The US is seeking more “reciprocal” trade with nations such as China and Germany in a bid to boost growth, reduce the trade deficit and keep US production capacity out of foreign hands, White House National Trade Council Director Peter Navarro said.
“If we are able to reduce our trade deficit through tough, smart negotiations, we should be able to increase our growth rate,” Navarro said at an economists’ conference in Washington on Monday.
Without action to close the gap, “foreigners will eventually own so much of America that there will be nothing left to trade,” he said.
Navarro said US President Donald Trump’s administration wants to rebuild the US’ industrial base, reversing the decline in the nation’s manufacturing workforce. He noted that about 20 percent of Germany’s labor force is employed in manufacturing, compared with only about 8 percent in the US.
“One of the goals of the Trump administration is to reclaim all of the supply chain and manufacturing capability that would otherwise exist if the playing field were level,” Navarro said.
On the campaign trail, Trump championed the idea of reducing the US trade deficit, promising to create millions of jobs by bringing back manufacturing positions from overseas. The message resonated in economically struggling states amid a widening of the deficit, which last year increased to its largest level since 2012.
Trump’s goal is to promote “free, fair and reciprocal trade,” Navarro said, adding that right now the US’ trade with the world is “anything but reciprocal.”
He identified 16 nations that account “for the lion’s share of the deficit problem,” such as Taiwan, China, India, Vietnam, South Korea, Ireland and Switzerland.
Asked if the yuan is fairly valued, Navarro said “it’s clear that the Chinese currency is undervalued” when looked at based on the trade balance between the US and China, though he acknowledged that Chinese authorities have been intervening to prop up the yuan.
He declined to comment on the value of the US dollar.
Navarro singled out India for having “notoriously high” tariffs and said the US trade deficit with Germany would be among the toughest to tackle.
The plan to reduce the trade deficit “is not based on higher tariffs, but rather getting our partners to lower theirs,” Navarro said.
The administration’s strategy to narrow its trade gap by dealing directly with other nations would not work, former IMF chief economist Olivier Blanchard said on Bloomberg TV after Navarro’s speech.
“Even if we had completely balanced trade, we could well have — we should have — trade deficits with some and trade surpluses with others,” said Blanchard, a senior fellow at the Peterson Institute for International Economics. “If we start trying to reduce the trade deficit from one country, the goods will go through another country. It will be a game of musical chairs.”
Navarro said the Trans-Pacific Partnership, which Trump pulled out of almost immediately after taking office, would have been a “death knell” to the US auto and vehicle parts industry that we “urgently need to bring back to full life.”
The US would aim to tighten the rules of origin provisions in almost all bilateral trade deals, he added.
More broadly, the Trump administration plans to implement tax, regulatory and energy policy reforms, while targeting nations that engage in unfair currency and trade practices, Navarro said.
A strong manufacturing and defense industrialist base is the bedrock of US national security, he said.
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