Trump Prepares For Coming Trade Wars With China, Picks Beijing Hawk For Trade Advisery Role

US President-elect Donald Trump picked Peter Navarro, an economist, professor and hardliner on trade with China, to head the newly-created National Trade Council (NTC) at the White House.

Trump’s transition team released a statement yesterday (22 November) saying that the formation of the NTC demonstrates Trump’s seriousness to make American manufacturing great again and “to provide every American the opportunity to work in a decent job at a decent wage.” The statement also added that Navarro, a professor at University of California, will develop trade policies that shrink US trade deficit, expand growth and help stop the exodus of jobs to other countries. Trump has vowed that his administration will follow two simple rules: buy American and hire American. NTC will help Trump follow these “simple rules.”

Navarro sees China as a threat both economically and military. He has authored "Death by China: How America Lost its Manufacturing Base”, a book highlighting the trade threat to the US from China. The book was later made into a documentary film. Navarro believes that America is fast losing the trade war with China and is a vocal opponent of multilateral trade deals like NAFTA and TPP.

Navarro has flagged concerns related to China’s imports and theft of US intellectual property. His economic line of thinking on trade has heavily influenced Trump and was one of his most important advisers during the campaign. Navarro and Wilbur Ross, Trump's pick for commerce secretary, had worked together to help Trump develop the trade, regulatory and energy policy agenda, which focused on reducing US trade deficit and boosting manufacturing.

Trump had even endorsed Navarro’s book, Death by China, saying that it “is right on. This important documentary depicts our problem with China with facts, figures and insight. I urge you to see it.”

It’s not about trade alone. Navarro is very much interested in studying foreign policy which makes him a unique economist. He has written a book called "Crouching Tiger: What China’s Militarism Means for the World," which tells us about the coming issues the world may face from an increasingly assertive China.

Trump’s determination on trade can be assessed from the fact that for the first time there would be a council within the White House focusing on American manufacturing and American workers, and it would work collaboratively with three other offices at the White House: the National Security Council, the National Economic Council, and the Domestic Policy Council, according to the transition team.

Trump had made trade as a centerpiece of his presidential campaign, trying to appeal to angry and frustrated blue-collar white voters who have seen manufacturing jobs lose in an increasing global economy.

But except his diatribes against China and good sounding slogans, Trump hasn’t put forward any detailed plan how to make manufacturing great again. He has promised to simplify taxes and cut regulations but that may not be enough as far as jobs are concerned. He threatens to slap tariffs on American companies that shift base outside but that’s no alternative to sound economic policy.

First, the companies who do stay, either by the carrot of less taxes or the stick of threats of tariffs, aren’t going to employ in thousands. It’s just the not the nature of business anymore. Plus it’s just too expensive especially in a country like America. Even companies in China and India where labour is much cheaper are increasingly opting for automation. Those who do employ will go for cheap labour. Low wages anyway won’t satisfy Trump’s white base and most of the jobs may go to impoverished minorities which won’t vote for him.

Second, it’s not that the US manufacturing is in shambles. The productivity is at all time high but the jobs are declining. As automation picks up pace, there is no staving off the loss of jobs.

Nonetheless, Trump’s pick is interesting and signals a shift from mainstream Republican orthodoxy on both trade and foreign policy vis-a-vis China. The task ahead from Trump and Navarro isn’t easy. China isn’t going to take anything lying down. And if and when the two biggest economies indulge in a cold trade war, there will be collateral damage, probably most significantly in South-East Asia than anywhere else. How the relationship on trade and foreign policy pans out between the US and China during the Trump administration may set the tone for the rest of century. Everyone must buckle up for a bumpy ride ahead.