Navarro has written a piece for the FT: Donald Trump’s tariffs will fix a broken system. He defends what Trump is doing, but it all sounds like a giant whinge from the world's richest nation, as if because it's unable to compete, it is somehow hard done by and is being unfairly treated. As others have said, America has benefited hugely from globalisation, a system it helped create but now seems to resent.
That the richest nation runs a big trade deficit in goods is hardly a surprise is it? America is awash with money, not always equally shared, and you would expect to find that fact sucks in expensive, high quality imports as well as cheap goods for the poorer sections of US society struggling to get by. The EU and countries like China and India are well-placed to provide all kinds of things that Americans want at prices they're happy to pay. This is just an economic fact of life.
To get more balance into international trade, either a lot of poor nations have to increase their wealth and purchasing power significantly or rich Americans have to become a lot poorer, otherwise you are swimming against the tide. America could help itself by becoming more competitive, by investing in more automation for example, or designing better products that can sell for a higher price.
Tariffs, even at 10%, aren't preventing US cars from being sold in Europe for example. The fact is, they are poor quality, badly designed, too thirsty, and too big. Even Americans don't buy them. Half the cars sold in America are imported.
But Navarro complains about 'unfair' tariffs and goes on a rant about non-tariff barriers:
“Even worse than this is the barrage of non-tariff weapons foreign nations use to strangle American exports, unfairly boost their shipments to the US, and wall off their own markets. These tools include currency manipulation, value added tax distortions, dumping, export subsidies, state-owned enterprises, IP theft, discriminatory product standards, quotas, bans, opaque licensing regimes, burdensome customs procedures, data localisation mandates and, increasingly, the use of “lawfare” in places like the EU to target America’s largest tech firms. On top of that, many foreign competitors operate from sweatshops and pollution havens that morally and environmentally stain the global landscape from Asia and Africa to Latin America.”
I think China has engaged in currency manipulation (their renminbi isn’t traded internationally) by keeping the official exchange rate low against other currencies and they certainly do a lot of IP theft. But many of his other moans just don’t stand up.
Accusations of VAT distortions are ridiculous. Does he want American exporters to escape VAT when their goods are sold here? Seriously? And ‘lawfare’ by the EU isn’t directed against American firms, it is simply the working of a democracy to control these powerful global businesses.
Europe doesn't import US food because all too often it's full of banned chemicals. And looking at TV pictures. half of Americans look incredibly obese, far more than Europeans. Nobody wants unhealthy US food in Europe.
Navarro also forgets that Boeing used to receive backdoor government subsidies (allegedly) through lucrative defence contracts. US farmers get government loans and grants to help them become more competitive. And America doesn’t allow European trucks in unless they’re at least 25 years old. It’s not all one way traffic as he would have you believe.
One of the comments below Navarro's piece is this:
"I especially like the juxtaposition between in one sentence bashing on how other countries outcompete the US by having lower environmental and labour standards (’sweatshops and pollution havens’) while in the next being upset that other countries don’t accept the US lax standards for hormone treated beef. It’s stuff like this that makes [it] so hard not to believe this is satire."
The sentence is in the paragraph that I quoted above. You can see the hypocrisy writ large. This also doesn't take account of America's trade surplus in services. Are they ripping us off?
But Navarro is quite a strange character. He’s definitely an academic. He is a Harvard PhD and was previously a business school professor at the University of California, Irvine. He is also the author of 13 books. But weirdly, in several of his books he cites quotes from an ‘expert,’ a Mr Ron Vara. Now, you might notice that Ron Vara’s name is an anagram of Navarro. If you did, you’re smarter than me and many others too, including co-author Glenn Hubbard, who wrote “Seeds of Destruction" with him. Hubbard didn't realise either.
Ron Vara is, of course, none other than Peter Navarro himself. I don’t think this is the sort of action you expect from an academic, or anyone in their right mind. Imagine writing a non-fiction book on a subject where you quote your own words to reinforce and back-up your own arguments, but use a different name as if they came from an independent source!
The New York Times had the story in 2019, uncovered by another academic, Tessa Morris-Suzuki, an emeritus professor at the Australian National University. It doesn't seem to have damaged his reputation with Trump, but then it wouldn't, would it? Trump used to do that same thing, pretending to be a John Baron when talking on the phone to newsmen about Donald Trump.
Incidentally, Trump is using emergency powers under the International Emergency Economic Powers Act of 1977 (IEEPA) to address the "national emergency posed by the large and persistent trade deficit" as you can see from this White House statement. America has run a trade deficit for decades so it's not clear why it is suddenly become an emergency.
There are doubts whether this is legal considering he's imposing the largest ever tax increase on Americans, according to his former VP Mike Pence.
However, before we condemn him for that, note that many US presidents have used these so-called emergency powers for various questionable reasons using the 1974 National Emergencies Act (NEA), and have been allowed to get away with it.
There are around 44 national emergency declarations in effect, some of which have been renewed every year for decades but Trump is making a habit of it. Since taking office in this second term, he's already declared no less than six new emergencies granting him wide-ranging powers akin to an ancient monarch.
And Congress has done nothing to stop him. They are all culpable.
