Response to Chinese Economic Aggression Driving Trade Decisions, Navarro Says

White House economic adviser Peter Navarro told an audience at the Hudson Institute that if China abandoned half of its industrial policy practices, it wouldn't be enough to resolve the problem. Navarro did not mention anything about tariffs at the June 28 event, but rather the elements of what he calls China's economic aggression that the U.S. is hoping to force change on through the leverage of tariffs.

First, he set up the problem by endorsing Trump's description of the U.S. as "the piggy bank of the world" because U.S. companies and consumers buy more foreign goods than other countries buy American goods. "American sends a half a trillion dollars offshore," he said. "Trade with China accounts for about half of the problem." The European Union is 20 percent of the problem and Japan and Mexico are another 18 percent of the problem, he said. He pointed to the EU's 10 percent car tariff, contrasting it with the 2.5 percent U.S. car tariff, but was silent on the U.S. 25 percent light truck tariff. "All the president is trying to do is level the playing field," he said.

With regard to China, Navarro talked about forced use of Chinese brand names for multinationals producing in China, government subsidies to Chinese firms, and the consolidation of state-owned enterprises into national champions. "It's always about technology transfer," he said, whether through forced transfer, theft, evading export controls or buying U.S. technology companies.

Michael Pillsbury, director of China policy at the Hudson Institute, said after Navarro left the podium that the Trump administration is not embroiled in debate about how to deal with trade, and there are no factions. Recent news reports have suggested that Navarro and U.S. Trade Representative Robert Lighthizer are hard-line allies, with Treasury Secretary Steven Mnuchin opposing their approach.

Dave Rank, a former deputy chief of mission at the Chinese embassy, attended the talk and shook his head with disbelief that Navarro took no questions. Rank, now an adviser at The Cohen Group, said none of what Navarro outlined is news. "What's the administration's strategy?" he asked. He said Navarro noted that the EU has some of the same complaints about how China treats foreign multinationals, but he said the approach on trade is not useful to get the EU to join forces with the U.S. to confront China.

Some of the issues that Navarro highlighted, with regards to how foreign firms are treated within China, would not lower the trade deficit if they were resolved. In fact, if companies were more certain they could manufacture in China without risking their intellectual property or sharing their profits, it might encourage more offshore production and fewer exports. "There's a lot of inconsistency," Rank said.