Unfortunately, Peter Navarro was on national television this morning expounding on the relative merits of his lunatic quest to rewrite the rules of global trade and commerce on the way to reshaping the world in the image of his 2012, straight-to-YouTube “blockbuster” Death by China.
Peter is a regular Rasputin figure at 1600 Penn. Over the course of the last year, he’s survived multiple attempts by the likes of Steve Mnuchin and Gary Cohn to wrest control of U.S. trade policy from the clutches of protectionism and he (Peter) seems to get stronger with each passing effort to water down his influence.
In May, Navarro was sidelined from trade negotiations with China after reportedly getting into a profanity-laced shouting match with Mnuchin in Beijing. With Navarro out of the picture, a comparatively rational Mnuchin struck a truce with China and told Fox that the trade war was “on hold”. Navarro and Steve Bannon (who started running his mouth to Bloomberg about Mnuchin selling out America) were furious and the backlash from the isolationist contingent caused Trump to change his mind.
Fast forward to September and here we are, on the brink of Trump going “all in”, where that means slapping tariffs on everything China imports to America.
“Following President Trump’s threat of further escalation, we now think the probability that all imports from China will ultimately be subject to tariffs has risen to 60%”, Goldman wrote on Sunday, reiterating their call from last week, when the bank suggested the administration’s penchant for using Beijing’s retaliatory measures as an excuse to push the envelope still further likely bodes ill.
On Tuesday morning, Navarro essentially confirmed the notion that Trump is prepared to slap duties on all Chinese imports. In an interview with Fox Business, Navarro said the President will impose more tariffs on Beijing should China retaliate to the levies applied to $200 billion in goods starting yesterday.
Beijing of course will retaliate and they’ve clearly stated that no further negotiations can take place if Trump and his surrogates continue to do what Navarro did this morning – that is, show up on TV and make threats.
Here’s a bit from Barclays regarding what comes next after the disparity between exports forces China to get creative when it comes to retaliating:
Given the limited US exports to China, the Chinese government officials have also threatened to use non-tariff ‘qualitative’ measures which could stifle the business of US companies in China. By pressuring its consumers and corporates to boycott and reduce shipments of goods manufactured by local subsidiaries of US companies in a way that minimizes damage to the Chinese economy, China could inflict damage to the long-term prospects of those US companies. Moreover, the US firms that are already doing business in China could find themselves facing increased anti-corruption probes, enforcement of stronger environmental and other regulations, and other bureaucratic procedures as part of its response.
As far as NAFTA goes, Navarro told Fox that “small things are holding up a big deal” with Canada and that Congress should address NAFTA following the midterms no matter who wins the House.
On Monday, Navarro told CNBC the following about market volatility and trade bombast:
In the absence of President Trump basically having a tough stance on trade, of setting the standard that trade must be free, fair and reciprocal, we would not have countries talking to us in earnest like they’re talking to us now. And that’s the beauty of the Trump trade strategy. Sometimes it creates a little volatility on the stock markets because the president takes, rightly, strong trade positions.
Got that? The “beauty” of Trump’s strategy is that it has the potential to create wild swings in your portfolio.
In any event, this is just more of the same banter from the mastermind of Trump’s protectionist push, but it’s worth flagging because at this point, “more of the same” is tantamount to an escalation.