When I am overseas, I often get asked what on earth is going on in Washington? The publication of famed Washington Post investigative reporter Bob Woodward’s book “Fear: Trump in the White House” popularized the term “crazytown” to describe President Donald J Trump’s Washington and added to fevered speculation about turmoil in the White House, whether the president could be impeached, when Robert Mueller will issue his report and much else.
If you only read The Washington Post and The New York Times every day, you might reasonably conclude that the Trump administration is under siege. In fact, the administration does indeed face a host of challenges, but it also enjoys strong support among a fairly broad swath of the electorate. Let me try to make a little sense of what is going on in Washington by addressing five key topics:
- Trump’s key foreign and domestic policies
- The political and economic impact of those policies thus far
- Why, given all the opposition to President Trump, does he remain popular and at this early stage a strong candidate to be re-elected? • The November 2018 midterm elections and why they mattered
- Implications for US-Indonesia relations
Of course, summarizing all of the president’s policies would be beyond the scope of a short essay like this, but let me focus on a few key specifics that I think may be of interest. Trump has pursued a nationalist, “America first” foreign policy that represents a sharp departure from that of his predecessors. To take a few examples: he is a skeptic of the benefits of globalization and believes it increases America’s vulnerability; he believes the United States should work on a bilateral basis with its international partners, rather than through multilateral agreements that he thinks either disadvantage the US and its workers or give us a disproportionate share of costs to bear. That’s why he decided to withdraw from the Trans-Pacific Partnership (TPP) and the Paris climate agreement, and at times has called into question the value of bedrock alliances such as NATO; he has proposed substantially reducing US contributions to the United Nations and announced that the United States will withdraw from Unesco and the UN Human Rights Council; he has confronted China over its many unfair trade policies and theft of intellectual property (an area, by the way, where Trump enjoys fairly wide bipartisan support).
On the domestic side, Trump has focused like a laser on fulfilling his campaign promise of bringing back jobs to the assembly line, deregulation and cutting taxes on business. To advance those goals, Trump is seeking to renegotiate the North American Free Trade Agreement, has imposed a series of tariff measures on China that could reach $250 billion in Chinese goods, and has imposed additional duties on key imports such as steel (25 percent) and aluminum (10 percent) with most of our key trading partners. He has proposed substantial changes to our immigration system, vowing to construct a border wall on the US border with Mexico, remove all unlawful entrants, end what he calls chain migration and eliminate the visa lottery system.
Many of these policies have been challenged by the US Congress, nongovernmental organizations or the courts. So the border wall, for example, has not received funding. Nor has the administration received congressional approval to stop the visa lottery program.
But Trump has turned traditional Republican domestic policies on their head. For example, the Republican Party used to be the party that warned against high budget deficits. In 2018, it pushed through tax cuts for business and other policies that have substantially increased the budget deficit. Those are just a few of the key changes the president has undertaken or proposed; there are many more.
What has been the economic and political impact in the United States of President Trump’s policies thus far? Let me take each in turn. From the president’s perspective, the economic impact has been positive. GDP growth remains strong – second quarter growth for 2018 was just under 4 percent. Unemployment remains low at just under 4 percent and the economy continues to generate a healthy 150,000 to 200,000 new jobs each month. Financial markets have remained bullish. The Dow Jones Industrial Average increased 31 percent in Trump’s first year in office and continues to grow – albeit at a slower pace in 2018.
To be fair, the news is not all good. Many analysts have pointed out that foreign direct investment into the United States has fallen substantially since Trump took office. According to the Council on Foreign Relations, for example, total net FDI inflow in the first quarter of 2016 was $146.5 billion. For the same quarter in 2017 it was $89.7 billion, and was down to $51.3 billion in 2018, around one-third of the 2016 level. This is worrying because Congress and the administration took several steps that should have helped boost FDI during that period.
In particular, the business tax cut approved by Congress and signed by the president should have lowered taxes for investors and made production and investment more profitable.
On the trade side, many are concerned that the administration’s tariffs are having a harmful impact. The influential president of the US Chamber of Commerce, Tom Donohue, for example, recently stated that “tariffs are beginning to take a toll on American businesses, workers, farmers and consumers as overseas markets close to American-made products and prices increase here at home. Tariffs are simply taxes that raise prices for everyone. Tariffs that beget tariffs that beget more tariffs only lead to a trade war that will cost American jobs and economic growth.”
Critics have also questioned the Trump administration’s tactics on trade. Lawrence Summers, a former treasury secretary and Harvard president, pointed out that a key rule of strategy is to unite your friends and divide your potential adversaries. Certainly everyone wants to see China pursue fairer trade practices and stop stealing intellectual property. But if the United States truly wants to make headway it should enlist Asian allies and the European Union, which shares our concerns, so we speak with a common voice. Instead, Summers argues, the United States seems to be doing the opposite. The United States alienated Asian partners by pulling out of the Trans-Pacific Partnership and upset its Group of 7 allies by imposing tariffs on steel and aluminum, as well as by making further threats that have caused them to doubt America’s commitment to the rule of law in global trade. Likewise, in pulling out of multilateral agreements such as the TPP the Trump administration has done nothing to negotiate new agreements in their place, thereby disadvantaging US companies and leaving other countries to set the rules.
Now let’s examine the domestic political impact of President Trump’s policies. President Trump’s approval ratings have been among the lowest of any post-World War II president in their first two years. They are lower than those of presidents Clinton and Obama, both of whom suffered catastrophic losses in their first midterm elections, and those of President Reagan, who had moderate losses in the 1982 midterm elections.
But what is important to understand is that President Trump’s support among his base remains very strong. Why is that? The Wall Street Journal reported a telling survey a few months ago in which 65 percent of respondents said they agreed “the system in America is rigged every day against ordinary Americans.” Three-quarters of Democrats agreed as did six in 10 Republicans. Trump very effectively taps into that concern. So his supporters tend to ignore the tick-tock of daily scandals in Washington because they believe that only he is working on their behalf, and they admire what Trump is doing to disrupt Washington.
Another factor is that Trump has a very good sense of what his base cares about and will vote for, and takes great care to make sure that his policies and public statements will have the approval of his base. So despite all the criticism you hear in Washington and liberal enclaves, Trump retains the strong support of his base, who continue to represent a significant portion of the Republican electoral base. That’s why most Republicans have been reluctant to criticize Trump – they fear that the base in their districts and states will turn against them. Trump also has surprising success sowing doubt about things that are said against him. He will often outright deny things, even when the facts suggest otherwise. He often makes misleading statements to blur the facts in his favor or put down his critics. The Washington Post keeps a running daily tally of
His supporters tend to ignore the tick-tock of daily scandals in Washington because they believe that only he is working on their behalf, and they admire what Trump is doing to disrupt Washington.
these. As of November, the newspaper counted more than 6,000 false or misleading claims made by Trump since taking office.
Trump continuously dismisses negative stories in reputable newspapers such as The New York Times and The Washington Post as “fake news” and has had a real impact in creating antagonism toward the press and doubt about what they report.
Implications for US-Indonesia relations
Despite the convulsions that have marked US foreign policy during Donald Trump’s presidency, US-Indonesia relations appear to have survived relatively unscathed thus far, compared to the significant changes that have marked American relations with many of our traditional allies, as well as important countries such as China.
When I was ambassador in Jakarta, I used to lament how little attention Indonesia got in Washington. In this case, that might be an advantage. But I also think there is genuine bipartisan support for Indonesia, its strong
democracy, its strong counterterrorism record, its relatively strong economy, Indonesia’s future promise and the fact that its best days lie ahead.
Several factors have helped buffer Indonesia from the tumult other countries have experienced in their relations with Washington. First, the Trump administration early on prioritized Indonesia with helpful high-level visits by Vice President Mike Pence and Defense Secretary James Mattis, both of whom enjoy significant influence in the administration. Second, the fact that US-Indonesian trade and investment totals and Indonesia’s surplus with America are much lower than US trade with the EU, China and partners such as Canada and Mexico has kept Indonesia a little more off the Washington radar and target list. Third, Indonesian leaders have engaged effectively with the Trump administration to address its concerns. The most recent example of this was Trade Minister Enggartiasto Lukita’s successful trip to Washington in July 2018, where he met with key cabinet officials and offered to increase Indonesian imports of US agricultural commodities to help reduce the US trade deficit with Indonesia, and agreed on a roadmap to deal with other areas of friction.
Likewise, Secretary Mattis’s continued efforts to ensure that Indonesia will not be sanctioned because of its procurement of
Indonesian leaders have engaged effectively with the Trump administration to address its concerns.
Sukhoi fighters from Russia is a positive sign that the administration recognizes the importance of our strategic partnership with Indonesia and the strategic, economic and military upsides of that partnership.
All of that said, there are steps Indonesia could take to help strengthen relations and reduce the potential for retaliatory measures by the Trump administration. First, it would be helpful for Indonesia to minimize economic nationalist actions that affect US companies. The recent decision by Pertamina, the Indonesian national energy company, to take over the Rokan field, for example, was a missed opportunity since Chevron was prepared to invest billions of US dollars in the field. Pertamina and Indonesia will now have to find other financing for this project.
Second, while it is certainly understandable that Indonesia wants to tax luxury imports to reduce its current account deficit and protect the rupiah from further depreciation, imposing new taxes on US consumer goods is likely to undercut the goodwill generated by Minister Lukita’s visit. Third, much of the US business community is closely watching the divestment negotiations of American company PT Freeport Indonesia regarding its gold and copper mines in Papua Province. Everyone wants to see Indonesia and Freeport reach a mutually satisfactory agreement in which Freeport retains management control. This, of course, is in Indonesia’s own interest, as Freeport is prepared to make a massive new investment to develop not only the largest but also the most technically challenging mine in the world.
Finally, it is important for the Indonesian government to continue to work constructively with the Office of the United States Trade Representative to address the concerns of American companies, reduce the trade surplus and ensure that Indonesia is meeting the Generalized System of Preferences criteria.