Candidate Barack Obama in 2008 bashed China as a currency manipulator and called the foreign purchase of an iconic American beer company a “shame.”
Now, Obama is bound by the rhetorical constraints of the presidency. As he prepares to meet next week with a top Chinese leader on a range of strategic and economic issues, similar statements could roil markets, disrupt alliances or trigger retaliation.
The Republican candidate he faces in November won’t be so restricted.
“His opponent can say what they’d like and how they’d react to an immediate crisis in the full knowledge that they won’t have to do it,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
Market uncertainty resulting from the European debt crisis, the escalating confrontation with Iran over its nuclear program and rising tension between China and the U.S. over trade amplify any utterances on those subjects from the leader of the world’s largest economy and the most powerful military.
The power of the president’s words was on display early in his first term. On Feb. 9, 2009, Obama raised market expectations by saying Treasury Secretary Timothy Geithner would unveil “some very clear and specific plans” for shoring up the financial industry and loosening credit.
After Geithner made the announcement the next day, the Standard & Poor’s 500 Index dropped 4.9 percent and the Dow Jones Industrial Average declined 4.6 percent on investor concern that the plan lacked specifics and the treasury secretary’s warning it would “take time” for the strategy to work.
Still, the advantage of having the platform of the presidency outweighs any restrictions on what Obama can say, according to Tony Fratto, who served as a White House and U.S. Treasury spokesman under President George W. Bush.
“It’s the world’s biggest megaphone, the ability to take action,” Fratto said. “He has great control over the agenda.”
Obama’s advisers said they’ve been studying how past incumbents, including Republican Bush and Democrat Bill Clinton, balanced presidential responsibilities with the simultaneous re-election campaign.
“What’s true is that, in the White House, not just the president but his spokespeople can cause international incidents and affect markets by saying the wrong thing,” Dan Pfeiffer, Obama’s White House communication director, said.
China and Currency
Those sensitivities are particularly acute when it comes to China and currency.
While Republican front-runner Mitt Romney has said he would slap sanctions on the Chinese for unfair trade practices and direct the Treasury Department to list China as a currency manipulator, Obama meets next week with the man in line to become the country’s next president, Vice President Xi Jinping.
While trade and currency are among top issues in the relationship, Obama is seeking China’s cooperation on broader global issues, including dealing with the nuclear ambitions of Iran and North Korea.
“Romney has the freedom to say those kinds of things,” said Fratto. “The president is boxed in by the reality of the policy environment and the very complicated relationship that it’s his charge to maintain with China.”
Rhetoric about China regularly becomes heated during campaigns as candidates make appeals to middle-income Americans concerned about jobs being shipped to cheaper labor markets. The U.S. had a $273 billion trade deficit with China in 2010.
Obama is no exception. Heading into the election year, the president has been taking a tougher stance with China, in part due to political demands and because of his own frustrations with the slow pace at which it’s responding to calls for its currency to appreciate and move toward a more balanced economy.
“Enough’s enough,” he said in November on China’s slow appreciation of the yuan.
Still, it doesn’t rise to the same level as when he was a candidate. In 2008, Obama called Bush a “patsy” for not standing up to China in trade talks. He told the Alliance of American Manufacturers in Pittsburgh in April of that year that the best way to deal with China was to tell them, “you guys keep on manipulating your currency, we are going to start shutting off access to some of our markets.”
Even with the recent strong language, when the Senate passed legislation in October to let U.S. companies seek duties on Chinese goods to offset the weak yuan, the administration said any action on China must be consistent with U.S. obligations under international treaties. The administration declined to brand China as a currency manipulator in its semi-annual report to Congress in December.
Another example of the difference between candidate and incumbent is illustrated by the displeasure Obama expressed in 2008 with Belgium-based brewer InBev NV’s takeover of Anheuser-Busch Cos. without affecting markets.
During a campaign stop in Missouri, just days before the St. Louis-based beer maker agreed to Inbev’s $52 billion acquisition offer, Obama said it would be a “shame if Bud is foreign owned.”
While the remarks might have played well with voters in the swing state of Missouri -- Obama lost there by 3,903 votes out of 2.9 million cast -- a similar statement by Obama today might raise concerns about a U.S. move toward protectionism and shake markets.
“A comment like this would probably have broader macro implications at least in the short term,” said Barry Knapp, the head of U.S. equity strategy at Barclays Capital in New York. “You’d get a negative currency reaction and you’d probably get a sell-off at least in the sector involved, if not in the market overall.”
Dismissing the acquisition of an iconic U.S. company by a foreign-owned corporation would also undercut one of the administration’s actions that Obama is touting in this year’s election: the rescue of the U.S. auto industry.
Obama’s administration engineered the purchase of Detroit-based Chrysler Group LLC by Italian carmaker Fiat SpA.