China "Shocked" By Navarro Appointment, As Trump Team Proposes 10% Import Tariff

Tyler Durden's picture

As the FT first reported yesetrday, in a dramatic development for Sino-US relations, Trump picked Peter Navarro, a Harvard-trained economist and one-time daytrader, to head the National Trade Council, an organization within the White House to oversee industrial policy and promote manufacturing. Navarro, a hardcore China hawk, is 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.

In the aftermath of Navarro's appointment, many were curious to see what China's reaction would be, and according to the FT, Beijin's response has been nothing short of "shocked." To wit:

The appointment of Peter Navarro, a campaign adviser, to a formal White House post shocked Chinese officials and scholars who had hoped that Mr Trump would tone down his anti-Beijing rhetoric after assuming office.


“Chinese officials had hoped that, as a businessman, Trump would be open to negotiating deals,” said Zhu Ning, a finance professor at Tsinghua University in Beijing. “But they have been surprised by his decision to appoint such a hawk to a key post.”

Shortly after the announcement of Navarro's appointment, the US Office of the Trade Representative yesterday put added more fuel to trade tensions with Chine when it put Alibaba, China’s biggest e-commerce platform, back on its “notorious markets” blacklist of companies accused of being involved in peddling fake goods.

Cui Fan at the China Society of WTO Studies, a think-tank affiliated with China’s commerce ministry, warned that Beijing would respond to any unilateral action by the incoming Trump administration. “China is preparing itself for US trade actions,” he said. “China will respond with counteractions of its own.”

China has found itself on the receiving end of diplomatic chaos for much of the past three weeks, starting with Trump accepting a congratulatory phone call from Taiwan president Tsai Ing-wen in early December, which defied almost four decades of precedent. It only escalated from there, and culminated with the confiscation of a US marine drone last week, which however, China promptly returned to the US earlier this week.

Trump’s recent rhetoric has given China cause for concern: since the call with Ms Tsai, he has publicly criticized China’s currency policies and island fortifications in the South China Sea. He has questioned Washington’s commitment to the One China policy, and also angered Beijing when he suggested that the confiscated navy drone was “stolen” by a Chinese ship. 

Wang told the People’s Daily: "We will lead the way amid a shake-up in global governance and take hold of the situation amid international chaos. We will protect our interests amid intense and complex games."

Meanwhile, He Weiwen, deputy director of the Center for China and Globalisation, told the FT that Beijing could retaliate against US exports and restrict market access for US companies.

* * *

In short, China is angry, and may get its wish to retaliate soon, because as CNN reports (take it with a "real fake news" grain of salt) Trump's transition team is discussing a proposal to impose tariffs as high as 10% on imports. A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed at spurring US manufacturing, which could be implemented via executive action or as part of a sweeping tax reform package they would push through Congress.

According to CNN, Reince Priebus floated a 5% tariff on imports in meetings with key Washington players last week. But the senior transition official who spoke to CNN Thursday on the condition of anonymity said the higher figure is now in play.

Such a move would, if confirmed, would likely send the US hurtling into a trade war with other countries, especially China which is already "shocked" by recent Trump action, while sending the cost of consumer goods in the US even higher. "And it's causing alarm among business interests and the pro-trade Republican establishment."

The senior transition official quoted by CNN also said the transition team is beginning to find "common ground" with House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady, pointing in particular to the border adjustment tax measure included in House Republicans' "Better Way" tax reform proposal, which would disincentivize imports through tax policy. The border tax, as explained here two days ago, would also lead to trade wars with key trading partners as it is the functional equivalent of a USD devaluation and is represents yet another tax on foreign exports.


Curbing free trade was a central element of Trump's campaign. He promised to rip up the North American Free Trade Agreement with Mexico and Canada. He also vowed to take a tougher line against other international trading partners, almost always speaking harshly of China but often including traditional US allies such as Japan in his complaint that American workers get the short end of the stick under current trade practices.

And now, if CNN is correct, Trump may be about to follow through with it. The question on everyone's lips, then, is with China having repeatedly warned it will retaliate if and when the US launched the first salvo in what will clearly be an escalating trade war, just how will China escalate.  One potential way is through its holdings of $1.1 trillion in US Treasuries and various other US assets.


As we reported earlier today, a SAFE official told reporters at a briefing that while China will make "tactical adjustments" on its US debt holdings, Beijing's long-term investment view on US debt has not changed, and that U.S. Treasuries are China’s long-term strategic investment targets. That, too, may also change quickly.

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hedgeless_horseman's picture


Oh no! 

The plastic pumpkins and fake dogshit made in China are going to cost 10% more at WalMart!

What will I ever do?


Buy local.

Stop sending your capital to China, Wall Street, and WalMart.

Give your capital a chance to come back to you.

2) Everything I Want To Do Is Illegal: War Stories from the Local Food Front,  by Joel Salatin.  $11

mrs_horseman and I love this guy.  If you haven't seen Joel in the excellent movie, Food, Inc., then do watch it.

Raffie's picture

Don't forget about toys for kids in American being painted with toxic paints.
Them harmful toys will cost more now.

bornlastnight's picture

No need to cancel Christmas. Just don't buy Chink poison painted toys.


BUY AMERICAN...duuude.

The Saint's picture
The Saint (not verified) bornlastnight Dec 22, 2016 7:41 PM

10% tariff??!!  What happened to 35%?  Slam their slant eyed monkey asses.


Croesus's picture

"Wang told the People’s Daily: "We will lead the way amid a shake-up in global governance and take hold of the situation amid international chaos. We will protect our interests amid intense and complex games."

I guess Wang doesn't understand that Trump is a man who likes a challenge...

So are most real Americans.

@ China:

"Appear strong, when you are weak" <- Taking a cue from your playbook, are you?

Stop flexing your muscles, paper tigers!

The CCP is not far away from an internal revolt; you piss us off, and we'll get your own citizenry pissed off at you.

scrappy's picture

A trade war is no more the remedy than a currency war is.

We need to restructure across the board.

So does the whole rest of the world.

I did find Navarro to be a possible hopeful sign as he knows about and teaches this free economics course.

I believe even Stiglitz admitted that land rent is 1/3 of GDP.

Is there a shift in economic philosophy in Russia?

Exerpt: The Stolypin Group

The third group represented was the one most Western observers ridiculed and dismissed, with the US Pentagon-linked Stratfor referring to them as a “strange collective.” I have personally met and talked with them and they are hardly strange to anyone with a clear moral mind.

This is the group which after two months has emerged with the mandate from Vladimir Putin to lay out their plans to boost growth again in Russia.

The group is in essence followers of what the great almost-forgotten 19th Century German economist, Friedrich List, would call “national economy” strategies. List’s national economy historical-based approach was in direct counter-position to the then-dominant British Adam Smith free trade school. (List) (George)

 Michael Hudson has been zeroing in on the topic for some time.

Perhaps the Chinese need to remember Sun Yat Sen and change too..

Sun Yat-sen and Henry George: The Essential Role of Land Policy in Their Doctrines

Based on the recent US election, I ask if will we adopt enlightened "Nationalism" and true free trade, or choose suicide by more war?

I used to love watching Kung Fu, so I leave you with this.

The Beginning of Wisdom

philipat's picture

As much as I applaud Trump's desire to make changes, it's difficult to see how a 10% (or more) tariff on imports from China is going to make any difference other than to make things more expensive for middle America. Comparing labor costs of $150/Month in China to $15/Hour in The US, the cost structure is so compelling to manufacture offshore that a 10% tariff makes little difference. It needs to be understood also that China makes very little profit from said manufacturing and the profits are funnelled to offshore tax havens used by Multinational Corporations using transfer pricing mechanisms, Royalties, Trademark and Licensing fees etc. So the real culprit here is US Multinational Corporations, not actually China. Reducing Corporate tax rates may encourage the profits to be repatriated but will not change the cost structure.
And picking on China just means that more Corporates will quietly shift manufacturing to Vietnam, Bangladesh, Indonesia etc. so they can say they don't manufacture in China. The strong Dollar only make this logic more compelling. Unfortunately.

scrappy's picture

China has many problems slowly bubbling up, I predict unrest. It would be wise to support the chinese deplorables desire to be free. Free of their government tyranny and our imposed corporate tyranny that enslaves them. We share this corporate overreach problem. Do we really want a facebook firewalled limited idea world? The information age is having a rough start so far, huh?

 "If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be." -- Thomas Jefferson

roddy6667's picture

It's obvious you have never spent ANY time in China. "Unrest" and "government tyranny" What a crock of shit! The overwhelming maority of Chinese citizens are better off than they were 10 or 20 years ago. The middle class is now 54% and growing. The people feel their leaders ae making the right decisions. Your opinions are based on propaganda fed to you. "Unrest" and "government tyranny" much better describe America.

philipat's picture

Absolutely agree. This is Government misinformation fed to the sheeple via the MSM, a/k/a "Fake news". It is actually all part of the neocon plan, including the "Wolfowitz Doctrine", that there should be a Unipolar world with the US as its "Leader" and that no nation should ever be allowed to rise to challenge the "exceptional country". Hence the pressure on both China and Russia both rising to be able to challenge the Unipolar neocon model.

brianshell's picture

Just note the tribe behind the curtain.

Dizzy Malscience's picture

Hell, that’ll teach them to build islands around a Spratly.

Is there now a worm in the apple?

..and it’s a good thing Samsung is somewhere around Korea..

Manthong's picture

hmm,,, maybe Iphones will come down to market value sometime soon.


JRobby's picture

"Laugh Track Deafening"

$650 iPone vs free LG for changing carriers?

It is mind boggling. Watched a documentary last night called:

"The Minimalists"

Sad and encouraging 

Zero Point's picture

Try criticising the Chinese government, or even Mao, to Chinese people in China. You'll be lucky if you get to walk home later.

Economiffed's picture

Actually, had some great conversations while in China with people about their government. Most dislike the system but have enough sense to keep it to themselves. One point you should know- when something happens that a majority of people feel strongly about, they rush the local gov offices and take over. They force the gov to recognize their fault and immediately correct it! I should note that happens more often in smaller towns.

Zero Point's picture

When were you there? The nineties? Nationalism is rabid there now and rising rapidly.

scrappy's picture

It is indeed, and it is dangerous. They will blame foreigners for their .gov shortcomings

Illegal's picture

A lot of the globalist corporations manufacture their merchandise in Vietnam and Cambodia where the wages are cheaper than China. China has a qc problem. Usually the first and second production runs are OK then the third is crap.

Aliexpress mostly sells knockoffs. There is very little brand items sold on this site. Many of these items are also sold on Amazon.

philipat's picture

Agreed but China will appeal to WTO if the US puts tariffs on Chinese imports. And will win. What then? The Multinationals remain in control. TPP would only have made the problem worse and I applaud Trump for putting an end to that.

Déjà view's picture

1971, Nixon played hard ball with a 10% import surcharge...GUESS WHAT...4 months later merchantilists found out he was NOT bluffing and folded-REVALUING THEIR CURRENCIES! R.I.P. President Nixon...

Did the world end? History sure rhymes...

WTO...China has much higher tariffs and or outright bans on U.S goods...what leg does China have to stand on?

Won't be having any sleepless nights unless importing Chinese made rubbish...

FYI...Vietnam and Cambodia are much MORE CORRUPT than China...word of mouth from Chinese businessman...AND 2015 Corruption Index.

GOOD LUCK WITH YOUR FACTORY IN THOSE 2 PLACES...they also have much less to lose in a trade spat...again GOOD LUCK to those risk takers...

Economiffed's picture

More ignorance! I lived in Hanoi recently. Traveled dozens of time throughout China. Vietnam and China are comparable regarding corruption. Granted, normal daily police/fedex/gov offices are much more open about money for favors in Vietnam. However, business/government corruption is equal and run very similarly.

Uh? You are as worldly as the avg trailer trash! Nike has had factories in Vietnam for more than 10 years and they are some of the most productive and stable of any in the world!

Businesses deal with corruption quite easily in Vietnam. They pay a fee monthly and all is well. Its a tax but not one that the public benefits from.

ExPatOne's picture

I unfortunately lived and worked in Vietnam and China for over a decade. They are both shitholes, and corrupt to the core. While I'm no fan of the shady practices in China, I've actually had more problems doing business in Vietnam.  Every contract of mine was blatantly broken with those people. It's common and accepted among Vietnamese to cheat foreigners and think nothing of it. Sure super big companies can grease all the necessary gook palms, and stay afloat that way, but the middle and small sized businesses usually don't have such deep pockets, or enjoy such longegevity.  

You don't simply pay a monthly fee and all is well. This is absolute rubbish. Even if you knew who to pay, they will constantly show up demanding different amounts, at random, for fabricated nonsense.  If you do get lucky enough to find an honest person (1 in a 1000), the other Viet's will label the person helping you a trader to the country, and basically ostracize them.  Yes giving fair deals to foreign businesses are frowned upon among the locals in Vietnam. Usually you will only get 'the special foreigner price' which is probably atleast 30% higher than for a Vietnamese national. I had to put a Vietnamese face on all of my procurement positions because of this. And even then we would get quoted higher prices simply because the sellers knew our VN buyer worked for whitey.   

It boils down to this asshole -  If you are defending Vietnam, you are probably either a Vietnamese yourself, or some dumb traveler who enjoys the 15 dollar blowjobs on dien bien phu street. Or maybe it's even worse... You didn't fall in love with one of those skinny bitches did you?   

JRobby's picture

The old blow job currency ruse again!!!

scrappy's picture

We need a fair blowjob policy.

Illegal's picture

Trump's call for tariffs is his stick. His carrot is an end to China's currency manipulation. Yet the US has major systemic problems if it wants corporations to return. There are too many rules and regulations that affect a business at all levels of government. There almost needs to be different levels of rules depending on the size of the enterprise. Also labor unions pose a significant barrier to start-ups and small firms. I have seen many companies quit because of unions.

philipat's picture

So long as the USD keeps getting stronger, it's difficult to blame any other country for commensurately weaker currencies? Not sure how that is a "carrot" and how it would be used?

Illegal's picture

The USD can not get too strong otherwise it effects em countries and their ability to pay debt and maintain their markets. They would slip into recessions with a strong USD which then affects the USs economy.

deja's picture

Just take a play from their own (and Japan's) playbook.  If you don't want it sold here let it rot on the pier.

Economiffed's picture

Chinas avg labor wage hasn't been $150 per month in 12 years or more. Avg unskilled labor is more than $800 usd per month. That is the reason Vietnam is the next factory slave market. Vietnam still less than $200 per month for unskilled factory workers!

Your math isn't wrong if you use your fake numbers

Max Hunter's picture

The Chinese currency has lost 10% of it's value in the past 6 months.. Problem solve.. China unaffected.. 

z80kid's picture

I believe 10% is what he can do without legislation. He has mentioned pushing for more in the past. And even if some companies do stay in Asia, we need to get the fuck away from China. They take the money they make from us and sink it into a military that they use to threaten us, and their neighbors. Opening trade was supposed to make them better neighbors. Instead it's just made them bigger assholes. Time to go back to shutting them out. Hell, we'd sanction any other country that behaves the way they do. Why take it from them?

TrajanOptimus's picture

I think what a lot of you are missing is the tariff will be offset by company taxes being reduced and regulations being removed. There should be no price increase at the retail level, if there is, then companies like wallmart are literally screwing their customers and blaming it on a tariff.

This tariff and tax/regulation reduction will make manufacturing in the US more attractive. Personally I think they should settle for a 20% tariff at a minimum considering our dollar strength is only going to increase as our economy recovers. Stronger dollar has a lot more purchasing power overseas. Normally companies bank this additional purchasing power as additional profit rather than pass that savings down to the consumer.

I also hope that China does dump it's treasuries, something needs to be done to smack the dollar down so our products made here are more competitive for companies in other countries to purchase. Right now, dollar strength is pricing us out of the market.

We need a weaker dollar and a tariff on imports to bring some equilibrium to our trade practices. Big companies that do not like the thought of slightly reduced short-term profits in exchange for more jobs boosting their consumer base long term can go screw themselves. 

scrappy's picture

Modern economists

Alfred Marshall argued in favour of a "fresh air rate", a tax to be charged to urban landowners and ‘‘levied on that value of urban land that is caused by the concentration of population’’.[65] That ‘‘general rate’’ should have ‘‘to be spent on breaking out small green spots in the midst of dense industrial districts, and on the preservation of large green areas between different towns and between different suburbs which are tending to coalesce’’. This idea influenced Marshall's pupil Arthur Pigou's ideas on taxing negative externalities.[66]

Paul Samuelson supported a land value tax. "Our ideal society finds it essential to put a rent on land as a way of maximizing the total consumption available to the society. ...Pure land rent is in the nature of a 'surplus' which can be taxed heavily without distorting production incentives or efficiency. A land value tax can be called 'the useful tax on measured land surplus'."

Milton Friedman stated: "There's a sense in which all taxes are antagonistic to free enterprise – and yet we need taxes. ...So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago."[67]

Michael Hudson was a proponent for taxing rent, especially land rent.".... politically, taxing economic rent has become the bête noir of neoliberal globalism. It is what property owners and rentiers fear most of all, as land, subsoil resources and natural monopolies far exceed industrial capital in magnitude. What appears in the statistics at first glance as "profit" turns out upon examination to be Ricardian or "economic" rent."

Paul Krugman agreed that a land value tax is efficient, however he disputed whether it should be considered a single tax, as he believed it would not be enough alone, excluding taxes on natural resource rents and other Georgist taxes, to fund a welfare state. "Believe it or not, urban economics models actually do suggest that Georgist taxation would be the right approach at least to finance city growth. But I would just say: I don’t think you can raise nearly enough money to run a modern welfare state by taxing land [only]."[68]

Nobelist Joseph Stiglitz wrote, "Not only was Henry George correct that a tax on land is non-distortionary, but in an equilibrium society ... tax on land raises just enough revenue to finance the (optimally chosen) level of government expenditure."

qomolangma's picture

"Perhaps the Chinese need to remember Sun Yat Sen and change too..

Sun Yat-sen and Henry George: The Essential Role of Land Policy in Their Doctrines"


I think China already carried out the largest and the most successful land reform program in the world since CCP came into power. That's one thing of many aspects that set the clear different outcomes in the economy progress between China and let say, India, which lacks of any land reform.

China is just further experimenting with farmland ownership rules this week.

That country is introducing the splitting of farmland ownership rights, contract rights, and operating rights for local farmers. This allows more people who want to farm to do so, while letting property owners who'd rather not be farming move on to greener pastures. It's in the pilot project at the Xiaogang Village at the moment. It's a common practice in China to test its new policy on a very small scale, then once successful to implement it nation-wide immediately.

scrappy's picture

I did not know about the farmland ownership experiment.

Great comment.

India take note.


quintus.sertorius's picture

thank you for this, some very interesting links

Gold Pedant's picture

Yeah, throwing a step function into any natural system NEVER caused any sort of havoc.

Déjà view's picture

FREE TRADE their FREE SHIT brethren...something for nothing crowd...

U.S. has been running a current account deficit going on 35 years!

Squid-puppets a-go-go's picture

Wel, whatever, I'm disappointed

After reading the headline I thought Dave Navarro was part of Trumps cabinet

MisterMousePotato's picture

Tariffs should be the weapon (if used as such) of last resort.

Serious changes in regulations and taxes would work better, cost less, and leave China without grounds to call foul.

Paul Kersey's picture

Be careful what you wish for, because nothing says "depression" like tariffs (especially that 75% of Americans living from paycheck to paycheck. Here's a little history:

"The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), otherwise known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, was an act sponsored by Senator Reed Smoot and Representative Willis C. Hawley and signed into law on June 17, 1930. The act raised U.S. tariffs on over 20,000 imported goods to record levels."

"In 1930 a large majority of economists believed the Smoot-Hawley Tariff Act would
"exacerbate the U.S. recession into a worldwide depression. On May 5 of that year 1,028 members of the American Economic Association released a signed statement that vigorously opposed the act. The protest included five basic points. First, the tariff would raise the cost of living by “compelling the consumer to subsidize waste and inefficiency in [domestic] industry.” Second, the farm sector would not be helped since “cotton, pork, lard, and wheat are export crops and sold in the world market” and the price of farm equipment would rise. Third, “our export trade in general would suffer. Countries cannot buy from us unless they are permitted to sell to us.” Fourth, the tariff would “inevitably provoke other countries to pay us back in kind against our goods.” Finally, Americans with investments abroad would suffer since the tariff would make it “more difficult for their foreign debtors to pay them interest due them.” Likewise most of the empirical discussions of the downturn in world economic activity taking place in 1929–1933 put Smoot-Hawley at or near center stage."

myne's picture

I'll take the 4 year depression over the 8 year failed reflation, thanks. 

CPL's picture

4 years to fix 110 years of mismanagement.  Good luck with that.

Withdrawn Sanction's picture

Yes, pinning the tail on the Smoot-Hawley donkey certainly sidesteps the incompetence of tax and monetary policy.  Let's ignore the massive run-up in debt that was triggered by the WW-I financing when public debt rose 25-fold in less than 2 years, b/w 1917 and 1919.

The wreckless and irresponsible centralizing and cutting of bank reserves in the 1920s further expanded credit and helped the roaring 20s roar. But just as a tree cant grow to the sky, debt cannot be piled up continuously, and w/a convertible money, that limit was reached much more quickly then than is true today.  

Did the 1930 tariffs help?  Certainly not, but blaming the tariff increase is simply a way to deflect blame and attention from the bankster-induced train wreck that was set in motion over a decade earlier.  All wars are bankster wars.  

CPL's picture

LOL iknorite!  Especially in a bad credit situation.  In 1917 the debt situation didn't extend to everyone, just government.  Today 10% on 95% on all imported goods, he cut his own throat.  The USA makes nothing of importance to anyone except meaningless and vapid lipservice, otherwise the 'western world' wouldn't be importing all of it's goods from a place that can crank out consumer crap like popcorn.

Let do the 5000 ft view of the USA:

  • No manufacturing centers
  • Most of the dev, eng work is done overseas, along with the entire electronic line plus assembly.
  • Weapons systems are third rate garbage and the only reason anyone buys their crap is because of foreign aid, they give people money to buy their shitty products that jam.  The USA has to bribe people with their own money to take their garbage...and people complain about plastic junk.  Rediculious.
  • Energy platforms that might as well be made from duct tape and horseshit.
  • By percentage 30+% of the work force does nothing and an education system that is built to warehouse bodies while cranking out corporate stooges.
  • Roughly 1.4 quadrillion dollars in derivative debt racked up that doesn't include the 220 trillion in unfunded liabilities.

Filing Chapter 11 on the USA is the only option.  The other option is burn it to the ground to save the world 70% of the materials consumed by a paltry 3% of world population.  It's the fat cow that need the knife applied.

Donnie Duvanie's picture

I think the shift will be for US corporations to move from Chinese manufacturers over to manufacturers in other asian countries. Unfortunately, the US Federl Government has allowed Chinese Oligarchy full possession of 150 years of advancing manufacturing technology. Not only does China now possess the know-how, but the factories and machinesa are now located on Chinese soil. That makes it very difficult for US interests to take them back, or even control how they are used. This will eventually have major repurcussions.

post turtle saver's picture

you assume that the supplied know-how and the machines used to employ it are timeless... I can assure that neither are...

the term is "Yankee ingenuity" for a reason, and that hasn't changed... nor will it anytime soon, never mind the many who post here attempting to shovel dirt in its face and declare it dead... why, we even have people posting that the US has no manufacturing centers... utter hogwash