World Bank President Ivanka Trump? By now, few would put such a gambit past a White House that’s more concerned with smashing long-established norms than governing.
Perhaps President Trump might nominate son-in-law Jared Kushner to replace Jim Yong Kim, who’s vacating one of the most coveted jobs among the Davos set. Hardly a stretch for a US leader who’s suggested naming his sister to the Supreme Court (and daughter Ivanka for the United Nations ambassador role).
Yet there’s a serious risk to consider as Kim leaves the World Bank for an investment-firm gig: how Trump might use the institution as a new stick with which to beat China and other major Asian export powers.
Traditionally, the US gets to install its own man at the World Bank, while Europe picks International Monetary Fund heads. And rank politics can taint decision-making. Look no further than George W Bush’s White House ordaining Iraq-invasion architect Paul Wolfowitz to run one of the “Nineteenth Street twins” institutions that long called the shots in global finance.
Trump may put forth a China-skeptic to help drive the next leg of his trade war. His team already put the screws on Kim, prodding his team to deal less with the second-biggest economy. In 2018, for example, David Malpass, US Treasury undersecretary, warned early and often about Beijing’s growing power. By December, Malpass was telling Washington lawmakers that US pressure got the World Bank to lend less to China (a drop of nearly 30%).
Might Trump tap Malpass to move into Kim’s office on Washington’s fabled 19th Street, across the road from IMF head Christine Lagarde? Or might Trump go the full Monty and appoint Peter Navarro, his most-nakedly anti-China advisor? Nothing would communicate heightened confrontation like promoting the co-author of “Death By China.”
Kim’s sudden departure presents an ideal opportunity to up the ante on trade tensions, not just toward China but Japan and South Korea, too.
Trump’s taxes on $250 billion of mainland goods are wreaking havoc with Asia’s top economy. For now, additional tariffs are on hold pending trade talks with President Xi Jinping’s government. Yet moves behind the scenes to limit Chinese investment in corporate America suggest Trump is agitating for more.
The Trump administration is particularly irked by Xi’s ambitious “Made in China 2025” and “Belt and Road” initiatives. Kim’s resignation, effective February 1, could be catnip for a president desperate for a win on the global stage. Along with a bull market in scandals, Trump’s legislative prospects in Washington have all but evaporated. His obsession with a southern border wall faces a wall of opposition.
It would also send a signal to Prime Minister Shinzo Abe’s government in Tokyo. An early 2019 priority is browbeating Japan into a bilateral trade deal that Abe’s Liberal Democratic Party doesn’t want. Tokyo has tried to talk Trump out of 25% taxes on imports of cars and auto parts. Trump might see new World Bank leadership as a way to regain the momentum.
President Moon Jae-in’s government in Seoul, meantime, is bracing for a new weak-dollar policy that could slam South Korean exports. Trump has made no secret of plans to demand non-manipulation pledges from Tokyo and Seoul while he demands the Federal Reserve halt its tightening cycle. As Trump angles for a sharply weaker dollar, he’ll find it handy to have leadership of one of the “Nineteenth Street twins” in his corner.
It’s not that easy, of course. It’s quite likely Kim’s departure – three years before his second term ends – is tied to his standoff with Team Trump. The US can’t unilaterally install a successor, as it holds just a 16% stake in the World Bank.
When the US chose Kim, a South Korean-born naturalized American, in 2012, he faced challengers from Colombia, Nigeria and elsewhere. If Trump goes with a Malpass or a Navarro (or an Ivanka), he may indeed face opposition from some of the 189-member governments who help pick World Bank heads. Might Xi’s China angle for a World Bank leader from developing Asia?
Still, the White House has long gotten its way, using its leverage. For example, the World Bank recently agreed to tweak its lending structure in exchange for US backing for a $13-billion capital increase. If Trump sees the institution as his latest plaything, and a way to up the ante on Asia, the tone coming from 19th Street could soon sing a more Trumpian tune.