Ron Sachs, Getty Images
Donald Trump signs an executive order in January concerning the withdrawl of the U.S. from the Trans-Pacific Partnership. National Trade Council director Peter Navarro, second from right, looks on along with VP Mike Pence, chief of staff Reince Preibus, and senior adviser Jared Kushner.

US Will Reclaim Global Supply Chain, Trump Trade Aide Says

March 7, 2017
Navarro: “If we are able to reduce our trade deficit through tough, smart negotiations, we should be able to increase our growth rate. Without action to close the gap, 'foreigners' will eventually own so much of America that there will be nothing left to trade.”

The U.S. is seeking more “reciprocal” trade with countries such as China and Germany in a bid to boost growth, reduce the trade deficit and keep American production capacity out of foreign hands, White House trade adviser Peter Navarro said.

“If we are able to reduce our trade deficit through tough, smart negotiations, we should be able to increase our growth rate,” Navarro said at an economists’ conference in Washington on Monday. Without action to close the gap, “foreigners will eventually own so much of America that there will be nothing left to trade,” he warned.

Navarro, the director of the White House National Trade Council, said the Trump administration wants to rebuild the American industrial base, reversing the decline in the nation’s manufacturing workforce. He noted that about 20% of Germany’s labor force is employed in manufacturing, compared with only about 8% in the U.S.

“One of the goals of the Trump administration is to reclaim all of the supply chain and manufacturing capability that would otherwise exist if the playing field were level,” Navarro said.

On the campaign trail, Trump championed the idea of reducing the U.S. trade gap, promising to create millions of jobs by bringing back manufacturing positions from overseas. The message resonated in economically struggling states amid a widening of the deficit, which last year increased to the largest since 2012.

President Donald Trump’s goal is to promote “free, fair and reciprocal trade,” Navarro said, adding that right now America’s trade with the world is “anything but reciprocal.” He identified 16 nations that account “for the lion’s share of the deficit problem,” such as Ireland, Vietnam, China, South Korea, Taiwan and Switzerland.

Asked if China’s yuan is fairly valued, Navarro said “it’s clear that the Chinese currency is undervalued” based on the trade balance between the U.S. and China, though he acknowledged that Chinese authorities have recently been intervening to prop up the yuan. He declined to comment on the value of the U.S. dollar.

Navarro singled out India for having “notoriously high” tariffs, and said the U.S. trade deficit with Germany will be among the toughest to tackle.

The American plan seeking to reduce the trade deficit “is not based on higher tariffs, but rather getting our partners to lower theirs,” Navarro said.

The administration’s strategy to narrow its trade gap by dealing directly with other countries won’t work, the International Monetary Fund’s former chief economist, Olivier Blanchard, said on Bloomberg TV after Navarro’s speech.

“Even if we had completely balanced trade, we could well have — we should have — trade deficits with some, and trade surpluses with others,” said Blanchard, a senior fellow at the Peterson Institute for International Economics. “If we start trying to reduce the trade deficit from one country, the goods will go through another country. It will be a game of musical chairs.”

Navarro said the Trans-Pacific Partnership agreement, which Trump pulled out of almost immediately after taking office, would have been a “death knell” to America’s auto and vehicle parts industry. The U.S. will aim to tighten the rules of origins provisions in almost all bilateral trade deals it pursues, he added.

More broadly, the Trump administration plans to implement tax, regulatory and energy policy reforms while targeting countries that engage in unfair currency and trade practices, Navarro said. A strong manufacturing and defense industrialist base is bedrock of America’s national security, he said.

By Andrew Mayeda, with assistance from Zoe Schneeweiss and Tom Keene.

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