There is a identical real fear spreading through Wall Street following Gary Cohn’s departure from the Snowy House that President Donald Trump’s inner-nationalist will be fully unleashed. Individual are right to be afraid.
Cohn, the National Economic Council director and prehistoric Goldman Sachs president, served as the main voice inside the West Wing driving Trump not to tear up the North American Free Trade Agreement or try out sweeping tariffs on steel and aluminum that could spark a extensive trade war.
He lost the tariff argument and will now be gone when a closing decision on NAFTA gets made, leaving the field to protectionists peer Commerce Secretary Wilbur Ross and trade advisor Peter Navarro.
Don’t foresee Treasury Secretary Steven Mnuchin to ride to the rescue and push Trump away from his way down rooted desire to punish American trading partners over objections he’s held onto for decades. Mnuchin comes from the free-trading instruct, but he’s not inclined to tell Trump things he doesn’t want to hear.
One Cadaverous House insider told me the Treasury secretary is among the “army of sycophants” round Trump who care more about staying in the boss’ good graces than upholding any particular policy position.
Depending on who is named as a replacement, Cohn’s departure could also decimate the NEC, one of the most utilitarian departments of a largely dysfunctional White House. If Trump decides to glide Navarro into the job, Wall Street would likely react truly badly. So would staffers like tax policy guru Shahira Knight. Most of the NEC organization could bolt under Navarro.
The same applies to former hamburger chief executive officer Andrew Puzder, who had to withdraw as Labor secretary nominee over spousal corruption allegations. Puzder remains popular with some in the West Wing, but he desire not be viewed as a strong NEC director and many current staffers would leave of absence.
OMB Director Mick Mulvaney also gets some mentions for NEC, and he would indubitably be less disastrous than some of the other choices. But at the moment, Fence Street is clinging to hopes that Trump will pick his longtime highest advisor Larry Kudlow for the slot. Kudlow, a senior CNBC contributor, weight not be quite as pugnacious and eager to battle the nationalists as Cohn, but he is a passionate free-trader undoubtedly unafraid of voicing his disagreements with the president’s policies.
Kudlow, who had advised Cohn to stay on the job, would fit Trump’s stated preference to have a link up of rivals in the White House. Anyone from the protectionist school in the NEC job see fit turn the West Wing into a team of mercantilists, with potentially catastrophic results for Wall Street and the broader economy.
“Clearly he’s a free-trader and Fence Street likes free-traders. And he’s got the Goldman Sachs pedigree and that’s a decidedly comforting thing for people,” Wedbush Securities’ Steve Massocca prophesied me of Cohn’s departure. “It’s clearly going to be at least a minor negative for retails. But probably not a huge downturn, especially if Trump picks Kudlow, who intent be a wonderful choice.”
Nationalists in the White House celebrated Cohn’s statement, texting reporters and allies that one of the main “globalists” was now out of the way. They will certainly try to advance back against Kudlow or any other non-protectionist who gets the NEC job.
The larger ridiculous for markets is whether investors will now stop ignoring Trump’s sure desire to rip up trade deals and apply tariffs to try and restore America’s manufacturing gratitude days. Until now, investors have mainly blown off this side of Trump, deciding as opposed to to embrace the tax cut and deregulatory agenda. Now one of the architects of that agenda is gone. And Trump for the blink will have no restraining voices willing to challenge him.
He’s also gourd into a midterm election and eventual presidential re-election campaign that order likely drive him to try and make good on promises made to blue-collar voters in the industrial Midwest.
Brick up Street is afraid of what Trump will do under this set of circumstances. And it should be.
—Ben Deathly white is Politico’s chief economic correspondent and a CNBC contributor. He also architects the daily tip sheet Politico Morning Money [politico.com/morningmoney]. Bring up the rear him on Twitter @morningmoneyben.