Huge Mistake Coming Up: Trump Set to Promote Trade Hawk Peter Navarro

At one point it appeared Trump was ready to cast aside Navarro. The situation reversed and it's a huge mistake.

In a very unfortunate turn of events, Trump is Set to Promote Trade Hawk Peter Navarro.

The White House plans to promote an adviser known for his hawkish views on trade policy, giving economic nationalists a stronger voice in internal debates as the Trump administration nears decisions on high-profile trade issues.

Peter Navarro, an economist who helped shaped Donald Trump’s 2016 protectionist campaign platform, will be named an assistant to the president, according to a person familiar with the matter.

Mr. Navarro began Mr. Trump’s presidency with broad influence and regular access to the Oval Office but his role was quickly limited after he clashed with the aides who oppose his views on trade deficits and multilateral trade agreements.

The move to elevate Mr. Navarro comes as the White House is nearing decisions on several high-profile trade matters.

It is unclear exactly how Mr. Navarro’s role will change, but the promotion is likely to give Mr. Navarro a more regular role in trade debates and meetings at the White House, according to the person familiar with the matter, a trade expert who has discussed the move with White House officials.

“This gives Peter a more formal seat at the table when trade and manufacturing policies are discussed,” this person said. “That’s something that has been in question the last six months.”

Another Smoot-Hawley Performance Coming Up?

The Smoot-Hawley Tariff Act and the following retaliatory tariffs by America's trading partners were major factors of the reduction of American exports and imports by more than half during the Depression. Economists disagree by how much, but the consensus view among economists and economic historians is that "The passage of the Smoot–Hawley Tariff exacerbated the Great Depression."

It's not often I agree with the consensus economic opinion, but the consensus economic opinion of Smoot-Hawley is undoubtedly correct.

Greenspan on Free Trade

Free trade is one issue on which Alan Greenspan was unwaveringly correct.

''We can erect walls to foreign trade and even discourage job-displacing innovation,'' Mr. Greenspan said. ''Tensions might appear to ease, but only for a short while. Our standard of living would soon begin to stagnate and perhaps even decline as a consequence.''

Mr. Greenspan disagreed with Mr. Kerry's proposal to link free-trade agreements with commitments by other countries to enforce tougher protections for workers and the environment.

Federal Reserve Chairman Alan Greenspan expressed concern Friday that Americans are losing faith in the benefits of free trade. He warned that efforts to erect protectionist barriers were "unwise and surely self-defeating."

"The evidence is overwhelmingly persuasive that the massive increase in world competition--a consequence of broadening trade flows--has fostered markedly higher standards of living for almost all countries who have participated," Greenspan said in a speech to foreign ambassadors at a conference in Dallas.

"The United States has been in the forefront of the postwar opening up of international markets, much to our and the rest of the world's benefits," Greenspan said in prepared remarks [to Congress]. "It would be a great tragedy were that process stopped or reversed."

Greenspan the Maestro

Bob Woodward dubbed Greenspan the "Maestro" in a book by that title.

He has since been vilified for his role in the housing bubble. The one thing Greenspan was never given credit for was his unwavering support for free trade.

Reaching Out to AFL-CIO

On February 22, I blasted Trump for Reaching Out to the AFL-CIO.

A couple of readers asked what's the matter with talking. Today we have the answer: everything.

This is not a case of talking with rogue foreign powers in an attempt to stop a war. This is a case of talking with and listening to trade-policy morons seeking to start a trade war.

States like Michigan and Ohio pushed Trump over the top in his victory over Hillary, but bad policy is bad policy.

Clueless About Trade

Trump does not understand trade deficits. The "art of the deal" cannot work when you don't understand essential points.

To understand the math, please see Trump's Tariffs Show He's "Clueless About Trade".

Trump's trade policies are set to exacerbate the next global recession.

Mike "Mish" Shedlock

Comments (35)
No. 1-35
lol
lol

trade war?what trade war? they use the billion plus slaves to send us trillions in cheap overpriced junk that breaks after a month or don't work at all ,we send them worthless iou's

Carl_R
Carl_R

I think it is more a situation where they sell us worthless (electronics,) beads, and trinkets, all of which will be in the landfill in a decade, and in exchange slowly take ownership of our land, houses, apartments, and businesses. That is why I suspect we won't see the real estate bubble pop in the near future, even though it becomes ever more expensive for us to find a place to live. There is an awful lot of real estate in the US, and so this could go on for many years.

thimk
thimk

Old wilburs lumber tariffs certainly had an impact. Don't you need lumber to improve infrastructure? https://www.cnbc.com/2017/04/25/trumps-canadian-lumber-tariff-could-cost-us-homebuyers-about-1200.html

Kinuachdrach
Kinuachdrach

Probably most of us readers of Mish's thoughts would agree -- Free Trade would be a great thing! It has certainly worked between, say, Texas & Louisiana. But most of what the lying media call "Free Trade" is not Free Trade at all. It is Managed Trade -- and the punters who supposedly negotiated the deals on behalf of the US have done a rotten job. Can the President and his staff do a better job of re-negotiating those dreadful Managed Trade deals? Let's give the Administration a chance to show what they can do.

Kinuachdrach
Kinuachdrach

These badly negotiated Managed Trade deals -- like the WTO or NAFTA -- have created winners & losers in the US. Some people have bought cheaper goods, and other people have lost jobs and are now a burden on the taxpayer. It is a "Tragedy of the Commons" type of situation. Is the US as a whole better off for these one-sided Managed Trade deals? The answer to that is unclear.

Kinuachdrach
Kinuachdrach

President Trump has talked about "reciprocity". They sell to us, we sell to them, on an even basis. Seems like that is the closest we are going to get to real "Free Trade" in this world. And it is very unfortunate that so many non-reciprocal trade deals have historically been passed off to the unsuspecting public as "Free Trade".

abend237-04
abend237-04

Tip O'neill was right: All politics is local. When it comes to trade, that's a problem because the local view is always to defend local jobs and the status quo. If you were making buggy whips in 1903, Henry Ford was your worst nightmare, whether you knew it or not at the time.

SweetKenny
SweetKenny

It is just a matter of time before the US and China are at loggerheads. Will Chinese people in the US be “trusted” when someone has to be blamed for the 2nd depression and politicians will take none of it? The US is dying the death of excess and debt but will it go quietly like the USSR before it?

AWC
AWC

Tariffs only succeed in making the “Protected” industries less competitive, and ultimately putting them out of business. Never mind that it’s the American consumer who pays for it. Looking more everyday like Donny is going to be the one to bring on the “The Great Reckoning “ putting an end to this dog and pony show.

Top-GUN
Top-GUN

Mish,,, you need to block ahengshp and his toko-boss crap...

Realist
Realist

Yes. It would be great if you could block the toko crap that is clogging up the comments section. Meanwhile, I couldn’t agree more with Mish on this topic. Trade agreements are always positive for both sides, otherwise they wouldn’t sign them. Trying to use Trade as an excuse for lost jobs only leads to protectionism, which is lose-lose. Trump has already begun his protectionist policies. Lumber, steel, aluminum, agriculture, washing machines, etc. This is already forcing up prices for consumers. The trend on trade is not good. A trade war will probably lead the US and others into the next recession.

philbq
philbq

I would argue that free trade as it is currently defined has been a loser for American labor and most of the benefits have gone to corporations and their stockholders. Of course there are cheap frying pans at Walmart but it does not compensate for the loss of millions of family-wage manufacturing jobs. Even now, companies are moving manufacturing to Mexico, where the labor now is even cheaper than China. For American labor to compete with workers in China and Mexico, it is a race to the bottom. I would propose a targeted tariff on goods from nations with exploitively wages (China, Mexico) but with no tariff on importing nations having comparable wages to the U.S. (Canada, Germany). The problem is that it is impossible for American labor to compete with workers in Mexico who make $2 per hour. But competing with German workers and products is a fair competition. Competition is good, but on a level playing field.

philbq
philbq

Typo: that should read "exploitively low wages (China, Mexico)"

philbq
philbq

Regarding the argument that corporate-controlled free trade benefits consumers through low prices on manufactured products, are Apple products cheap? No - they moved production offshore but did not lower prices. They just made more profits from lower labor costs. Same with Nike. Basic kitchen wares are cheaper, but many products are still expensive. Take Levi jeans: they moved their U.S. factories to Mexico 20 years ago. Are Levi jeans cheap? Not at all- they are still expensive. So the offshoring of production does not always bring a cheaper product to consumers. It only brings greater profits to the manufacturing corporation, and destroys jobs for American workers, with resulting negative effects to the economy. Wages are still low for 60% of the workers. Credit debt is high. Easy credit cannot replace good wages. So the benefits of free trade are very mixed. For many, it has been a loser.

philbq
philbq

Finally, the Smoot-Hawley Act of 1930, contrary to establishment myth, did not lead to the Great Depression. Most economists agree that its effect on the depression was minimal. Milton Freidman, the icon of conservative economists, thought that Smoot-Hawley did not have much effect on the depression- he thought the Fed was responsible. So let's lay to rest the myth that tariffs caused the Great Depression.

Realist
Realist

Philbq; your concern for American workers is understandable. But trying to protect high paying jobs in the US vs the equivalent low paying jobs in other countries is a losing proposition. The US company becomes increasingly uncompetitive over time, and eventually cuts the “protected” workers or goes out of business. If you build a protectionist wall around the US and become a completely self-contained economy, your companies would never be able to grow and sell to other countries.

philbq
philbq

Realist: you are distorting my position. I do not advocate and did not call for a "protectionist wall around America". I called for tariffs only on countries with slave-labor wages , like China and Mexico. I do not propose tariffs on countries with similar wages to the U.S. , like Canada and Germany. Therefore, countries would be rewarded for having decent wages while trading with the U.S. Only counties with slave-labor wages would be tariffed. This would encourage Mexico to raise wages, and stop the race to the bottom for workers. And I believe this trade policy would be very politically. Protecting good wages is good policy.

philbq
philbq

typo: "I believe this policy would be very popular politically."

philbq
philbq

When companies increase profits by off-shoring production to a low wage country, the increased profits only benefit stockholders. And 80% of all stock is held by the upper 20% income group. So the financial benefits of globalization have mostly gone to the wealthy, while the working class has seen their economic status steadily eroded. Globalization has been a loser for the working class.

Realist
Realist

Hi philbq; your position seems reasonable and understandable. I also agree that it is politically popular. I’m simply saying that it is difficult to fight free market forces. Competition continues to force businesses to become leaner over time. If an auto manufacturer in Detroit is sourcing parts, they look for the best value provider; just as you walk into a store and buy the best value product, wherever it came from. It is difficult to prevent this process of self-interest.

Kinuachdrach
Kinuachdrach

Realist -- since you are a realist, you understand that most of the complex 1,000+ page trade deals are not "Free Trade". And you understand that the Leftist who have squatted in the bureaucracy for decades do not have the interests of the American people at heart. And you understand that massive trade deficits are unsustainable. And you understand that there is a link between massive trade deficits and the declining labor market participation (aka value creation) in the US.

Kinuachdrach
Kinuachdrach

Free Trade would be wonderful. It is amazing that smart people fall for the untruth that complex managed trade deals are free trade.

Sechel
Sechel

can't think of a worse economist to listen to than navarro. protectionism never works

philbq
philbq

The principal reason Trump is in the White House is he promised to protect U.S. jobs. His support in the Rust Bel states (Michigan, Wisconsin, Ohio, Pennsylvania0 was from his promise to protect American jobs. So if his trade policy now is about protecting some U.S. industries, you should not be surprised.

philbq
philbq

Typo: "Rust Belt states..."

philbq
philbq

My central point is that trade policy should not be about which country 's workers will work cheapest. That is a race to the bottom. Trade should be about the qualityof the product. The German's understand this. Their products are quality, and their workers are well-paid. That is a win-win. U.S. companies should compete with other countries with quality products, not cheapest workers.

philbq
philbq

Mish: Free trade proponents (and flacks) have for many years been saying that Smoot-Hawley caused the Great Depression. It is standard myth or propaganda). Since you mentioned Smoot-Hawley, I felt it germane to point out that few economists believe that the trade act caused the Depression. The standard scare tactic of free traders is by protecting U.S. industries, a depression will be caused.

Kinuachdrach
Kinuachdrach

There is a world of difference between the over-simplified world of theory, where it is smart to have no tariffs on imports even if the other side has high tariffs against your exports, and the real world in which we live. Since the US has become the Importer of Last Resort after decades of one-sided "free trade" deals, it seems that a collapse in world trade would make life worse -- for the exporters! China, Germany, Japan. In that circumstance, threatening to undo the one-sided trade deals may be a great negotiating tactic -- a way of getting those bad actors to level the playing field, which could lead to an expansion in world trade.

Kinuachdrach
Kinuachdrach

Lets see how things play out. Even Mish might be surprised!

philbq
philbq

Trade should be a competition of products, not a competition about which county has the cheapest labor.

Kinuachdrach
Kinuachdrach

And let's not get into competitions about which country has the highest subsidies to their industry, or the lowest environmental standards, etc. Establish a level playing field, then let the most efficient producer win.

Realist
Realist

Asking your government to protect your jobs and protect your industries is a recipe for disaster. Hoping for a trade war because you think it will hurt the other guy more than it will hurt you, is just plain stupid. These are all lose - lose scenarios. Yet somehow, it’s easy to rally people to “the cause”. Trump thinks he can “win” a trade war. Hopefully he will won’t extend this to wanting to win a nuclear war.