President Trump tweeted Tuesday morning that a new round of trade talks with China are underway. It comes three days after he struck an agreement with Chinese President Xi Jinping to postpone additional tariffs on Chinese imports for the next three months while talks continue.
But Trump threatened that if a deal falls through, he's "a tariff man."
Here & Now's Jeremy Hobson talks with White House trade and economic adviser Peter Navarro about upcoming China trade talks, replacing NAFTA and the state of the U.S. economy.
On the ongoing trade war between the U.S. and China, and the agreement struck at the G-20 summit not to raise tariffs on Chinese goods in the next 90 days
"First of all we prefer to call this a trade dispute — the language of 'war' is a bit inflammatory. What we have is a situation where China engages in a number of structural practices which are designed to capture our technology and our innovation base, and President Donald J. Trump initiated an investigation of these practices over a year ago, and the United States trade representative found a wide range of these structural issues. It's worth [it] for your listeners to understand kind of what we're up against: It's forced technology transfer, counterfeiting and other forms of intellectual property theft, cyberintrusions to American business, our chronically undervalued currency, state-directed investment aimed at the U.S. technology base, large-scale subsidies to China's state-owned enterprises, and high tariff and nontariff barriers.
"We've been talking with China since day one of this administration about making these required structural changes. Previous administrations had had similar kinds of talks, but the Chinese never took them seriously because there was no follow through. President Donald J. Trump has the attention of China right now. It was a historic meeting with the two presidents in Argentina, which I was privileged to be at, and the question of whether within the 90 days we can come to some kind of agreement will hinge entirely on China. [It's] basically, will they a) commit to the kind of structural changes and market access issues that are on the table, and b) ... equally important, will they honor their commitments? Because there is a long, long history of China agreeing to things and then not honoring those commitments."
On why the administration believes pressuring China now will work when it hasn't so far
"There has been no pressure on China up until now. What's different is Donald J. Trump and his administration and the team that he has assembled on the trade issue, if you look simply at the difference between the Trump administration and the previous administrations, I mean look at what we've done so far under the president's leadership. Everybody said we could never renegotiate trade deals, but we've done it so far with a very bad South Korean deal and a very bad NAFTA deal. On the China issue, we have finally got their attention, brought them to the table, we've put tariffs in place on $50 billion worth of China's exports to the U.S. which are targeted at our most sensitive technologies.
"So what's different is both the mindset in this administration, the leadership and the expertise that are backing up the president. It was extraordinary to have the president of China himself at that dinner spend the first 30 to 45 minutes laying out the parameters in detail of a deal — that's never really happened in the history of the U.S.-China relationship. The way this generally works is that the minions meet and talk about these things. This was president-to-president, so that's very much different as well. The two presidents appear to have a very, very good relationship, so again, that's different."
On whether trade fights like the one over NAFTA are worth it if the end result is minor policy changes
"The underlying assumption there on the [U.S.-Mexico-Canada Agreement], which is the replacement for NAFTA, is that they're minor changes. This is a false narrative, this is a spin I think which is meant to diminish both the president himself and the very hard and fine work that was done by Ambassador Robert Lighthizer. This USMCA agreement is in my judgment a model agreement. It's the gold standard — better not use that word because that's what Hillary Clinton used for the South Korean deal. What I say here is that it's a great agreement. It modernizes NAFTA, which we were desperately in need of on things like digital rights and all the like.
"But most importantly, here's the thing: Canada, Mexico and the U.S. all have an interest in restoring the supply chain for manufacturing in North America. The linchpin of this whole deal is very high domestic content rules, 75 percent, accompanied by very strong labor and environmental provisions to make sure that much of that supply chain will relocate back to the United States' soil. And so this whole idea that somehow this is an incremental boot to the old NAFTA, again is a false narrative. This is a great deal and I think there's great optimism that once there's an up or down vote in the Congress, as is required by fast-track legislation, that there will be overwhelming support for this deal, because it's clearly a better alternative by a longshot to the existing deal, and to the other alternative, which is terminating NAFTA."
On whether negotiating the USMCA hurt the friendships the U.S. has with Mexico and Canada
"Not at all. Actually, I was down at the G-20 in Argentina watching the signing. Justin Trudeau, the prime minister of Canada, [Enrique] Peña Nieto, the Mexican president, they were both standing with smiles on their face next to our great President Donald J. Trump. You have to understand the way these things work: These are tough negotiations, but once the agreement's reached, everything is healed.
"Mexico in particular has a great interest in restoring the regional supply chain to the country, because one of the problems Mexico had in the wake of NAFTA — even though a lot of jobs went south — [was] they were really kind of the maquiladora, more sweatshop labor-type jobs, which didn't build the middle class that NAFTA promised. And as a result, and partly because of the NAFTA issue on farming products, we had the flood of immigration north to the U.S. — which not only hurts the U.S., particularly in our black and Latino communities, but also down in Mexico.
"And so this is something where I think the deal itself economically will strengthen us strategically, and this is the style of President Donald J. Trump, to take hard positions based on fair and reciprocal trade that his predecessors have been unwilling to do, and to bring about historic changes through renegotiated trade deals and getting the president of China to sit down across the table and personally present a deal to the American president."
On describing the U.S. economy as "bullish and strong" across the country
"If you look at simply a couple of parameters, the unemployment rate is at historic lows — particularly in the lower ... blacks, Hispanics, women, all have historically low unemployment rates. Wages are rising disproportionately to the benefit of our lower-income distribution, which is a really good thing. We're seeing manufacturing jobs being created, outpacing by previous standards the growth in other standards. So clearly, our manufacturing base is getting strengthened.
"This is all a very bullish scenario, and it's being done with a trade policy where these tariffs on things like aluminum, steel, on China attract investment here in the U.S. What does that do? It increases productivity, with productivity comes higher wages and with that comes lower inflation. So we're growing without inflation, and that means that the Federal Reserve should restrain itself from raising interest rates. If we get that kind of restraint we'll have ... — as Alan Greenspan used to call it — a 'Goldilocks economy' where we have robust growth with low inflationary pressures."
This segment aired on December 4, 2018.