Peter Navarro is one of the key White House figures who has made a case for imposing stiff new tariffs on imported steel and aluminum. What ideas and philosophy drive Navarro? Economics correspondent Paul Solman revisits his profile of Trump's right-hand man on trade to consider what President Trump’s tariff announcement means for the global economy.
The president's decision comes after months of debate within the White House, the government and among many businesses about how to handle trade and tariffs.
One of the key figures in the White House who has made a case for these actions is the president's adviser Peter Navarro.
Economics correspondent Paul Solman has spent some time looking at the ideas and philosophy that drive Navarro.
He's back with an updated report for our weekly installment, Making Sense.
President Donald Trump:
China. China. China. China. China. China. China. China. China all the time. China.
China and unfair trade, key Trump themes for years. So this week's tariffs, as pushed by a favorite film of his, "Death By China," should come as no surprise.
China has stolen thousands of our factories and millions of our jobs. Multinational corporation profits are soaring, and we now owe over $3 trillion to the world's largest communist nation.
The filmmaker, Peter Navarro, was also quite clear when we met during the campaign.
We're going right down the toilet, and it's a made-in-China toilet.
Navarro, an economist then at the University of California, Irvine, was the campaign's main trade adviser, is now the White House's right-hand man on trade.
So how'd you get interested in and worried about China?
I teach MBAs. And I noticed, starting a few years after China joined the World Trade Organization, that a lot of my students were no longer employed. They were still coming to get their MBA, but they'd lost their jobs.
And I started to ask questions why. And, at that point, all roads were leading to Beijing.
Navarro has done plenty of technical work in economics, is a pioneer in online learning. But he began focusing on China just a few years ago.
The defining moment in American economic history is when Bill Clinton lobbied to get China into the World Trade Organization. It was the worst political and economic mistake in American history in the last 100 years.
In the last 100 years?
In the last 100 years, yes. China went into the World Trade Organization and agreed to play by certain rules. Instead, they are illegally subsidizing their exports, manipulating their currency, stealing all of our intellectual property, using sweatshops, using pollution havens.
What happens is, our businesses and workers are playing that game with two hands tied behind their back.
Navarro said you could even see the effects in Irvine, where Chinese students pay top dollar and flood the university, while their parents scoop up local real estate.
Generally all cash deals.
So your argument is, unfair trade practices, they amass dollars, they bring the dollars back here, they buy up property, and they drive up real estate prices?
That's right. And they drive up rents for younger people. They will drive up home prices for first-time homebuyers. So it's not just that we're losing jobs and factories. We're giving away our homes, our businesses, our companies, our technologies.
But, of course, we heard the same alarm about Japan in the 1980s, a false alarm. But China is different, says Navarro, so much bigger.
We are going to enforce all trade violations against any country that cheats.
The new tariffs, however, don't much affect China directly.
Canada is the largest exporter of steel and aluminum to the U.S., and though, for now, Canada and Mexico are exempted, tariffs would hit seven other bigger metal-exporters than China.
But Navarro has said that China simply built too many mills, driving down prices and killing U.S. firms.
Today, President Trump said the same.
Other countries have added production capacity that far exceeds demand and flooded the market with cheap metal that is subsidized by foreign governments, creating jobs for their country and taking away jobs from our country.
For example, it takes China about one month to produce as much steel as they produce in the United States in an entire year.
The new tariffs are being widely attacked as protectionism, however. Over 100 free trade Republicans signed a letter opposing them. But when we talked to Peter Navarro 18 months ago, he insisted tariffs weren't anything of the kind.
Wrong word. Wrong word.
Donald Trump is not a protectionist. All he wants to do is defend America against unfair trade practices.
Well, defend, protect.
Very different. Trade is good. Tariffs and the threat of tariffs are a negotiating tool to require countries like China to stop their unfair trade practices. That's the mission.
But what about retaliation? European Commission President Jean-Claude Juncker has announced his own tariff targets.
Harley-Davidson, on blue jeans, Levis, on bourbon. We can also do stupid. We also have to be this stupid.
Which prompted this London front page on Tuesday.
In China, Foreign Minister Wang Yi warned,
Choosing a trade war is a wrong move. The outcome will only be harmful. China would have to make a proper and necessary response.
Such tough talk has left Peter Navarro unfazed. Here he is last week.
I don't believe any country in the world is going to retaliate, for the simple reason that we are the most lucrative and biggest market in the world.
And the fact that tariffs will increase costs to U.S. firms and consumers, in this case those using aluminum and steel? Here's Navarro's response on "FOX News Sunday."
If you look at a 10 percent tariff on aluminum, a six-pack of beer or Coke, that's a cent-and-a-half. If you look at the other end of the spectrum, Boeing 777, it's one of the best airliners ever made, it's a $330 million aircraft. We are talking about an increase in cost at the worst of $25,000.
So, when you're talking about these massive costs or whatever as a fact, it's not. There are no downstream price effects on our industries that are significant.
Added up, however, the overall costs would be in the billions, to which Navarro's answer back in 2016 still holds.
Any increase would be less than the paycheck that all these people would be getting, both in terms of actually having a job, plus wages rising again.
The Trump trade doctrine is this. America will trade with any country, so long as that deal meets these three criterion: You increase the GDP growth rate, you decrease the trade deficit, and you strengthen the manufacturing base.
But isn't technology responsible for the elimination of American factory jobs?
Certainly, technology has played a part, but the dramatic change from 5.5 decades of 3.5 percent rate of growth prior to China entering our markets with illegally subsidized goods and the 1.8 percent afterwards suggests strongly that China has played an enormous role in the decline and downfall of the American economy.
And I can show on a blackboard exactly why.
Now, your typical economist would hardly agree. But, hey, says Navarro, your typical economist still believes in the old so-called Keynesian approach to reviving the economy.
All right, Paul, the growth of any nation is simply four things.
More consumption, C, by consumers and more G, government spending. He and Trump, however, will supposedly flip the script, stimulating more I, investment, by business, via tax cuts for the wealthy and corporations, while boosting net exports through new trade deals.
That's exports minus imports.
And, of course, if that's a negative number, that is, you have more imports than exports.
This is the big kahuna. This is what Donald Trump understands. This is the trade deficit. We run a trade deficit of close to $800 billion a year. And so this directly subtracts from this. This is why we're stuck in low-growth mode.
Actually, growth has picked up considerably since Navarro and I talked. Few economists think unbalanced trade was hampering it. And even fewer think the new tariffs will.
A typical critic is Josh Bolten, who runs the Business Roundtable.
This will cause huge damage across broad sectors of the economy.
You maybe will be able to give a little bit of help to the steel and aluminum industries. You're going to cause damage across any number of downstream industries and any number of industries that export to countries that are likely to retaliate.
Well, I guess we will see. The Trump-Navarro policy of tax cuts to boost investment and tariffs to defend American producers will get a test run at last, for better or worse.
For the "PBS NewsHour," this economics correspondent Paul Solman.
For the record, we have repeatedly requested interviews on trade with members of the Trump administration. Our requests have not yet been granted.
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