gregory Mankiw, a Harvard professor and former chief White House economist for President George W. Bush. “Of course, uncertainty is an inevitable fact of life. But uncertainty caused by erratic policymakers is gratuitous.”

The president’s volatile approach to the economic situation played out on Twitter over the course of only a few hours on Friday. He started the day boasting that “the Economy is strong and good, whereas the rest of the world is not doing so well.”

Hours later, he lashed out at the Federal Reserve Board for not taking the sort of action usually reserved only for an economy that is weak and bad.

Even for a president who has made a habit of personal attacks on his own Federal Reserve chair, Jerome H. Powell, Mr. Trump then took it further than any president has in modern times by comparing him to President Xi Jinping of China. “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi,” Mr. Trump tweeted.

Not content to leave it there, Mr. Trump proceeded to try to unilaterally dictate to the private sector how and where it should conduct business, presuming a role in the marketplace that no other president has asserted in similar circumstances.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA,” he tweeted.

While White House officials said no such order was being drawn up and it was not clear how it would be justified legally, at least without an act of Congress, a president does have an array of tools at his disposal to make it more difficult or costly for businesses to remain in China.

Shaken as both China and Mr. Trump again raised tariffs in a tit-for-tat exchange on Friday, stock markets fell sharply. The president turned that into a laugh line at the expense of a Democratic congressman from Massachusetts who ended his bid for the presidency on Friday.

“The Dow is down 573 points perhaps on the news that Representative Seth Moulton, whoever that may be, has dropped out of the 2020 Presidential Race!” Mr. Trump tweeted. (The Dow Jones industrial average finished the day 623 points down.)

Mr. Trump’s tweets caught most of his advisers and staff by surprise. His advisers have grown concerned that he is creeping perilously close to turning what they had hoped would be his signature issue into a liability. His moves risk scaring away voters, including some of his own backers.

His aides believe Mr. Trump is being urged on by Robert Lighthizer and Peter Navarro, his trade advisers, who generally share the president’s hostile view of China and who advocated a confrontational path with tariffs. Some said they have filled a void left by Mick Mulvaney, the acting chief of staff, who has not weighed in forcefully.

The tweet on corporations being “ordered” to leave, aides said, was drafted, however imprecisely, with a method in mind, sending a notice to corporations to leave China on their own.

Supporters of a muscular approach said Mr. Trump was waging a smart and necessary pressure campaign against China, which has unfairly taken advantage of the United States for decades while other presidents failed to take strong enough action.

If it ultimately results in jobs and factories returning to the United States, they argue, it will benefit both the country and the president’s political standing.

“Since the beginning, Trump has been the source of stability in this relationship,” said Stephen K. Bannon, Mr. Trump’s former chief strategist. “Today, China showed they are engaged in economic war against the United States. The president fired a warning shot to corporate America — this war will not end quickly; it’s time to bring your supply chains home.”

The president’s comments come at a time when Mr. Trump, known for a visceral brand of politics that shakes things up rather than a calm and steady style of leadership, has seemed especially erratic, spinning out wild conspiracy theories, provoking racial and religious divisions and employing messianic language about himself.

He has also veered wildly on policies lately, reversing himself over the past week alone on gun control, tax cuts and foreign aid. He even abruptly called off a trip to Denmark out of pique that its prime minister would not sell Greenland.

“Is Trump really losing it, or is this just more of the same, but more?” asked Russell Riley, a presidential scholar at the University of Virginia’s Miller Center. “Democracies don’t get into serious trade disputes with authoritarian regimes because, presumably, democrats know out of the box that when things get tough, they don’t have at their disposal the tool of last resort for the autocrat: a command economy.”

The long-simmering debate about Mr. Trump’s stability has flared again in recent days. On Twitter, the president’s critics have again called for invocation of the 25th Amendment, which provides for the removal of a president for incapacity.

Mr. Trump “is a clear and present danger—to our country, to the globe and to himself,” tweeted former Gov. William F. Weld of Massachusetts, who is waging a long-shot campaign for the 2020 Republican presidential nomination against Mr. Trump. He included the hashtag #25thAmendment.

The global economy will be front and center over the weekend in Biarritz, France, as Mr. Trump meets with his counterparts from the Group of 7 industrialized nations: Britain, France, Germany, Italy, Canada and Japan. No doubt the other leaders will be watching his moves warily even as Mr. Trump assails them for not following his lead on economics.

But at home, recent indicators suggest that corporate leaders are feeling less confident about the future. A monthly index of global policy uncertainty compiled by researchers from the University of Chicago, Northwestern University and Stanford University, which goes back to the late 1990s, reached a new high in June.

A version of the index for the United States, which dates to the mid-1980s, hit its highest level ever in January, amid a partial government shutdown over Mr. Trump’s demands for a border wall.

An index of trade policy uncertainty for the United States also has soared under Mr. Trump. In June, it was more than six times higher than its average level since the mid-80s.

“The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers,” said David French, a senior vice president of the National Retail Federation. “Where does this end?”

On that, no one could say.