April 2, 2018 – CNBC, Closing Bell
KELLY EVANS: NOW THE MARKETS TODAY WERE PLUNGING. WAS IT FEARS OF A TRADE WAR WITH CHINA? IN A FIRST ON CNBC INTERVIEW WE ARE JOINED NOW BY NATIONAL TRADE COUNCIL DIRECTOR PETER NAVARRO. MR. NAVARRO, THANK YOU FOR JOINING US. WHAT A DAY.
PETER NAVARRO: WHAT A DAY.
EVANS: WHAT’S THE PRESIDENT THINKING ABOUT THE MARKET?
NAVARRO: LOOK, THE MARKET IS REACTING IN A WAY WHICH DOES NOT COMPORT WITH THE STRENGTH, THE UNBELIEVABLE STRENGTH IN PRESIDENT TRUMP’S ECONOMY. I MEAN, EVERYTHING IN THIS ECONOMY IS HITTING ON ALL CYLINDERS BECAUSE OF PRESIDENT TRUMP’S ECONOMIC POLICIES. WE’VE CUT TAXES. THAT’S STIMULATING INVESTMENT IN A WAY WHICH WILL BE NONINFLATIONARY. THAT’S GOING TO DRIVE UP PRODUCTIVITY AND WAGES. THAT’S ALL GOOD. MICK MULVANEY IN OMB IS ORCHESTRATING ONE OF THE BEST DEREGULATION EVENTS SINCE THE REAGAN ADMINISTRATION. THAT’S A SUPPLY SIDE BENEFIT TO THE ECONOMY THAT PUSHES INFLATION DOWN AND GROWTH UP. WE’VE GOT AN UNLEASHING HISTORICALLY OF THE ENERGY SECTOR, WHICH IS GOING TO DRIVE DOWN COSTS TO THE AMERICAN MANUFACTURERS, MAKE THEM COMPETITIVE EVEN AS IT DRIVES DOWN COSTS TO CONSUMERS AND ALLOWS THEM TO SPEND MORE AND GET MORE OUT OF THEIR DOLLAR. IN TERMS OF TRADE POLICY, BY REDUCING THE TRADE DEFICIT, WHICH IS THE INTENT OF THE PRESIDENT’S FAIR AND RECIPROCAL TRADE POLICIES, THAT WILL ADD THOUSANDS OF JOBS TO THIS ECONOMY AND BRING IN FOREIGN INVESTMENT. I MEAN, WHEN WE PUT THE TARIFFS ON SOLAR AND WASHING MACHINES IN JANUARY, THAT BROUGHT IN A FLOOD OF NEW INVESTMENT. SO YOU WONDER, AND IF I PUT MY OLD HAT ON AS A FINANCIAL MARKET ANALYST, I’M LOOKING AT THAT – THIS MARKET AND THE ECONOMY AND THINKING, THE SMART MONEY WILL BUY ON THE DIPS HERE BECAUSE THE ECONOMY IS AS STRONG AS AN OX.
EVANS: IS THE PRESIDENT — HAVE YOU HEARD HIM COMMENT ON THE MARKET WEAKNESS, PETER? IS HE ASKING ABOUT IT? HAVE PEOPLE –
NAVARRO: I HAVEN’T SPOKEN WITH HIM TODAY. BUT LET’S BE CLEAR, THE PRESIDENT — THE PRESIDENT’S FOCUS, SINGULAR FOCUS IS ON ECONOMIC GROWTH, RISING WAGES AND A STRONG MANUFACTURING AND DEFENSE INDUSTRIAL BASE.
EVANS: I KNOW, BUT YOU KNOW – I KNOW HE’S WATCHING IT. HE USED TO TWEET ABOUT IT ALL THE TIME.
NAVARRO: IF WE HIT ALL POINTS OF THAT COMPASS, HANG ON, IF WE HIT ALL POINTS OF THAT COMPASS, THE MARKET WILL GO UP. SO THAT’S KIND OF WHERE WE’RE AT. I THINK IT’S THE AARON RODGERS THING EVERYBODY NEEDS TO RELAX AND LOOK AT THE CHESSBOARD HERE. LOOK, THIS ECONOMY IS JUST STRONG. IT’S NOT JUST THE U.S. ECONOMY. WE HAVE THE SYNCHRONICITY GLOBALL. WHERE EUROPE AND ASIA, LATIN AMERICA, THEY’RE ALL DOING VERY WELL MOVING TOGETHER ON THIS. THAT HELPS EVERYBODY. SO, AGAIN, RELAX.
EVANS: LET’S TALK ABOUT THE CHESSBOARD FOR A MOMENT BECAUSE JUST THIS AFTERNOON THERE WAS WORD THE PRESIDENT WANTS TO WRAP UP THESE NAFTA NEGOTIATIONS WITHIN TWO WEEKS. IS THAT REALISTIC?
NAVARRO: WELL, THE ISSUE HERE, WHICH THE PRESIDENT UNDERSTANDS KEENLY, IS THAT THE MEXICAN ELECTIONS ARE APPROACHING. AND YOU’RE GONNA GET TO A CERTAIN POINT, JUST LIKE AS YOU DO IN THE AMERICAN ELECTIONS, WHERE IT BECOMES DIFFICULT TO DO MEANINGFUL POLICY CHANGES. SO, I THINK WHETHER IT’S TWO WEEKS OR 30 DAYS, IT’S GOT TO BE SOON. AND AMBASSADOR ROBERT LIGHTHIZER, THE U.S. TRADE REPRESENTATIVE, HAS BEEN DOING A GREAT JOB GOING OF THROUGH MULTIPLE ROUNDS WITH HIS CANADIAN AND MEXICAN COUNTERPARTS. SO WE NEED TO BE HOPEFUL ABOUT THIS BUT NOT GET OUR EXPECTATIONS UP TOO HIGH. LET’S SEE WHAT HAPPENS. WHAT THE AMERICAN PEOPLE NEED TO KNOW IS THAT THEY’RE IN VERY GOOD HANDS WITH THE TWO BEST NEGOTIATORS IN AMERICA, THE PRESIDENT HIMSELF AND AMBASSADOR LIGHTHIZER.
EVANS: WHAT DOES IT MEAN TO HAVE THE NEGOTIATIONS FINISHED? DO YOU THINK IT’S MORE IMPORTANT TO THE PRESIDENT TO FINISH THE NEGOTIATE, PERIOD, WITH THE ELECTION COMING UP OR THAT THERE’S FUNDING FOR THE WALL OR THAT MEXICO SAYS WE’LL DO MORE TO HELP KEEP CENTRAL AMERICAN IMMIGRANTS FROM COMING THROUGH TO THE U.S.
NAVARRO: LOOK, IMMIGRATION POLICY IS CRITICAL TO THIS ADMINISTRATION. IT’S THE FOUR PILLARS OF THAT POLICY HAVE BEEN SPELLED OUT AND THE PRESIDENT IS FIRMLY COMMITTED TO THAT. THE NAFTA NEGOTIATIONS ARE A SEPARATE ISSUE FROM THAT. AS SAID, THERE’S LITERALLY HUNDREDS OF PEOPLE ON ALL THREE SIDES OF THIS NEGOTIATION MEETING OVER THE LAST NUMBER OF MONTHS, TRYING TO COME WITH A GOOD SOLUTION TO A BAD AGREEMENT. I MEAN, YOU GO BACK TO 1994 WHEN BILL CLINTON SIGNED THAT, WE WERE PROMISED 200,000 NEWS JOBS AND THE MOON. AND WHAT WE BASICALLY GOT WAS HELL FOR THE AMERICAN WORKERS AND HELL FOR THE AMERICAN MANUFACTURERS AND THAT’S GOT TO END.
EVANS: PETER, WHAT DO YOU MAKE OF CHINA’S ANNOUNCED TARIFFS THIS MORNING? SOUNDS LIKE THEY ARE GOING AFTER PORK. I THINK THEY’RE GOING TO GIVE US A 25% TARIFF. LOOKS LIKE THEY’RE NOT PUTTING SOYBEANS ON THAT LIST, BUT DO YOU THINK THEY’RE TARGETING TRUMP STATES AND TRUMP VOTERS?
NAVARRO: HERE’S THE BIGGER QUESTION TO ME: YOU HAVE CHINA, WHICH EVERYBODY KNOWS AROUND THE WORLD IS STEALING OUR INTELLECTUAL PROPERTY AND ALSO USING INDUSTRIAL POLICIES WHICH FORCE THE TRANSFER OF OUR INTELLECTUAL PROPERTY TO CHINESE FIRMS AND ALLOW THEM TO OUTCOMPETE US. THE PRACTICAL RESULT OF THAT HAS BEEN THE LOSS OF MILLIONS OF JOBS AND 60,000 FACTORIES TO CHINESE SOIL. NOW, ALL THE PRESIDENT IS DOING IS TRYING TO DEFEND AMERICAN WORKERS AND AMERICAN BUSINESSES AGAINST THAT ECONOMIC AGGRESSION OF CHINA. WHAT’S CHINA DOING? THEY’RE BASICALLY THROWING ANOTHER PUNCH AT US. I’M NOT SURE THAT’S THE BEST WAY TO GET THE CONFIDENCE OF THE AMERICAN PEOPLE BEHIND CHINA.
EVANS: HOW SHOULD THE PRESIDENT AND THE U.S. RESPOND? PETER, IF WE READ THIS AS THE US IS SIMPLY TRYING TO LEVEL THE PLAYING FIELD AND NOW CHINA IS COMING FORWARD TO PUT ON MORE TARIFFS, WHAT SHOULD THE U.S. RESPONSE BE?
NAVARRO: I DON’T THINK THIS IS GOING TO BE AN ACTION/RESPONSE, ACTION/RESPONSE. THAT’S NOT WHAT THIS SHOULD BE ABOUT. THAT JUST LEADS TO ESCALATION SPIRALS. WHAT I DO KNOW IS THAT THE PRESIDENT IS FIRMLY COMMITTED TO A COURSE OF ACTION WHICH WILL LEVEL THE PLAYING FIELD BETWEEN THE UNITED STATES AND CHINA AND HE HAS THE FULL SUPPORT OF THE AMERICAN PEOPLE. HE WAS ELECTED, IN MANY WAYS, ON THE BASIS OF HAVING FAIR AND RECIPROCAL TRADE, PARTICULARLY WITH CHINA. SO, THE COURSE HERE IS GOING TO BE A COURSE OF RESOLUTENESS AND FIRMNESS IN TERMS OF RIGHTING THE WRONGS THE AMERICAN PEOPLE HAVE SUFFERED. AND AGAIN, I WANT TO SAY, JUST – LOOK, THEY STEAL OUR STUFF. EVERYBODY KNOWS THAT. THEY FORCE THE TRANSFER OF OUR STUFF. EVERYBODY KNOWS THAT. WHAT ARE WE SUPPOSED TO DO? ARE WE SUPPOSED TO NOT DEFEND OURSELVES AND THEN WHEN WE DEFEND OURSELVES, ARE WE SUPPOSED TO TAKE ANOTHER PUNCH FROM THEM? I MEAN, I THINK THE CHINESE SIDE NEEDS TO THINK VERY CAREFULLY ABOUT HOW THEY RESPOND BECAUSE THE AMERICAN PEOPLE ARE NOT GOING TO STAND FOR THAT KIND OF RESPONSE.
EVANS: BUT I WONDER, PETER, IT’S INTERESTING, WE’VE SEEN MULTIPLE EXAMPLES IN RECENT MONTHS OF AMERICAN COMPANIES NOT NECESSARILY STANDING UP TO CHINA AND, IN FACT, KIND OF BOWING DOWN TO THEIR WISHES. APPLE, FOR EXAMPLE, MOVING SOME OF ITS CLOUD OPERATIONS INTO CHINA. YOU KNOW, WHETHER IT WAS MERCEDES OR ANYBODY WHO’S – MARRIOTT WHEN THEY PUT TAIWAN AS AN INDEPENDENT COUNTRY IN A DROP-DOWN LIST AND THEN HAD TO BACK OFF AND SAY, “HEY, WE’RE SORRY.” DO YOU SEE CORPORATE AMERICA AS A PARTNER IN THIS EFFORT OR ARE THEY GETTING IN THE WAY?
NAVARRO: THE PROBLEM IS – THE PROBLEM HISTORICALLY IS THAT PREVIOUS PRESIDENTS HAVE NOT HAD THE BACK OF CORPORATE AMERICA. THEY BASICALLY LET CORPORATE AMERICA GO TO CHINA, GET RIPPED OFF AND THAT HAS REBOUNDED BACK TO THE AMERICAN PEOPLE AND THE AMERICAN MANUFACTURERS HERE. THIS PRESIDENT, PRESIDENT DONALD J. TRUMP, HAS THE BACK OF AMERICAN BUSINESSES AND WORKERS AND THAT’S GOING TO BE THE DIFFERENCE. SO, I THINK THE DYNAMIC GOING FORWARD IS GOING TO BE A LOT HEALTHIER AND WE’RE GOING TO SEE WHAT WE’RE GOING TO SEE BUT THE STATUS QUO CANNOT HOLD HERE. WE CAN NO LONGER HAVE COMPANIES, WHETHER IT BE APPLE OR ANYBODY ELSE, GO TO CHINA, SURRENDER THEIR TECHNOLOGY AND THEN HAVE CHINESE COMPETITORS COME BACK AND BEAT US IN THE MARKETPLACE UNFAIR AND NONRECIPROCALLY. THAT’S AN UNSUSTAINABLE EQUILIBRIUM FOR THE GLOBAL ECONOMY. THAT’S WHY I SAY, I MEAN, IF YOU THINK ABOUT THE TRADE ISSUE, ULTIMATELY, I THINK IT’S REALLY A GOOD THING FOR THE MARKET THAT WE ARE DOING THESE KINDS OF TRADE ACTIONS BECAUSE WHAT WE’RE TRYING TO DO WITH THIS SITUATION IS TRY TO GET TO A PLACE WHERE WE HAVE FAIR AND RECIPROCAL TRADE, BALANCED TRADE ACROSS NATIONS AND EVERYBODY TRADES FREELY IN A WAY THAT TEXTBOOKS USED TO WRITE ABOUT BUT WHICH WE NEVER GET IN REALITY. I MEAN, THAT’S — AND I TEACH THAT STUFF. I MEAN, LET’S REMEMBER IF ANYBODY KNOWS WHAT GOES WRONG WITH THOSE MODELS, IT’S THE GUY WHO KNOWS HOW TO TEACH THEM.
EVANS: LET ME ASK YOU ABOUT AMAZON FOR JUST A SECOND BECAUSE WE SOMETIMES HEAR PEOPLE SAY THE U.S. SHOULD DEFEND ITS CORPORATE CHAMPIONS, IN MUCH THE WAY CHINA, FRANKLY, IS DOING. IT SHOULD SAY, “YOU KNOW WHAT, AMAZON AND FACEBOOK AND GOOGLE, THESE ARE COMPANIES THAT HAVE MADE INCREDIBLE INROADS AROUND THE WORLD, THEY NEED TO BE SUPPORTED,” ET CETERA. YOU KNOW WHERE I’M GOING WITH THIS THE PRESIDENT CONTINUES TO ATTACK AMAZON. THERE’S A LOT OF CHATTER ABOUT WHETHER IT WILL BE FOUND GUILTY OF BEING A MONOPOLY, OF TAKING ADVANTAGE OF THE POST OFFICE, OF NEEDING TO BE BROKEN UP AND HAVING TOO MUCH MARKET POWER. WHAT’S YOUR ASSESSMENT? IS AMAZON TOO BIG OR NOT?
NAVARRO: WELL, I’LL LET THE DEPARTMENT OF JUSTICE DEAL WITH THE ANTI-TRUST ISSUES AND STAY WAY OUT OF THEIR LANE, BUT I WOULD SAY TO YOU THAT PRESIDENT DONALD TRUMP HAS HIT IT RIGHT ON THE NAIL – THE NAIL ON THE HEAD ABOUT AMAZON ON A COUPLE OF POINTS. I MEAN, FOR EXAMPLE, AMAZON DOESN’T PAY THE KINDS OF SALES TAX IT COULD. IT HAS NOW GOTTEN TO THE POINT WHERE IT COLLECTS SALES TAXES FROM ALL 45 OF THE STATES THAT LEVY THEM. BUT IN A LOT OF — SOME OF THOSE STATES IT DOESN’T COLLECT THE LOCAL TAXES. AND THAT GIVES AN ADVANTAGE TO AMAZON OVER THE LOCAL RETAILERS. AND MORE IMPORTANTLY, THERE’S OVER 800,000 INDEPENDENT VENDORS THAT ACCOUNT FOR ABOUT HALF OF THE $136 BILLION IN ANNUAL REVENUES TO AMAZON. AND AMAZON DOESN’T EVEN TRY TO COLLECT MUCH OF THOSE SALES TAXES AT ALL, AND THAT’S A HUGE DISADVANTAGE TO THE BRICKS AND MORTAR RETAIL STORES. AND DON’T FORGET, AMAZON EARNED A TON OF MONEY LAST YEAR AND THEY DIDN’T PAY ANYTHING IN TAXES. AND FINALLY, ON THE POST OFFICE ISSUE, THERE ARE SOME STUDIES THAT SHOW IF AMAZON PAID THE FULL FREIGHT ON EVERY PARCEL IT SHIPPED WITHOUT PAYING ITS SALES TAX PROPERLY, THAT WOULD BE ABOUT $1.50 PER PARCEL. SO, THE PRESIDENT IS DEAD RIGHT ABOUT AMAZON. AND AGAIN, THIS IS ABOUT FAIRNESS, RECIPROCITY, AND THAT’S WHAT THE PRESIDENT’S ALL ABOUT.
EVANS: SO, IT SOUNDS LIKE YOU’RE MORE FOCUSED ON SAYING, AND LOOK, IF THE POST OFFICE RAISES PRICES FOR AMAZON, AMAZON MIGHT SAY THAT’S GREAT, WE’RE GONNA BUILD OUT OUR OWN NETWORK, WE DON’T NEED YOU. AND THAT COULD HURT THE U.S. TAX PAYER. IT SOUNDS LIKE YOU’RE MORE FOCUSED ON THE POST OFFICE ISSUE, AND MAKING IT MERCHANTS PAY SALES TAXES, A LOT OF WHICH ARE SMALL BUSINESSES, RATHER THAN BREAKING IT UP.
NAVARRO: WELL, THE BIG ISSUE, I THINK, THAT THE PRESIDENT HAS HIT UPON IS THIS FAILURE TO PAY SALES TAX. I MEAN, LOOK, I LIVED IN CALIFORNIA FOR YEARS BEFORE I GOT TO WASHINGTON, D.C. AND THE SWAMP, AND I REMEMBER, YOU KNOW, ORDERING STUFF ON AMAZON, SITTING IN A COUNTY WHERE THE SALES TAX WAS UP TO ALMOST 10%, THINKING, “WOW, I CAN BUY ON AMAZON 10% OFF.” IT’S LIKE THAT HAS SORT OF GONE AWAY NOW AS AMAZON HAS PRETENDED TO COLLECT ITS SALES TAX BUT REMEMBER, HALF OF – ALL THOSE INDEPENDENT VENDORS, IT’S NOT REALLY — AMAZON IS NOT DOING ITS JOB. SO WE NEED TO GET TO THE BOTTOM OF THAT. THESE BRICKS AND MORTAR STORES ARE AN IMPORTANT PART OF THE FABRIC OF THIS COUNTRY, AND THEY SHOULDN’T HAVE TO COMPETE UNFAIRLY AGAINST THE BIG BEHEMOTH OF AMAZON.
EVANS: WELL LET ME ASK YOU ABOUT THE ECONOMY BEFORE WE LET YOU GO. AND SIMPLY AS YOU MENTIONED, THERE’S A LOT OF STRENGTH OUT THERE. BUT WE’RE SITTING HERE LOOKING AT NOT ONLY LOOKING AT THE SELLOFF IN STOCKS TODAY, PETER, BUT INTERESTINGLY ENOUGH, THE YIELD ON THE BENCHMARK, THE TEN-YEAR, YOU KNOW, TREASURY NOTE, IT’S FALLING. IT WAS ALMOST 3% AND NOW CLOSER TO 2.7%. FRANKLY, NO ONE AROUND HERE CAN REALLY EXPLAIN IT. WHAT DO YOU THINK IS GOING ON?
NAVARRO: YEAH, I WAS A LITTLE PUZZLED WHEN THE FED ANNOUNCED THREE RATE HIKES BEFORE THE END OF THE YEAR BECAUSE WHEN I LOOK AT THE CHESS BOARD, I DON’T SEE ANY INFLATION TO SPEAK OF IN THE ECONOMY. AND A LOT OF REASON IS THINGS LIKE THE PRESIDENT’S TAX CUTS, WHICH ARE GOING TO STIMULATE A LOT OF INVESTMENT, PRODUCTIVITY, GROWTH, DOWNWARD PRESSURE ON WAGES, AND REMEMBER, THE SUPPLY SIDE EFFECTS OF DEREGULATION. I THINK IF YOU SEE THE YIELDS GO DOWN, THAT’S — THAT HAS AS MUCH TO DO WITH THE FACT THAT THERE’S MODERATING INFLATIONARY PRESSURES DUE TO PRODUCTIVITY GROWTH AND SUPPLY SIDE FACTORS, NOT SLOWER GROWTH.
EVANS: YEAH – BUT DOES THAT MEAN, PETER – WHICH IS GREAT. YOU’RE RIGHT AND THAT’S THE IDEAL OUTCOME. BUT FINAL QUESTION HERE, DOES THAT MEAN THAT THERE’S NO REASON TO KEEP HIKING INTEREST RATES?
NAVARRO: WELL, THAT’S THE FEDERAL RESERVE JOB. ALL I CAN TELL YOU IS I WAS SURPRISED WHEN I SAW THAT ANNOUNCEMENT BASED ON MY READ OF THE INFLATION CHESSBOARD. I REMEMBER IN THE LATE 90s WHEN ALAN GREENSPAN WAS HURRYING TO RAISE INTEREST RATES AND WE HAD TREMENDOUS PRODUCTIVITY GROWTH AND LOW INFLATIONARY PRESSURES THEN. SO, AGAIN, YOU KNOW, BOTTOM LINE HERE IS THAT THE MARKET –
EVANS: IS IT A MISTAKE? WAS IT A MISTAKE THEN? IS IT A MISTAKE NOW?
NAVARRO: I WON’T SAY THAT. I’M NOT IN — THAT’S THE FEDERAL RESERVE CHAIRMANS LANE. AND WE’VE GOT A GOOD – KEVIN HASSETT, THE COUNCIL ECONOMIC ADVISORS.
EVANS: I THINK YOU’RE HINTING THAT IT’S — HINTING AT A MISTAKE.
NAVARRO: ALL I’M SAYING IS TO THE INVESTORS WATCHING CNBC HERE IS THAT THE ECONOMY LOOKS VERY, VERY STRONG ON ALL PARAMETERS AND DOESN’T APPEAR TO BE SIGNIFICANT INFRLATIONARY PRESSURES THAT WOULD DETRACT FROM THAT STRENGTH, SO IT’S ALL GOOD.
EVANS: ALRIGHT PETER NAVARRO. THANK YOU FOR YOUR TIME.
NAVARRO: MY PLEASURE.
