by Mish

The director of President Donald Trump’s newly formed National Trade Council said Monday the administration would make the reduction of U.S. trade deficits its top policy focus.
Speaking to a conference of business economists, trade adviser Peter Navarro said the U.S. faced a growing economic and potential national security risk from the commercial behavior of its major trading partners, including China and Germany.
“Bilateral trade deficits do indeed matter, and it is a critical economic goal and in the interest of national security to reduce these deficits in a way that expands overall trade,” Mr. Navarro said.
He warned the U.S. could lose a “broader cold war…not by shots being fired but by cash registers ringing.”
Mr. Navarro said a major goal of the administration would be to reposition the U.S. as a manufacturer of raw goods, and he lamented the recent focus in the manufacturing sector toward assembling foreign-made components. The administration’s policy would seek “to reclaim all of the supply chain and manufacturing capabilities that would otherwise exist if the playing field were level.”
Beyond an expansion of bilateral trade agreements, Mr. Navarro offered fewer specifics about how the U.S. would seek to reduce trade deficits. He said the U.S. should impose “countervailing duties on currency manipulators” but declined later to say whether the U.S. Treasury should label China as a currency manipulator when it produces its semiannual report next month.
He also dismissed concerns the administration’s focus on cutting imports and growing exports would lead to a trade war. “The broader goal…is not to raise either tariffs or nontariff barriers. Rather, it is simply to encourage our trading partners to lower theirs,” he said.
Mr. Navarro also dismissed concerns Americans would pay more for products made domestically. “You can’t buy an air conditioner much less pay your mortgage if you get laid off because your job went offshore,” he said.
Mr. Navarro focused his attention almost exclusively on the U.S. trade deficit in goods. The U.S. runs a trade surplus in services, but Mr. Navarro said because those jobs tend to pay less, trade policy should focus on goods-producing sectors.
During a question-and-answer session, Mr. Navarro responded with incredulity to the premise that the 12-nation Trans-Pacific Partnership would have allowed the U.S. more equal trading terms with foreign partners. Mr. Trump withdrew the U.S. from the trade agreement, which Congress hadn’t yet ratified, shortly after he took office in January.
“I’m saving this for my memoirs,” Mr. Navarro said as he tucked the question, written on a slip of paper, inside his suit-jacket pocket.

Navarro Makes Poor Assumptions

The idea Trump can bring back manufacturing jobs is ludicrous. Those jobs are long gone and are vanishing everywhere.

Manufacturing may return, but don’t expect jobs to come back as well.

Importantly, Navarro attacks a symptom of a problem. Sizable trade deficits would not exist for long had Nixon not closed the gold window.

For a discussion, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Also see Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold’s Honest Discipline Revisited

Trade Golden Goose

Trump better be careful of Killing the Trade Golden Goose.US farmers are already rattled by Trump’s NAFTA rescinding plans.

Living Wage Idiocy

As for people not being able to afford their mortgage, Navarro ought to point his finger at the Fed, and its inflation tactics not China.

The affordability problem has nothing to do with the lack of “living wage” but rather a Fed determined to force prices up in an inherently price-deflationary world of ever-expanding technological advancement.

Finally, inquiring minds may wish to consider Living Wage Idiocy and Free Money Experiments.

Mike “Mish” Shedlock

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