Trump Appoints "Death By China" Author Peter Navarro To Head Trade Office, Hints At Trade War With Beijing

Tyler Durden's picture

Another day, another shot across the bow from Donald Trump aimed squarely at China.

Having already participated (and in the case of one, precipitated) two mini diplomatic snafus with Beijing in just the past two weeks, Trump is sending a clear message to Beijing that US-China trade under his administration will be anything but business as usual, by creating a National Trade Council inside the White House to oversee industrial policy and has decided to appoint a hard core China hawk to run it.

According to the FT, which broke the news, Trump has chosen Peter Navarro, a Harvard-trained economist and one-time daytrader, to head the NTC. The author of books such as "Death by China" and "Crouching Tiger: What China’s Militarism Means for the World" has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance — a message that the president-elect sold to voters across the US during his campaign.

Speaking to the American public, Trump said “I read one of Peter’s books on America’s trade problems years ago and was impressed by the clarity of his arguments and thoroughness of his research,” Trump said. “He has presciently documented the harms inflicted by globalism on American workers, and laid out a path forward to restore our middle class.”

Fast forward to today, when Trump has made it clear that at least when it comes to the Chinese trade relationship, the president elect will engage in a wholesale overhaul of the legacy relationship. More details from the FT:

The Trump transition team described Mr Navarro as a “visionary economist” who would “develop trade policies that shrink our trade deficit, expand our growth, and help stop the exodus of jobs from our shores”. His appointment is the second restructuring of trade policy that will see Mr Trump attempt to follow through on his focus to resurrect manufacturing, and create more industrial jobs, in the American economy.

 

The Trump team said the NTC would lead a “Buy America, Hire America” programme that would boost job creation in areas such as infrastructure and defence. It will work in tandem with three other offices in the White House: the National Security Council, the National Economic Council and the Domestic Policy Council.

 

They added that it would mark the first time there was an office dedicated to manufacturing inside the White House, in a strong signal that Mr Trump plans to follow through on the promises that he made on the campaign trail.

While the Navarro appointment will certainly raise eyebrows, the move to create the new office is also likely to be seen as controversial by mainstream economists, many in the business community and pro-trade Republicans. Targeting the trade deficit is seen by many economists as likely to lead to protectionist trade policies. It may also be complicated by Mr Trump’s plans for an increase in spending and rising interest rates, both of which have already yielded a surge in the dollar that is likely to make US exports less competitive and would normally lead to a bigger trade deficit.

Navarro's appointment also means that the speculation that Trump may launch a "Border tax proposal" to eliminate the US trade deficit is far more likely than the 30% probability some assign to it. If it indeed passes, then watch out, because as Deutsche Bank calcualted yesterday, it would lead to a 15% surge in the dollar, which would almost certainly lead to a full blown Chinese economic crisis.

For those who missed it, here is what a border tax proposal would mean in three paragraphs:

  • A “border tax adjustment” would, roughly speaking, be equivalent to a 15% one-off devaluation of the dollar. Imports would be 20% more expensive, because corporates would have to pay the new 20% corporate tax rate on their value. Exports would be roughly 12% “cheaper”, because for every $33 of earnings earned from $100 of exports (we use the 33% gross margin of the S&P), there would be a 12% tax cost ($33 earnings*35% current tax rate) that would no longer be imposed on corporates. Taking the average impact on the prices of exports and imports is equivalent to a 15% drop in the dollar.
  • A border tax adjustment would be very inflationary. The price of exports doesn’t affect the US consumption basket so would have no impact on CPI. However, the cost of imports would go up by 20%, which based on a simple relationship between import PPI and US inflation would be equivalent to a 5% rise in the CPI. Corporates may of course choose to absorb part of the rise in import costs in their profit margins. But either way, the order of magnitude is large.
  • A border tax adjustment would be very positive for the US trade balance. Similarly to the dollar calculations, a border tax adjustment would be equivalent to an across the board import tariff of 20% and an export subsidy of 12%. Keeping all else constant and applying standard trade elasticity impact parameters to an average of the two estimates results in a more than 2% drop in the trade deficit equivalent to more than 400bn USD, or equivalently, an almost complete closing of the US trade deficit.

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Lost in translation's picture

Deport Keith Olbermann to China.

That should bring the Reds to their knees.

Catalonia's picture

Less international trade = less oil demand = fracking not profitable 

eforce's picture

Last time this happened it resulted in a Pearl Harbour.

The Saint's picture

China going to be shuttering those factories.  We'll help China clean up their air by bringing those factory jobs back to America.

 

stacking12321's picture

yeah, china, it might be our currency, but it's your problem!

MillionDollarBonus_'s picture

Trump better be careful – a trade war with China wouldn’t work out for us. China has all the cards, and we need them far more than they need us. Trump needs to apologize to China now for taking a call from the terrorist renegade state of Taiwan. We need to respect the One China policy or expect serious repercussions. Sometimes, when I read zerohedge I wonder whether Tyler even watches the news? These articles are so detached from what is reported on reputable news outlets like CNN that one has to wonder.

MOVE ASIDE TRUMP, CHINA IS THE NEW GLOBAL POWER
carbonmutant's picture

You're buying your weed from the Democrats, aren't you?

rhyzimmer02's picture

My short AUD/USD is starting to look fantastic.  0.60 here we come

beemasters's picture

Trump must have had bad blood with China from his past business dealings. One thing we know of him is he holds grudges. Why he practically pardoned Hillary is still puzzling, however.

Citxmech's picture

If this is a "hint," I'd hate to see what a clear statement looks like.

johngaltfla's picture

Uh, no. He's buying heroin, no doubt about it. Why screw around with the weak stuff.

Ghost of Porky's picture

"Risten to mirrion dorrar bonus. He sounds very interrigent."

HowdyDoody's picture

Trade war? How does that work? The US won't trade its useless fiat for (fairly) useful Chinese goods? Hmmm. That might actually work.

 

 

Stuck on Zero's picture

The best trade strategy has always been tit-for-tat. Trump is following a proven game strategy.

johngaltfla's picture

Based on this story and the so-called financial media pissing themselves over this, 2018 is shaping up to be a new year on the Chinese Lunar Calendar:

"2018 - Year of Bear with Major Erection"

Paul E. Math's picture

I'm fine with ti-for-tat.  As long as China gets tat.

So-Now-What's picture

 

 

Ha Ha Ha..!!

 

Thnx MDB for the best laugh of the day !! ..:-)

DownWithYogaPants's picture

Don't encourage the poor moron.  If he thinks you think him the least bit funny he continues.  He has this moronic left wing blog he continually shills here.

ImpliedVol's picture

MDB is a satire account and his entire blog -- including even the user comments -- is satire too. The Tyler's might be behind it. The user comments on his blog posts are the funniest bit though.

Antifaschistische's picture

a trade war with China will hurt China...sure, it means they will be forced to sell their exports even cheaper to the rest of the world, which will destroy the US capability to compete in the export market.  Unless the US companies mfr "things" overseas in cheaper labor markets....which is exactly NOT what Trump wants.

 

in the end....productivity wins....and American factory workers do not want to be productive.

Nexus789's picture

Productivity is irrelevant if you don't have a 'competitive' national economy.  You can only generate economic wealth by out competing other nations. Competing.on the basis of cost is dumb as well.. Does not matter how cheap your products if they are not 'competitive'

bh2's picture

"China has all the cards"

No, they don't. The buyer holds all the cards. Not the seller.

Gladi8tor's picture

YO...I WILL STEP ASIDE TO NO COUNTRY!  AMERICA FIRST AGAIN! 

dogismycopilot's picture

took you that long to pry Trump's dick out of your ass?

welcome back, Carter. 

kiwigal's picture

The people of the U.S. have chosen a man that has the genius to undo some of the inequalities that have been created through globalisation. President elect Trump, is bringing together some of the most successful people on the planet to attempt this herculean feat. The biggest threat that will come will be China starting a war with the blockade of trade routes in the Sth China Sea. The only one happy with that scenario will be the gold bugs.

LMAOLORI's picture

 

 

 

ROFL - MDB do you write Satire professionallY?

SILVERGEDDON's picture

Wanna fuck with my drone ?

Here, now you get my weapon of mass destruction in return, egg rollers. 

Ha ha ha, velly fonney. 

macholatte's picture

 

We all know that in order to bring jobs back to USA we need factories which need customers which need jobs.... etc.
We pay 20% more money for shit we don’t need but get 20%+ more employment.
I’m good with that.

America First

Twee Surgeon's picture

First you have to get back a lot of the manufacturing machinery that was sold to China when the factories closed down, you have to get back the people who know how to run them, the people that can install and maintain them, clearance from ten government agencies to push the ON button. Millwrights, electricians, Hydraulic techs and on and on, Then you have to get two generations that have never seen the inside of a factory to say that giving up 2/3rds of their life to create (Nails, Shoes, plumbing fixtures, whatever.) 8 - 12 -16 hour shifts of repetition in many cases. Many people who have actually worked in "Manufacturing" do not miss it at all and have obviously found other ways to get along.

I'm not seeing it being as simple as it sounds, half of the Millennials won't even pass a drug test, the paychecks will get sucked up by Student loan and Child Support Liens that will never go away and can't be Bankrupted out, housing will still be unaffordable and the older folk are too soft and bitter to see any future in the 1950's model of America. China has miles and miles of empty cities built by the commie geniuses of China at the expense of 2+ generations of Westerners ( in jobs lost to the plans of idiots.) China is a nation of rigged lottery winners who will blow their load on Lamborghini's and Graceland interiors.

You can't go home again.... ( George Orwell. )

DownWithYogaPants's picture

So same old demo / lefty / prog chorus of "Why even try?"

You sir are not the brightest bulb.  

Not to mention the fact new factories will be so automated that the experience will be nothing like that of the factory of yesteryear.  

Twee Surgeon's picture

I'm not saying don't even try, and I'm a lot further right than you would be comfortable with, I just happen to come from a line of people that got things built, a family waist deep in the Industrial revolution that brought the world out of the peonage of the Agricultural ages into the True Progressive age.

I doubt that you have the ability to change your own brake -pads or jam rags.

Do you understand that Machines are like living creatures, babies. If you do not have people who know how to take care of them,they start crying, then they get a temperature and if not properly taken care of Die.

The plug and play future of robots building robots and running something as simple as a Frisbee Factory is absolutely delusional bullshit.

Machines have ghosts in them, personalities, requirements, tendencies. Skills that run/ build/maintain machines are handed down through families and apprenticeships, robots tighten nuts to Foot/Pound/Inches but they do not hear the little cracking noise that dooms the machines future and they are screwed when the guiding lazer gets a little dusty. Some auto mechanics are doing a lot of hearing in a simple engine tune up, this separates the Wheat from the Chaff. "Factories will be so Automated in the future" are you off your fucking rocker ? Do you know what a tenth of a second loss or gain in Automated Systems anywhere turns into after ten further action / fails ?

People who talk about robots and automation should go and switch out an automatic transmission in a Cadillac or BMW and then write a book about the Robotic future.

Your Juicer and Toaster might look like simple things, it took mankind thousands of years, feelings and tears, to make your Toaster happen. Fucking Robots are the equivalent of the Academe Francais that keeps French stagnant and dying. WE are done (Says the French language.) No intrusion, the Art is complete. Your argument is Wrench free, Naive, and a Throw away Toaster equal to your understanding of the effort that is taken to make neat things BE. Go and buy a socket set and a  broken lawnmower, fix the fucker, call me in the morning with your Robot maintained future story. Get a fucking wrench, your going to need it.

Raging Debate's picture

Twee - Hogwash. Four people I know well and I only know about twenty well, work at factories, a couple at Hanes, one at Pratt Whitney and one at Sig Sauer. The latter two pay well. Hanes not that great but pays the bills for the couple I know who work there.

There will be many millenials willing to work for $15-18 an hour. Still wont be much benefits for a good long while but chicks dont dig guys in Mommy's basement. A decent job gets them a decent ride, small house or apartment (with a roomie can be done anyways) and gets you the girl. Drug tests are easy to beat. There are companies that sell clean piss online. 

 I would take such a job, I did a short stint when I was in my early twenties but have a micro company in publishing which makes me dough but if I had to pay the bills your damn right this Gen-Xer would be a machine operator again. Might suck but I would do it for a few months, scimp and save and relaunch a small biz, get SBA loan. Factory machines can be bought from many places in the world including the US. Many small.or.mid size manufacturers still use machines from the 80's that still work fine, many of them still operate on DOS software.

I do agree about your comment it wont be all robots building robots. The larger manufacteres sure but robots all building robots across the board will require commercialization of quantum computing, I give that a 15-20 year time frame in any event. 

Raging Debate's picture

Exactly. Trade has to reblance for job and wage increases. Fining businesses for hiring illegals and shutting off most welfare will halt the flow.of them.coming in, also good.for wages. Increasing revenue is the only way out of malaise. But it will cause some geopolitical frictions. There never was a painless way out. But adding energy and infrastructure stimilus is also smart. Same with the tax cuts. Yeah, it helps the already rich which sucks, but it will help every other class too.

So far, I like what I see, time will tell. We still may get world war three, but getting rid of some traitors and descalation with Russia might just well stave off nuclear war. China and the US have had a love/hate relationship for a long time. China may decide to march a couple million troops on the Silk Road, release  there nasty pet North Korea and other nasties. I hope not. 

Paul E. Math's picture

I've been critical of Trump's billionaire cabinet appointments.  But this one I think I like.

But don't the Chinese have billions (trillions?) of US treasuries that, if sold, would destroy the US dollar and put immense upward pressure on yields?

BullyBearish's picture

Trump has to buddy up with Russia if he wants to go after China...you know, the ol' divide and conquer thing...

sleigher's picture

White christian nationalist countries teaming up?  That ought to send shivers down Soros' spine!

Idaho potato head's picture

Heh the choice for Russia(and Japan) Go with the new silk road plan and asian infrastucture or stick with a failing corrupt empire and blow up the rest of the world....difficult choice.

Illegal's picture

Give Japan 2 aircraft carriers and you will see the big fat Panda flip out.

AllBentOutOfShape's picture

A trade war with China means a trade war with Russia along with the rest of the BRICS.  Trump's hostility towards Iran is also indirect aggression towards Russia. 

Trump says he wants to be friends with Russia, but the ideology and policies he's revealed thus far clearly say otherwise.

TheObsoleteMan's picture

Your history is wrong. The Japs attacked us because we slapped them with an oil embargo. At the time, the US was the world's number one oil producer. That was 90% of their oil imports! Roosevelt essentially forced them into attacking us, as  their economy {and war machine} had ground down to a halt.

Kayman's picture

More American jobs = more oil demand = higher prices for American oil.

 

Ghost of Porky's picture

KISS YOUR BEROVED PETRODORRAR GOODBYE, DONARD!

Kirk2NCC1701's picture

Trump will then issue "T-Bills"

Backed by FBI, CIA, DOD.  Unlike now, when it's only backed by the Fed.

/s

SilverRhino's picture

Say herro to brockade of all coastal shitties comrade!!  

An Lushan Rebellion 2.0 coming right up ya commie fucks.

Budnacho's picture

Oooo China gonna get it's tendies hurt!

SallySnyd's picture

Here is an article that explains how President Obama is attempting to start a new global trade cold war:

 

http://viableopposition.blogspot.ca/2016/05/president-obama-united-state...

 

While the media focuses on Donald Trump's inward looking trade perspective, Obama has threatened the globe with retribution if the trade game isn't played his way. 

buzzsaw99's picture

if trump does an all out trade war with china i don't care what other lies he's told. all will be forgiven. fuck china. seriously, fuck them in the asian anus bitchez.