It doesn’t sound as though Peter Navarro is sold on the idea of the US rolling back tariffs on China as part of an interim trade deal.
Although he isn’t mentioned by name, Reuters on Thursday afternoon said plans to lift duties on Beijing in exchange for Xi’s signature have been met with pushback at 1600 Penn. Navarro is the most hawkish advisor in Donald Trump’s inner circle and has clashed repeatedly with trade doves, including and especially Steve Mnuchin.
Reuters did reiterate that the plan, as of now, is to “cancel the tariffs in phases”.
The details around the “Phase One” deal remain sketchy. It’s clear that key structural issues won’t be addressed this year, or maybe ever. After all, it’s far from certain that Trump will get a second term, and you can be absolutely sure that Navarro’s days in Washington are finished as soon as Trump leaves town for his new home in Florida (or prison).
Given that reality, Peter and other trade hawks are likely pushing hard to squeeze as much out of China over the next year as possible, starting with the interim agreement that’s widely expected to be signed as soon as the end of this month.
“The prospect of lifting [tariffs], even in phases, has drawn fierce opposition from many of [Trump’s] advisers in and outside of the White House and his re-election campaign”, Reuters said Thursday afternoon, in a piece that briefly shook markets.
Larry Kudlow sought to “clarify” things just before the close on Wall Street. “If there’s a phase one trade deal there are going to be tariff agreements and concessions”, he said.
Trade hawks have repeatedly insisted that keeping the tariffs in place is one of the best ways to ensure compliance and given the nebulous nature of “Phase One”, it’s entirely likely that tariff relief without any meaningful concessions from Beijing on IP theft and forced technology transfer will be seen as Trump caving in order to secure an ostensible “win” in the face of mounting political pressure inside the Beltway.
Of course, the president is between a rock and a hard place. The market has now priced in the removal of the September 1 tariffs and the cancellation of the December 15 escalation – and then some. If the administration were to balk at the last minute, it could lead to a grievous selloff.
Failure to “correct” the situation in short order in the event there’s another escalation could then spill over and manifest itself in still worse PMI data and/or undermine consumer sentiment during the key holiday shopping season.
All of that on top of a public impeachment inquiry.
You can understand why this is one time when Trump might politely ask Navarro (and other hawks) to shut up.