If Donald Trump is treating the staffing of his administration like a glorified casting call, then there is no shortage of candidates for Washington’s foreign policy establishment to boo or cheer. So far, Secretary of State Rex Tillerson and Defense Secretary James Mattis occupy the roles of the heroes, the moderating forces who will stare down the bad guys. The villains are the two Steves, Miller and Bannon, who are allegedly Trump’s ideological puppet-masters, plus national security adviser Michael Flynn, who seems intent on confrontation not only with Iran but Islam generally.
Amid all the fretting about what diktats or foreign wars Miller, Bannon and Flynn might be concocting, one figure only intermittently flickers into public consciousness: Peter Navarro, the head of Trump’s National Trade Council. But it would be a costly mistake to short sell his influence. He sports some establishment credentials—most notably, a Harvard Ph.D. in economics—but his views are quite radical. He may, in fact, be the loopiest member of Trump’s retinue.
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Over the past few weeks, Navarro, a former professor at the University of California, Irvine, has triggered angst not only in Asia, but also in Europe. Trump had already angered Germans by declaring that he would consider imposing tariffs on German automakers like Mercedes-Benz and BMW, but Navarro piled on in an email interview with the Financial Times. In the interview—during which he also made noises about repatriating global supply chains, an astonishing suggestion that would be enormously costly and take years to execute—Navarro amplified Trump’s claims about Germany by declaring that the European Union amounts to a German economic racket in which Berlin artificially boosts its exports with what he called a "grossly undervalued Euro.” Of course, Berlin doesn’t get to set the value of the euro.
Navarro’s folderol, however, made it clear that the Trump administration is bucking for a clash with one of America’s biggest trading partners. We already knew, of course, that Navarro was bucking for a clash with America’s biggest trading partner: China. He has a long and colorful history of China-bashing (just check out his bizarre scaremongering documentaries), which makes Chinese officials nervous. He seems to think that every one of Chinese economic successes comes at U.S. expense.
This truculent approach represents an abrupt departure from the philosophy that has governed U.S. and global trade policy for the past half-century. Since the Bretton Woods Conference in 1944, the foundation of the world order has been an open international economic system designed to prevent a recurrence of the trade wars of the 1930s. The U.S. profited enormously from this arrangement—which rested on institutions like the International Monetary Fund and the World Bank—establishing what the historian Melvyn Leffler called a "preponderance of power” in Europe and Asia in order to combat the rising Soviet empire. Even after the Cold War, the system has ushered in what amounts to a golden economic age for the U.S. and its partners.
Navarro is proposing to upend all this. But don’t expect to see big gains accruing to the U.S. from his stringent trade policies. Quite the contrary. The more likely result is that Germany, Mexico, China and other countries will simply retaliate against, or bypass, the U.S., and an isolated Washington could find itself trapped in the spiral of a worldwide economic depression. By all means, fear the possible hot war with Iran that Bannon and Flynn might be plotting. But also fear the conflict that is far more likely if Navarro wields his influence successfully: a global trade war.
Navarro is the obverse of economists who somewhat euphorically believe that trade will bring about peaceful relations with other countries, and he poses the opposite problem: He’s a hard-line mercantilist who insists that military confrontation with some trading partners is almost inevitable. In this, he throws Economics 101 out the window. The classical economist David Ricardo offered a fundamental insight at the heart of the case for free trade—the theory of comparative advantage. He noted that if one country can produce a good at a lower marginal cost than another, they can each focus on what they manufacture best for mutual gain—exactly what is happening today. Navarro will have none of this. He’s a zero-sum economist, who, like Trump, believes that every item not made in the U.S. represents the theft of an American job.
So far, Navarro’s bugbear has been China, which he depicts as a voracious enemy intent on undermining the U.S. in any way possible. Fears of a dominant China have been percolating for decades—in 1997, for example, Richard Bernstein and Ross H. Munro published the controversial tract The Coming Conflict With China—but Navarro has taken them to a new level. Less a novel thinker than a gifted popularizer—he published essays everywhere from Foreign Policy to the National Interest during the campaign and is a persuasive public speaker—Navarro has adapted a legitimate debate about China’s hegemonic aims into a series of alarmist tracts and films, all of which are redolent of Cold War hysteria about Moscow’s international red web. Navarro takes it as a given that China is a revisionist power that seeks to destroy the American labor force, evict America from East Asia and establish a new totalitarian order. He never considers that China might have its own national interests or that its rise is hardly foreordained. With a slumping economy and massive internal corruption, Beijing faces its own host of internal problems.
Instead, everywhere he looks, Navarro sees the hand of China at work, subverting American freedoms and prosperity. Navarro’s first foray into China studies came in his 2006 book The Coming China Wars: Where They Will Be Fought, How They Can Be Won. It contains chapter titles such as "‘Made In China’: The Ultimate Warning Label” and "Red Army Rising—The Coming China Hot Wars.” Navarro uses military language to refer to China’s trade policies, referring to its "conquest” of the world’s export markets, which has "vaporized literally millions of manufacturing jobs and driven down wages.” Particularly disturbing is Navarro’s fearmongering about war with Beijing. China’s aspirations are so insatiable, he claims, that eventually there will be a clash over "our most basic of all needs—bread, water, and air.”
Indeed, he has propounded this line with messianic zeal in "Death By China: Confronting the Dragon—a Global Call to Action” (2011) and again in 2015 with his book and film "Crouching Tiger,” the latter of which is accompanied by ominous music and footage of marching Chinese troops. It even invokes the specter of "dogfights in the sky between China and a potentially overwhelmed American force” which "calls into further question the ability of the United States to maintain air dominance over the skies of the Pacific.” Dogfights? A military confrontation with China, a leading nuclear power, could quickly turn into a lot more than that, something that does not really seem to occur to Navarro.
To counter the manifold economic and military threats the United States faces, Navarro recommends a sweeping revision of U.S. foreign policy. He wants high tariffs, the repudiation of trade pacts and, above all, a massive military buildup against China. One of Navarro’s aspirations is to beef up military ties with Taiwan, which Beijing considers part of China. Calling the Obama administration’s treatment of Taipei "egregious,” Navarro declared in Foreign Policy that it has been "repeatedly denied the type of comprehensive arms deal it needs to deter China’s covetous gaze.” At the same time, Navarro wants to end sequestration on defense and go on an all-out shipbuilding binge for the U.S. Navy. Nor does Navarro seem to see a bomber that he would not like to build.
The hysterical economic warnings, the scary prescriptions and the self-defeating proposals would simply be fanciful nonsense if Navarro weren’t whispering in the ear of the most powerful man in the world. The fact that he is makes them dangerous. Of course, where Trump will actually head still remains an open question. After his initial questioning of a "one China” policy, Trump, in a phone call with Chinese President Xi Jinping on Thursday, seems to have endorsed it. But at the same time, Trump is clearly seeking to use Japan to balance Chinese power, which is why he is hosting Japanese Prime Minister Shinzo Abe this weekend. On Friday, Abe even promised to invest in America and joked that he would help build a Maglev train that would convey the president within an hour from Washington to his Manhattan aerie.
Like not a few presidential advisers in history, Navarro may not be able to enact everything he proposes. Perhaps he will breathe fire about the perfidy of China and other countries but not decisively influence economic policy. In this scenario, Navarro would serve as a convenient release valve for ventilating frustration about the further loss of manufacturing jobs that is likely to continue under Trump, thanks mostly to the inexorable rise of artificial intelligence and automation. In the Washington Post, Ed Hess, a professor of business administration at the University of Virginia, predicts that tens of millions of jobs will be destroyed in the next five to 15 years by emerging technologies, and 47 percent wiped out over the next 10 to 15 years.
Another possibility is that Navarro doesn’t get free rein but has to jockey for power with the other economic players in the administration, including Steven Mnuchin at Treasury, a former Goldman Sachs executive who has no history of China antagonism. In this scenario, Trump doesn’t jettison NAFTA but rather accedes to some cosmetic changes that don’t fundamentally alter the pact. At the same time, he retreats from his bogus charge that Beijing is depressing its currency—it isn’t—and initiates trade talks with the Chinese while also working with them to corral North Korean nuclear ambitions.
But there’s a third possibility—one that we shouldn’t dismiss. In this scenario, the Navarro line prevails. Trump unilaterally slaps draconian tariffs on Mexico and China. In turn, the World Trade Organization says they’re illegal. Trump, never one to defer to the courts, pulls the U.S. out of the WTO, and the international economic order is upended. With tariffs high and Trump bailing out of international institutions, it doesn’t take long before we end up in a global depression. The last time something like this occurred it led directly to the rise of fascist regimes in Germany, Italy and Japan, with nationalist leaders promising that domestic repression and external expansion were a quick and easy remedy to their nation’s woes.
And today? The consequences won’t just be financial—the whole global system will shift as countries grasp at new, more beneficial alliances. Mexico is rethinking its relationship with Washington—it could try and strike up new deals with India and China. At the same time, if Trump abandons, or even significantly curtails, free trade with Europe, he will force Germany to move closer to China. Already Merkel has invited the Chinese prime minister to Berlin, and German officials are looking to expand trade ties with China as quickly as possible. Ironically, pursuing the Navarro line could end up benefiting China enormously. Navarro and Trump have already strengthened China’s hand by jettisoning the Trans-Pacific Partnership. Now, Beijing is trying to position itself, at least rhetorically, as the defender of global free trade. In January, Chinese President Xi Jinping announced at Davos, "We should commit ourselves to growing an open global economy. No one will emerge as the winner in a trade war.” The incongruity of the head of a nominally Marxist nation embracing open markets more ardently than the U.S. has not gone unnoticed or unremarked around the world.
For years, the U.S. has relied on the post-World War II economic system—undergirded by free trade and international institutions—to buttress its prosperity and power. It’s not hard to imagine where Navarro’s plans to scrap that system would lead. A garrison state, shorn of allies, regarded with suspicion, if not hostility, from Berlin to Beijing, is hardly a recipe for the kind of rapid rise in GDP that Trump is promising. It amounts to a flagrant repudiation of the kind of belief in free market capitalism that presidents from Harry Truman to Ronald Reagan, from Bill Clinton to George W. Bush have championed as a matter of course. This alone should be enough to give anyone with a stake in the world economy—which these days is pretty much everyone—the collywobbles. Trump should shun his advice. If he follows Navarro’s little schemes, it could rapidly lead to a world crisis. Watch this man.