The Chaos Report: Tariffs For Everybody!
Trump’s Folks Make It Clear They’re Not Going To Make Exclusions To Steep Steel And Aluminum Tariffs
Trump’s point person on tariffs, Peter Navarro, said if there are specific products U.S. companies need that they can’t get domestically, the Trump Administration may consider exceptions for those. Though we wonder how that process would work. Who would they ask? Who would approve it? How long would it take? How would they prove they couldn’t buy the same thing from a U.S. producer?
And Commerce Secretary Wilbur Ross said that of course Trump could also randomly change his mind. “If he says something different, then it’ll be something different”, Ross admits.
Short of that, they say, tariffs will stick and will be in place sometime this week. And they’ll be the same for all countries regardless of what their relationship is to the U.S. politically, or whether the U.S. is running a trade deficit with them or not.
So Canada, which is one of the biggest suppliers of steel to the U.S. would still be included, even though the U.S. actually runs a trade surplus with Canada. The latest numbers from the President’s own Trade Representative’s office show a $12.5-billion overall surplus in 2016. Meaning Trump’s Tweet this morning that we have a large trade deficit with Canada is totally misleading. Even if you separate out services and just look at goods, which maybe is what the President is doing, it then becomes a question of what you consider “large”. (If your definition is “anything above zero”, then Trump is right). Yet the trade deficit on goods with Mexico is 5X bigger,with China, 32X bigger. In his early morning Tweets Trump also connects trade from Mexico with drugs pouring over the border into the U.S. Illegal drugs are not counted when figuring trade surpluses/deficits. (Maybe they should be, but they’re not).
And while Europe is threatening to retaliate, Trump’s tariffs in a sense were a “surprise attack” (some in his cabinet reportedly not even expecting it), so it’ll take the rest of the world a while to really catch up. In the mean time, they’ll probably do some symbolic stuff: Harleys, whiskey, jeans…
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Trade Director Peter Navarro, Rising Star In Trump White House
If you listen to President Trump talk trade these days, nearly everything that comes out of his mouth is exactly what his in-house trade guru, Peter Navarro has been saying for months. Sometimes verbatim. From steel and aluminum imports, to China, to the evil being wrought by the World Trade Organization. This profile of Navarro in Politico foretells exactly everything the President is doing right now. It’s from last July.
Which means these days, when it seems like just about everybody’s on the “outs” with the President, there’s at least one person who isn’t.
So let’s take a closer look at who Peter Navarro is exactly.
Legend has it Navarro was hired onto Trump’s team when Jared Kushner found a book he wrote called “Death by China” on Amazon.com and thought that would pique the President’s interest. But we found evidence Trump knew of him way before (perhaps Kushner reminded him). Navarro says he contacted Trump in 2011 after Trump praised one if his earlier books in an interview with Chinese state media. In a fascinating account of that interview, the L.A. Times reports Trump claimed to have read “hundreds of books about China over the decades”, and to “understand the Chinese mind”.
The New Yorker did an extensive profile on Navarro, pre-election.
Navarro made a Bannon-like film based on his book, which was largely ridiculed by critics, one writing “it’s the documentary equivalent of a raving street corner derelict”. But its central thesis is one that we happen to agree with at least at least partly: “American companies cannot compete because they’re not competing with Chinese companies, they’re competing with the Chinese government”. Francine LeFrak, daughter of a major New York real estate developer who’s one of Trump’s closest friends and outside advisers, was a producer on Navarro’s film.
Navarro is a trained economist. He has a Ph.D. from Harvard, and was a Professor at Cal Irvine. He also ran for public office several times in California, and lost, mostly as a Democrat.
Since coming to the White House, Navarro until now has stayed out of the spotlight, though it may not have been entirely by choice. Several articles from a month or two ago suggested he had been marginalized; stuck in a small office with just two staffers and his position reshuffled so that he’d now report to Trump’s top economic adviser Gary Cohn, who is against the tariffs. Axios went so far as to assert most in the White House “have little respect for him”. Navarro appears to have circumvented Cohn anyway, and gained the respect of the one person who counts.
If Navarro is as ascendant as he appears to be, that dramatically increases the chances that NAFTA is dead. The trade pact between the U.S., Canada, and Mexico, which Trump hates, continues only because Trump’s Agriculture Secretary and Commerce Secretary Ross have been able to talk the President out of a hasty departure. Negotiations continue in Mexico today. But if Navarro’s in the President’s ear, it doesn’t portend a bright future for the pact, since he’s probably even more in favor of killing it than Trump, if that’s possible.
With that in mind, we leave you with this (from an arts editor at one of Canada’s leading newspapers):
(“The Shape of Water” won Best Picture, BTW.)
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China Today Announces Big Boost In Military Spending
The Chinese Finance Ministry says it’ll spend $175-billion this year, the most in 3 years, an increase of more than 8%. Part of the motivation behind the higher numbers: keeping the military happy after the decision to allow President Xi to stay in power for life. That wouldn’t be possible without support from the armed forces.
$175-billion is still a fraction of the more than $600-billion the U.S. spends.
Still, many China-watchers say the government there deliberately understates its military budget by as much as 50%. And even if they don’t, there are inherent cost-savings China has that the U.S. doesn’t.
• The cost of troops. China actually has more soldiers than the U.S.: about 2.3-million compared to 1.4-million. But they get paid about 10% of what U.S. soldiers receive in salary. That’s even true for career officers.
• China has few overseas bases (although that’s expected to change), and that represents huge cost savings as well.
So the next time somebody says the U.S. spends 3X times more on its military than China, it’s not exactly a fair comparison.
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Florida Gun Measures Could Pass Today
The final bill being considered by the Florida State Legislature includes raising the minimum purchase age for rifles from 18 to 21, and arming teachers. Most of the rest of what’s in it focuses on school safety and mental health.
An amendment to ban assault weapons outright failed in the state Senate by a narrow margin: 17–20, with a few South Florida Republicans voting in favor. The proposal for arming teachers passed by a similar narrow margin: 20–18.
And if you’re thinking it should be easy enough to rectify the situation by just flipping just a couple of seats and then passing a better bill, especially if Parkland students keep the pressure up, remember as we reported last week, although Florida’s a “purple” state as a whole, most voting districts within the state are not. According to the Miami Herald, only about 10 out of the 120 state congressional districts are considered competitive. The rest are either deep blue or bright red.
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West Virginia Teachers Continue Walkout
Striking teachers in West Virginia remain out of school today. Even though they reached an agreement with the state’s Governor last week, the state Senate refused to approve it. Public school teachers in West Virginia make about $45,000 on average, among the lowest in the country. They are asking for a 5% raise.
Teachers in Oklahoma say they’re inspired and considering similar action.
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Two Big Developments In Europe
• Confusion continue in Italian elections, even after the vote. The only thing that’s for sure: everything’s shaken up, and upside down. The party gaining the most votes may be the biggest unknown. Calling itself the Five Star Movement, it was founded by a comedian, and is considered anti-establishment. While neo-fascists did not dominate, they did pretty well. Still, no party or faction seems to have gotten enough votes to immediately form a government.
The more mainstream, centrist parties did poorly. Meaning whomever eventually comes out on top will likely be less cooperative with the European Union.
• Separately, German Chancellor Angela Merkel has managed to form a government, 6 months after elections in that country, and will shortly start her 4th term. Just in time for Trump to possibly start a trade war with Germany over car imports.
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