International Trade

Subterms

    More stories

    • 163 Shares129 Views

      in US Politics

      Why Donald Trump’s plan to weaken the dollar is flawed | Kenneth Rogoff

      by

      Now that US President Donald Trump’s tariff war is in full swing, investors around the world are asking: what’s next on his agenda for upending the global economic order? Many are turning their attention to the “Mar-a-Lago Accord” – a plan proposed by Stephen Miran, chair of Trump’s Council of Economic Advisers, to coordinate with America’s trading partners to weaken the dollar.At the heart of the plan is the notion that the dollar’s status as the world’s reserve currency is not a privilege but a costly burden that has played a major role in the deindustrialisation of the American economy. The global demand for dollars, the argument goes, drives up its value, making US-made goods more expensive than imports. That, in turn, leads to persistent trade deficits and incentivises US manufacturers to move production overseas, taking jobs with them.Is there any truth to this narrative? The answer is yes and no. It’s certainly plausible that foreign investors eager to hold US stocks, bonds, and real estate could generate a steady flow of capital into the United States, fuelling domestic consumption and boosting demand for tradable goods such as cars and non-tradables such as real estate and restaurants. Higher demand for non-tradable goods, in particular, tends to push up the dollar’s value, making imports more attractive to American consumers, just as Miran suggests.But this logic also overlooks crucial details. While the dollar’s reserve-currency status drives up demand for Treasuries (Treasury bills, Treasury bonds, and Treasury notes), it does not necessarily increase demand for all US assets. Asian central banks, for example, hold trillions of dollars in Treasury bills, to help stabilise their exchange rates and maintain a financial buffer in the event of a crisis. They generally avoid other types of US assets, such as equities and real estate, since these do not serve the same policy objectives.This means that if foreign countries simply need to accumulate Treasury bills, they don’t have to run trade surpluses to obtain them. The necessary funds can also be raised by selling existing foreign assets such as stocks, real estate, and factories.That is precisely what happened in the 1960s through the mid-1970s. By then, the dollar had firmly established itself as the global reserve currency, yet the US was almost always running a current account surplus – not a deficit. Foreign investors were accumulating US Treasuries, while American firms expanded abroad by acquiring foreign production facilities, either through direct purchases or “greenfield” investments, in which they built factories from the ground up.The postwar era was hardly the only time when the country issuing the world’s reserve currency ran a current account surplus. The British pound was the undisputed global reserve currency from the end of the Napoleonic wars in the early 1800s until the outbreak of the first world war in 1914. Throughout that period, the UK generally ran external surpluses, bolstered by high returns on investments across its colonial empire.There is another way to interpret the US current account deficit that helps explain why the relationship between the exchange rate and trade imbalances is more complicated than Miran’s theory suggests. In accounting terms, a country’s current account surplus equals the difference between national savings and investment by the government and the private sector. Importantly, “investment” here refers to physical assets such as factories, housing, infrastructure, and equipment – not financial instruments.When viewed through this lens, it is clear that the current account deficit is influenced not just by the exchange rate but by anything that affects the balance between national saving and investment. In 2024, the US fiscal deficit was 6.4% of GDP, significantly larger than the current account deficit, which was under 4% of GDP.While closing the fiscal deficit would not automatically eliminate the current account deficit – that would depend on how the gap is closed and how the private sector responds – it is a far more straightforward fix than launching a trade war. Reducing the fiscal deficit would, however, involve the difficult political task of convincing Congress to pass more responsible tax and spending bills. And unlike a high-profile trade confrontation, it wouldn’t cause foreign leaders to curry favour with Trump; instead, it would shift media attention back to domestic politics and congressional negotiations.Another key factor behind the current account deficit is the strength of the American economy, which has been by far the most dynamic among the world’s major players in recent years. This has made US businesses particularly attractive to investors. Even manufacturing has grown as a share of GDP. The reason employment has not kept pace is that modern factories are highly automated.skip past newsletter promotionafter newsletter promotionMiran’s plan, clever as it might be, is based on a flawed diagnosis. While the dollar’s role as the world’s leading reserve currency plays a part, it is just one of many factors contributing to America’s persistent trade deficits. And if the trade deficit has many causes, the idea that tariffs can be a cure-all is dubious at best. Kenneth Rogoff is professor of economics and public policy at Harvard University. He was the IMF’s chief economist from 2001-03.© Project Syndicate More

    • 263 Shares119 Views

      in US Politics

      The Guardian view on Trump’s shock therapy: warehouse and transport workers are the first victims of a class war | Editorial

      by

      The White House, eager to win a trade war it barely understands, has yanked the emergency brake on China-US trade without checking who’s inside the vehicle. Donald Trump’s early April trade decree has taken a month to hit the economy – that’s how long Chinese containers need to reach Los Angeles. And on cue, US pacific ports registered a 45% drop in container bookings this week from China. When warehouses fall quiet and trucks idle in California, the silence will creep eastward. Unemployment will surely tick upwards.Even if Washington reverses course by the end of May, and Beijing plays nice, the best-case scenario is delayed damage. Some goods are being rerouted to avoid charges, but you can’t reboot global logistics overnight. This isn’t strategic decoupling – it’s economic self-harm. By the time the Trump administration notices, it will be too late. The consequences of the US president’s rash tactics will reverberate through Main Street. Mr Trump offers a flippant excuse: blame 11-year-olds with too many dolls – not his own tariffs – for rising hardship.US gross domestic product just shrank for the first time in three years – despite Mr Trump’s promise of a “golden era”. His tariffs are steering the world toward a downturn. Even the International Monetary Fund (IMF) knows it. According to its latest modelling, the fund now sees the probability of global growth falling below 2%, a threshold widely seen as equivalent to a global recession, as approaching one in four. That’s double the risk it estimated six months ago. Escalating US tariffs, says the IMF, are the main reason behind the darkening skies.What does this mean for the world? Below 2% global growth, much of the per capita gains vanish. Most of what’s left is soaked up by expanding giants in Asia and Africa – places with the people and industrial catch-up capacity to grow even in a weakened global economy. The UK does not have this. Britain is an ageing, post-industrial economy in a productivity slump without the momentum of demographics or the slack of underdevelopment. That’s why Labour can’t afford to sit back. Rising living standards and real economic security require government to invest, build and redistribute – because the market alone won’t.Commentators still blindly cling to David Ricardo’s 1817 theory of comparative advantage – as if today’s global capitalism mirrors Georgian England’s trade in wine and cloth. It doesn’t. Ricardo assumed nations specialise based on domestic costs. But in a world of mobile capital, it’s companies that specialise, not countries. That’s what the economist Dani Rodrik warned in the late 1990s: free capital flows undermine comparative advantage. Development now depends not on obeying trade patterns, but on shaping them – through industrial policy.But Maga protectionism isn’t rebuilding US industry – it’s shock therapy. Mr Trump engineers a trade crisis to hike prices, kill off “uncompetitive” firms and clear the way for a leaner, capital-heavy economy. Meanwhile, tax cuts hand America’s oligarchic tendency even more power to reshape markets in its image. Mr Trump’s narrative promises a revival for US workers – particularly the unionised holdouts in places such as Detroit – but what they will get is higher costs, stagnant wages and patriotic slogans. This isn’t industrial policy. It’s class politics disguised as economic nationalism – a controlled demolition of what remains of US labour’s bargaining power, sold as a populist renaissance.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More

    • 138 Shares189 Views

      in US Politics

      Ukraine, Gaza and Iran: can Witkoff secure any wins for Trump?

      by

      Donald Trump’s version of Pax Americana, the idea that the US can through coercion impose order on the world, is facing its moment of truth in Ukraine, Gaza and Iran.In the words of the former CIA director William Burns, it is in “one of those plastic moments” in international relations that come along maybe twice a century where the future could take many possible forms.The US’s aim has been to keep the three era-defining simultaneous sets of negotiations entirely separate, and to – as much as possible – shape their outcome alone. The approach is similar to the trade talks, where the intention is for supplicant countries to come to Washington individually bearing gifts in return for access to US markets.The administration may have felt it had little choice given the urgency, but whether it was wise to launch three such ambitious peace missions, and a global trade war, at the same time is debatable.It is true each of the three conflicts are discrete in that they have distinctive causes, contexts and dynamics, but they are becoming more intertwined than seemed apparent at the outset, in part because there is so much resistance building in Europe and elsewhere about the world order Donald Trump envisages, and his chosen methods.In diplomacy nothing is hermetically sealed – everything is inter-connected, especially since there is a common thread between the three talks in the personality of the property developer Steven Witkoff, Trump’s great friend who is leading the US talks in each case, flitting from Moscow to Muscat.View image in fullscreenTo solve these three conflicts simultaneously would be a daunting task for anyone, but it is especially for a man entirely new to diplomacy and, judging by some of his remarks, also equally new to history.Witkoff has strengths, not least that he is trusted by Trump. He also knows the president’s mind – and what should be taken at face value. He is loyal, so much so that he admits he worshipped Trump in New York so profoundly that he wanted to become him. He will not be pursuing any other agenda but the president’s.But he is also stretched, and there are basic issues of competence. Diplomats are reeling from big cuts to the state department budget and there is still an absence of experienced staffers. Witkoff simply does not have the institutional memory available to his opposite numbers in Iran, Israel and Russia. For instance, most of the Iranian negotiating team, led by the foreign minister, Abbas Araghchi, are veterans of the 2013-15 talks that led to the original Iran nuclear deal.Yuri Ushakov, Vladimir Putin’s chief foreign policy adviser, who attended the first Russian-US talks this year in Saudi Arabia, spent 10 years in the US as Russian ambassador. He was accompanied by Kirill Dmitriev, the head of the Russian sovereign wealth fund who then visited the US on 2 April.In the follow-up talks in Istanbul on 10 April, Aleksandr Darchiev, who has spent 33 years in the Russian foreign ministry and is Russian ambassador to the US, was pitted against a team led by Sonata Coulter, the new deputy assistant secretary of state for European and Eurasian affairs, who does not share Trump’s benign view of Russia.View image in fullscreenAs to the Gaza issue, Benjamin Netanyahu has lived the Palestinian conflict since he became Israel’s ambassador to the UN in 1984.Richard Nephew, a former US Iran negotiator, says the cuts to state department means the US “is at risk of losing a generation of expertise … It’s beyond tragedy. It’s an absolutely devastating national security blow with the evisceration of these folks. The damage could be permanent, we have to acknowledge this.”One withering European diplomat says: “It is as if Witkoff is trying to play three dimensional chess with chess grandmasters on three chessboards simultaneously, not having played the game before.”Bluntly, Witkoff knows he needs to secure a diplomatic win for his impatient boss. But the longer the three conflicts continue, the more entangled they become with one another, the more Trump’s credibility is questioned. Already, according to a Reuters Ipsos poll published this month, 59% of Americans think Trump is costing their country its credibility on the global stage.The risk for Trump is that the decision to address so much so quickly ends up not being a show of American strength but the opposite – the public erosion of a super power.In the hurry to seal a deal with Iran inside two months, Trump, unlike in all previous nuclear talks with Tehran, has barred complicating European interests from the negotiation room.To Iran’s relief, Witkoff has not tabled an agenda that strays beyond stopping Iran acquiring a nuclear bomb. He has not raised Iran’s supply of drones to Russia for use in Ukraine. Nor has he tabled demands that Iran end arms supplies to its proxies fighting Israel.That has alarmed Israel, and to a lesser extent Europe, which sees Iran’s desire to have sanctions lifted as a rare opportunity to extract concessions from Tehran. Israel’s strategic affairs minister, Ron Dermer, and Mossad’s head, David Barnea, met Witkoff last Friday in Paris to try to persuade him that when he met the Iran negotiating team the next day in Rome, he had to demand the dismantling of Tehran’s civil nuclear programme.Witkoff refused, and amid many contradictory statements the administration has reverted to insisting that Iran import the necessary enriched uranium for its civil nuclear programme, rather than enrich it domestically.Russia, in a sign of Trump’s trust, might again become the repository of Iran’s stocks of highly enriched uranium, as it was after the 2015 deal.Israel is also wary of Trump’s aggrandisement of Russia. The Israeli thinktank INSS published a report this week detailing how Russia, in search of anti-western allies in the global south for its Ukraine war, has shown opportunistic political support not just to Iran but to Hamas. Israel will also be uneasy if Russia maintains its role in Syria.But if Trump has upset Netanyahu over Iran, he is keeping him sweet by giving him all he asks on Gaza.Initially, Witkoff received glowing accolades about how tough he had been with Netanyahu in his initial meeting in January. It was claimed that Witkoff ordered the Israeli president to meet him on a Saturday breaking the Sabbath and directed him to agree a ceasefire that he had refused to give to Joe Biden’s team for months.As a result, as Trump entered the White House on 19 January, he hailed the “EPIC ceasefire agreement could have only happened as a result of our Historic Victory in November, as it signalled to the entire World that my Administration would seek Peace and negotiate deals to ensure the safety of all Americans, and our Allies”.But Netanyahu, as was widely predicted in the region, found a reason not to open talks on the second phase of the ceasefire deal – the release of the remaining hostages held in Gaza in exchange for a permanent end to the fighting.Witkoff came up with compromises to extend the ceasefire but Netanyahu rejected them, resuming the assault on Hamas on 19 March. The US envoy merely described Israel’s decision as “unfortunate, in some respects, but also falls into the had-to-be bucket”.View image in fullscreenNow Trump’s refusal to put any pressure on Israel to lift its six-week-old ban on aid entering Gaza is informing Europe’s rift with Trump. Marking 50 days of the ban this week, France, Germany and the UK issued a strongly worded statement describing the denial of aid as intolerable.The French president, Emmanuel Macron, is calling for a coordinated European recognition of the state of Palestine, and Saudi Arabia is insisting the US does not attack Iran’s nuclear sites.Witkoff, by contrast, has been silent about Gaza’s fate and the collapse of the “EPIC ceasefire”.But if European diplomats think Witkoff was naive in dealing with Netanyahu, it is nothing to the scorn they hold for his handling of Putin.The anger is partly because Europeans had thought that, after the Volodymyr Zelenskyy’s public row with Trump in the Oval Office, they had restored Ukraine’s standing in Washington by persuading Kyiv to back the full ceasefire that the US first proposed on 11 March.View image in fullscreenThe talks in Paris last week between Marco Rubio, the US secretary of state, and European leaders also gave Europe a chance to point out it was Putin that was stalling over a ceasefire.But instead of putting any countervailing pressure on Russia to accept a ceasefire, Witkoff switched strategy. In the words of Bruno Tertrais, a non-resident fellow at the Institut of Montaigne, Witkoff is “is now presenting a final peace plan, very favourable to the aggressor, even before the start of the negotiations, which had been due to take place after a ceasefire”.No European government has yet criticised Trump’s lopsided plan in public since, with few cards to play, the immediate necessity is to try to prevent Trump acting on his threat to walk away. At the very least, Europe will argue that if Trump wants Ukraine’s resources, he has to back up a European force patrolling a ceasefire, an issue that receives only sketchy reference in the US peace plan.The Polish foreign minister, Radosław Sikorski, addressing the country’s parliament on Wednesday, pointed to the necessity of these security guarantees. “Any arrangement with the Kremlin will only last so long as the Russian elite dreads the consequences of its breach,” he said.View image in fullscreenBut in a sense, Trump and Putin, according to Fiona Hill at the Brookings Institution, a Russia specialist in Trump’s first administration, may already have moved beyond the details of their Ukrainian settlement as they focus on their wider plan to restore the Russian-US relationship.It would be an era of great power collusion, not great power competition in which Gaza, Iran and Ukraine would be sites from which the US and Russia could profit.Writing on Truth Social about a phone call with Putin in February, Trump reported” “We both reflected on the Great History of our Nations, and the fact that we fought so successfully together in World War II … We each talked about the strengths of our respective Nations, and the great benefit that we will someday have in working together.”Witkoff has also mused about what form this cooperation might take. “Shared sea lanes, maybe send [liquefied natural] gas into Europe together, maybe collaborate on AI together,” he said, adding: “Who doesn’t want to see a world like that?” More

    • 250 Shares109 Views

      in US Politics

      China’s top leaders pledge to oppose ‘unilateral bullying’ in global trade in veiled rebuke to Trump – US politics live

      by

      China’s top leaders pledged on Friday to step up support for the economy and oppose “unilateral bullying” in global trade, offering a veiled rebuke of hefty tariffs recently imposed by US president Donald Trump.The world’s two largest economies are engaged in a high-stakes tit-for-tat trade war that has spooked markets and spurred major manufacturers to reconsider supply chains.Since returning to the White House in January, Trump has slapped most trading partners with 10% tariffs. But China has received the worst, with many products from the country now facing a 145% tariff. Beijing has responded with new 125% tariffs of its own on US goods.A spokesperson for Beijing’s commerce ministry said on Thursday that “there are currently no economic and trade negotiations between China and the United States”. But hours later, asked about the state of negotiations with Beijing, Trump maintained: “We’ve been meeting with China.”Chinese financial news outlet Caijing reported on Friday that Beijing was considering the exemption of certain US semiconductor products from recent additional tariffs, citing sources familiar with the matter. Beijing’s commerce ministry did not immediately respond to an Agence France-Presse (AFP) request to confirm the reports.Meanwhile, the Hill reports that China cancelled 12,000 metric tons of US pork shipments, according to data from the US Department of Agriculture (USDA), with Bloomberg News reporting that this represents the biggest cancellation of pork orders since the Covid-19 pandemic.More on this story in a moment, but here are some other recent developments:

      US defense secretary Pete Hegseth had an unsecured internet connection set up in his Pentagon office so that he could bypass government security protocols and use the Signal messaging app on a personal computer.

      Donald Trump directed his attorney general to investigate the Democratic fundraising platform ActBlue based on an unsubstantiated rightwing claim.

      Federal judges blocked several aspects of Trump’s agenda that he has tried to enact through executive orders, which do not carry the force of law. One judge blocked his efforts to add a proof of citizenship requirement to the federal voter registration form, a change that voting rights advocates warned would have disfranchised millions of voters.

      Another judge ruled the Trump administration’s attempt to make federal funding to schools conditional on them eliminating any DEI policies erodes the “foundational principles” that separates the United States from totalitarian regimes.

      On immigration, a judge ordered the Trump administration to make “a good faith request” to the government of El Salvador to facilitate the return of a second man sent to a prison there back to the US, saying his deportation violated a court settlement. Another judge blocked the Trump administration from withholding federal funding from several so-called sanctuary jurisdictions that have declined to cooperate with the president’s hardline immigration crackdown.

      Trump issued a rare rebuke against Vladimir Putin, and said he has his own deadline for the Russia-Ukraine war. Trump said that he still thinks the Russian leader will listen to him.

      The Trump administration is loosening rules to help US automakers like Elon Musk’s Tesla develop self-driving cars so they can take on Chinese rivals. US companies developing self-driving cars will be allowed exemptions from certain federal safety rules for testing purposes, the transportation department said on Thursday.

      The Trump store is now selling “Trump 2028” hats to fans of the president, who is barred by the US constitution from serving a third term, despite the fact that a new poll from Reuters/Ipsos found that three-quarters of respondents said Trump should not even try to run.
      The US justice department says it did not fire a former pardon attorney, Liz Oyer, after she refused to recommend reinstating Mel Gibson’s gun rights.But in the latest episode of Politics America Weekly Oyer tells Jonathan Freedland a different story, one she believes points to a wider crackdown by the Trump administration on the rule of law in the US.You can listen to the podcast here:A US push to approve deep-sea mining in domestic and international waters “violates international law”, China warned on Friday, after a White House order to ramp up permits, reports Agence France-Presse (AFP).“The US authorisation … violates international law and harms the overall interests of the international community,” Chinese foreign ministry spokesperson Guo Jiakun said.President Donald Trump on Thursday signed an executive order to “expedite the process for reviewing and issuing seabed mineral exploration licenses and commercial recovery permits in areas beyond national jurisdiction”.Private companies and governments have long considered the mineral and metal resources found in stretches of the ocean floor, but they have mostly held off while waiting for the International Seabed Authority (ISA) regulator to devise rules – a process that began in the 1990s.The US never ratified the agreements that empowered the Isa’s jurisdiction and is not a member of the UN-affiliated body, reports AFP.Trump’s order demands Washington become a “global leader” in seabed exploration and “counter China’s growing influence over seabed mineral resources”.Beijing, which has so far held off mining in international waters while awaiting Isa rules, warned Trump’s orders “once again expose the unilateral approach and hegemonic nature of the United States”.US peace envoy Steve Witkoff is in Moscow today for further talks with Russia, including president Vladimir Putin, on Donald Trump’s peace plan for Ukraine.Hoping to get results before Trump’s 100 days in the office next week, Witkoff will have to find a way to convey the sense of the president’s frustration with the Russian attack on Kyiv on Thursday, while hoping to make good progress as Washington tries to put pressure on Kyiv to agree to its proposal.During a gathering of the Chinese Communist party’s top decision-making body focused on economic work and attended by president Xi Jinping, leaders acknowledged that “the impact of external shocks is increasing”, reports Agence France-Presse (AFP), citing state news agency Xinhua.They also said they would seek to “work with the international community to actively uphold multilateralism and oppose unilateral bullying practices”, said Xinhua.Last year saw China achieve record exports, providing a key source of economic activity as domestic challenges in the property sector and deflationary pressure persisted.Friday’s politburo meeting “shows the government is ready to launch new policies when the economy is affected by the external shock”, Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, wrote in a note, reports AFP.However, Zhang noted “it seems Beijing is not in a rush to launch a large stimulus at this stage”. “It takes time to monitor and evaluate the timing and the size of the trade shock,” he added.China’s top leaders pledged on Friday to step up support for the economy and oppose “unilateral bullying” in global trade, offering a veiled rebuke of hefty tariffs recently imposed by US president Donald Trump.The world’s two largest economies are engaged in a high-stakes tit-for-tat trade war that has spooked markets and spurred major manufacturers to reconsider supply chains.Since returning to the White House in January, Trump has slapped most trading partners with 10% tariffs. But China has received the worst, with many products from the country now facing a 145% tariff. Beijing has responded with new 125% tariffs of its own on US goods.A spokesperson for Beijing’s commerce ministry said on Thursday that “there are currently no economic and trade negotiations between China and the United States”. But hours later, asked about the state of negotiations with Beijing, Trump maintained: “We’ve been meeting with China.”Chinese financial news outlet Caijing reported on Friday that Beijing was considering the exemption of certain US semiconductor products from recent additional tariffs, citing sources familiar with the matter. Beijing’s commerce ministry did not immediately respond to an Agence France-Presse (AFP) request to confirm the reports.Meanwhile, the Hill reports that China cancelled 12,000 metric tons of US pork shipments, according to data from the US Department of Agriculture (USDA), with Bloomberg News reporting that this represents the biggest cancellation of pork orders since the Covid-19 pandemic.More on this story in a moment, but here are some other recent developments:

      US defense secretary Pete Hegseth had an unsecured internet connection set up in his Pentagon office so that he could bypass government security protocols and use the Signal messaging app on a personal computer.

      Donald Trump directed his attorney general to investigate the Democratic fundraising platform ActBlue based on an unsubstantiated rightwing claim.

      Federal judges blocked several aspects of Trump’s agenda that he has tried to enact through executive orders, which do not carry the force of law. One judge blocked his efforts to add a proof of citizenship requirement to the federal voter registration form, a change that voting rights advocates warned would have disfranchised millions of voters.

      Another judge ruled the Trump administration’s attempt to make federal funding to schools conditional on them eliminating any DEI policies erodes the “foundational principles” that separates the United States from totalitarian regimes.

      On immigration, a judge ordered the Trump administration to make “a good faith request” to the government of El Salvador to facilitate the return of a second man sent to a prison there back to the US, saying his deportation violated a court settlement. Another judge blocked the Trump administration from withholding federal funding from several so-called sanctuary jurisdictions that have declined to cooperate with the president’s hardline immigration crackdown.

      Trump issued a rare rebuke against Vladimir Putin, and said he has his own deadline for the Russia-Ukraine war. Trump said that he still thinks the Russian leader will listen to him.

      The Trump administration is loosening rules to help US automakers like Elon Musk’s Tesla develop self-driving cars so they can take on Chinese rivals. US companies developing self-driving cars will be allowed exemptions from certain federal safety rules for testing purposes, the transportation department said on Thursday.

      The Trump store is now selling “Trump 2028” hats to fans of the president, who is barred by the US constitution from serving a third term, despite the fact that a new poll from Reuters/Ipsos found that three-quarters of respondents said Trump should not even try to run. More

    • 200 Shares179 Views

      in US Politics

      Peter Navarro: the economist who has outsmarted Elon Musk and has the ear of Donald Trump

      by

      Elon Musk called him “dumber than a sack of bricks” but, in the raw contest for political power, Peter Navarro has outsmarted the billionaire.The tumult in global trade shows that for now it is the 75-year-old economist, not Musk, who has Donald Trump’s ear in the Oval Office.Navarro is the US president’s chief trade adviser and the intellectual driving force behind the global tariffs and trade war with China. The chaos and uncertainty have been too strong even for Musk, the great disrupter, but Navarro’s silky mien still assures the US all is well.Even after the tech tycoon publicly compared him to a sack of bricks, and added that he was “truly a moron”, Navarro retained his composure. “I’ve been called worse,” he told NBC.That is true. Navarro has been called a charlatan and a criminal who risks driving the world economy off a cliff.It is a remarkable metamorphosis for a man who a decade ago was a little-known academic nearing retirement at the University of California, Irvine, a respected, stolid institution in Orange County.Then the professor’s hawkish views on China caught the eye of Trump’s 2016 presidential campaign and vaulted him to Washington, where he played key roles in economic policy, the Covid pandemic and the attempt to overturn the 2020 election, a vortex that landed him in jail – for contempt of Congress – only for him to re-emerge, more influential than ever, in Trump’s second administration.“This is the land of reinvention, both cosmetic and ideological, and he is part of that,” said John Pitney, a political scientist and author at Claremont McKenna College.Critics worry that Navarro is trying to reinvent economic rules and the postwar global order with improvisation and bluster that could trigger recession and backlash. For Trump, Navarro is the expert who can articulate a daring and necessary pivot to protectionism.Navarro’s early life, and career, suggested a different trajectory. The son of a musician and a secretary, he grew up on the east coast and obtained a master’s degree in public administration and then a PhD in economics from Harvard. His doctoral dissertation was not on trade but on corporations’ charity motives.He taught economics at San Diego universities and did research on public utilities before landing a tenure position as professor of economics and public policy at UCI in 1989. Tanned and svelte, he had the look of a glossy politician and ran as a Democrat for elected office, including for mayor of San Diego and Congress, but lost.In 2001 he switched to writing get-rich investing books such as If It’s Raining in Brazil, Buy Starbucks: The Investor’s Guide to Profiting from News and Other Market-Moving Events.In 2006 the professor took another swerve by publishing the first of a series of books, and accompanying documentaries, that assailed China as an insatiable menace that bullies, lies and cheats, especially on trade rules through currency manipulation, illegal export subsidies, intellectual property theft and polluting sweatshops.There is no evidence of causality but Navarro’s alarm coincided with California’s proliferating number of Chinese investors and students, notably at UCI, which prompted racially tinged nicknames such as the University of Chinese Immigrants and the University of Caucasian Isolation.Other economists also accused Beijing of unfair practices but Navarro’s radical critique put him on the fringe.In 2016 Trump reportedly instructed his son-in-law Jared Kushner to do research to bolster his views on China. Kushner found Navarro’s book, Death By China, on Amazon, and Navarro ended up advising the campaign.In an interview that year with the Guardian near his Laguna Beach home, Navarro endorsed Trump’s use of the word rape to characterise Beijing’s impact on the US. “It’s an apt description of the damage and carnage that China’s trade policies have wrought on the American economic heartland. What’s happening is rapacious.” He also endorsed Trump’s proposed 45% tariffs on Chinese goods, which he said would compel Beijing to back down. “We’re already in a trade war with China. The problem is we’ve not been fighting back. Trump, through tariffs, wants to call a truce.”Trump had few credentialed academics on his team so Navarro served a useful purpose, Pitney said. “He provided a degree of scholarly cover for what Trump was saying. That’s why he was brought into the administration.”Navarro’s standing in the White House survived the disclosure that his books cited a fictitious expert, Ron Vara, that is an anagram of Navarro. He sought to shrug off the deception by calling it an “inside joke” with himself and a “Hitchcockian writing device”.In Trump’s first administration, more mainstream economic advisers prevailed and there was no trade war. Even so, Navarro expanded his remit to public health during the pandemic, which afforded more opportunity to assail China, and established personal chemistry with the president that made him a survivor amid White House personnel flux.After his chief lost the 2020 election, Navarro promoted the theory that the election was rigged and sought to delay its certification. For rebuffing a congressional committee that investigated the January 2021 attack on the Capitol he was found guilty of criminal contempt and last year served four months in prison.Now back in the White House as Trump’s senior counsellor for trade and manufacturing, Navarro’s influence has been felt in tariffs, stock market volatility and grim economic warnings despite a pause in the most severe tariffs for 90 days.Navarro has a combative streak yet he chose to project indifference over Musk’s insults. “It’s no problem,” he told CNN. A White House spokesperson shrugged off the row: “Boys will be boys.” More

    • 125 Shares99 Views

      in US Politics

      Trump administration sued over tariffs in US international trade court

      by

      A legal advocacy group on Monday asked the US court of international trade to block Donald Trump’s sweeping tariffs on foreign trading partners, arguing that the president overstepped his authority.The lawsuit was filed by the Liberty Justice Center, a legal advocacy group, on behalf of five US businesses that import goods from countries targeted by the tariffs.“No one person should have the power to impose taxes that have such vast global economic consequences,” Jeffrey Schwab, Liberty Justice Center’s senior counsel, said in a statement. “The Constitution gives the power to set tax rates – including tariffs – to Congress, not the President.”The Liberty Justice Center is the litigation arm of the Illinois Policy Institute, a free market thinktank. It was instrumental in the supreme court case Janus v AFSCME in which it successfully fought to weaken public labor unions collective bargaining power.According to the group’s statement, the tariffs case was filed on behalf of five owner-operated businesses who have been severely harmed by the tariffs. The businesses include a New York-based company specializing in the importation and distribution of wines and spirits, an e-commerce business specializing in the production and sale of sportfishing tackle, a company that manufactures ABS pipe in the United States using imported ABS resin from South Korea and Taiwan, a small business based in Virginia that makes educational electronic kits and musical instruments, and a Vermont-based brand of women’s cycling apparel.Representatives of the White House did not immediately respond to an email seeking comment.The Trump administration faces a similar lawsuit in Florida federal court, where a small business owner has asked a judge to block tariffs imposed on China. More

    • 225 Shares159 Views

      in US Politics

      Tariff turmoil to continue as Trump warns nobody ‘off the hook’ amid smartphone exemption – US politics live

      by

      Good morning and welcome to our US politics blog.In an announcement made late on Friday evening, Donald Trump’s presidential administration exempted smartphones and computers from the 125% levies imposed on imports from China as well as other “reciprocal” tariffs.The devices would be excluded from the 10% global tariff that Trump recently imposed on most countries, along with the much heftier import tax on China, in what seemed like a softening of the president’s trade positioning towards Beijing.US stock markets were expected to stage a recovery after the announcement. Shares in Apple and chip maker Nvidia were on course to surge after tariffs on their products imported into the US were lifted for three months.China’s commerce ministry said the exemption demonstrated the US taking “a small step toward correcting its erroneous unilateral practice of ‘reciprocal tariffs’,” and suggested the American administration cancel the whole punitive tariff regime.However, Trump’s commerce secretary, Howard Lutnick, said on Sunday that critical technology products from China would face separate new duties along with semiconductors within the next two months.“He’s saying they’re exempt from the reciprocal tariffs, but they’re included in the semiconductor tariffs, which are coming in probably a month or two,” Lutnick said in an interview on ABC. “These are things that are national security, that we need to be made in America.”Amid the confusion over the White House’s tariff policy, Trump said he would provide more details on his administration’s approach on semiconductor tariffs later today.But he suggested any tariff exemption for China-made smartphones would be short-lived, writing on his social media: “Nobody is getting off the hook for unfair trade balances”. Stay with us throughout the day as we bring you the latest tariff developments and other US political stories.Spain’s economy minister, Carlos Cuerpo, is expected to meet the US treasury secretary, on Tuesday as he aims to bolster bilateral ties between the two countries.The Trump administration has slapped a 10% tariff on imports of most European goods, including olive oil, although it announced a 90-day pause last week on higher, 25% “reciprocal” duties.Spain is the world’s top exporter of olive oil and also sells important quantities of auto parts, steel and chemicals to the US. The country’s prime minister, Pedro Sánchez, has announced a €14.1bn (£12.2bn; $16bn) government aid package to industry to lessen the domestic impact of Trump’s levies.Maya Yang, a breaking news reporter and live blogger for Guardian US, has filed this story about a warning over the potential consequences of Trump’s erratic economic policies:Billionaire investor Ray Dalio said that he is worried the US will experience “something worse than a recession” as a result of Donald Trump’s trade policies.Speaking to NBC’s Meet the Press on Sunday, the 75-year-old hedge fund manager said: “I think that right now we are at a decision-making point and very close to a recession. And I’m worried about something worse than a recession if this isn’t handled well.”He went on to add: “A recession is two negative quarters of GDP and whether it goes slightly there. We always have those things. We have something that’s much more profound. We have a breaking down of the monetary order. We are going to change the monetary order because we cannot spend the amounts of money.”Dalio’s comments come in response to a tumultuous week across the global stock markets following the US president’s tariffs policies that include a 145% tariff raise on China. The billionaire also said there are “profound changes in our domestic order … and world order”, comparing current times with the 1930s.“I’ve studied history and this repeats over and over again. So if you take tariffs, if you take debt, if you take the rising power challenging existing power, if you take those factors and look at the factors, those changes in the orders, the systems, are very, very disruptive. How that’s handled could produce something that is much worse than a recession. Or it could be handled well,” he said.Dalio, who correctly predicted the 2008 recession, also said the current economic state of the US is “at a juncture”.“Let’s take the budget. If the budget deficit can be reduced to 3% of GDP, it will be about 7% if things are not changed. If it could be reduced to about 3% of GDP, and these trade deficits and so on are managed in the right way, this could all be managed very well,” he said.He went on to urge congressional members to take what he calls the “3% pledge”, adding that if they don’t, there will be a supply and demand problem for debt with results that will be “worse than a normal recession.”You can read the full story here:Chinese President Xi Jinping will be welcomed by Vietnam’s President Luong Cuong today as he seeks to strengthen economic ties in south-east Asia amid a trade war with Washington that has caused turmoil in global markets.In an article for the Nhan Dan newspaper, Xi called for more regional cooperation, saying China and Vietnam were “friendly socialist neighbours sharing the same ideals and extensive strategic interests”.He added that a “trade war and tariff war will produce no winner, and protectionism will lead nowhere”, without explicitly mentioning the US.The visit, planned for weeks, comes as Beijing faces 145% US duties, while Vietnam is negotiating a reduction of threatened US tariffs of 46%. China is Vietnam’s biggest trading partner; Hanoi has a good relationship with both Washington and Beijing.As my colleague Rebecca Ratcliffe notes in this story, officials in Hanoi were shocked when Vietnam was hit with the 46% tariff, even after various efforts to appease the Trump administration. The tariff, which has been paused, threatens to devastate the country’s ambitious economic growth plan.Xi will visit Vietnam, a manufacturing powerhouse, from 14 to 15 April, and Malaysia and Cambodia from 15 to 18 April. He last visited Cambodia and Malaysia nine and 12 years ago, respectively.Xi’s trip to Hanoi, his second in less than 18 months, aims to consolidate relations with a strategic neighbour that has received billions of dollars of Chinese investments in recent years as China-based manufacturers moved south to avoid tariffs imposed by the first Trump administration.Good morning and welcome to our US politics blog.In an announcement made late on Friday evening, Donald Trump’s presidential administration exempted smartphones and computers from the 125% levies imposed on imports from China as well as other “reciprocal” tariffs.The devices would be excluded from the 10% global tariff that Trump recently imposed on most countries, along with the much heftier import tax on China, in what seemed like a softening of the president’s trade positioning towards Beijing.US stock markets were expected to stage a recovery after the announcement. Shares in Apple and chip maker Nvidia were on course to surge after tariffs on their products imported into the US were lifted for three months.China’s commerce ministry said the exemption demonstrated the US taking “a small step toward correcting its erroneous unilateral practice of ‘reciprocal tariffs’,” and suggested the American administration cancel the whole punitive tariff regime.However, Trump’s commerce secretary, Howard Lutnick, said on Sunday that critical technology products from China would face separate new duties along with semiconductors within the next two months.“He’s saying they’re exempt from the reciprocal tariffs, but they’re included in the semiconductor tariffs, which are coming in probably a month or two,” Lutnick said in an interview on ABC. “These are things that are national security, that we need to be made in America.”Amid the confusion over the White House’s tariff policy, Trump said he would provide more details on his administration’s approach on semiconductor tariffs later today.But he suggested any tariff exemption for China-made smartphones would be short-lived, writing on his social media: “Nobody is getting off the hook for unfair trade balances”. Stay with us throughout the day as we bring you the latest tariff developments and other US political stories. More

    • 175 Shares159 Views

      in US Politics

      ‘The sky won’t fall’: China plays down Trump tariff risks as stock markets rally

      by

      China has played down the risk of damage to its exports from Donald Trump’s tariffs, with an official saying the “the sky won’t fall”, as stock markets rose on Monday amid signs of a retreat on electronics restrictions.The world’s second-largest economy has diversified its trade away from the US in recent years, according to Lyu Daliang, a customs administration spokesperson, in comments reported by state-owned agency Xinhua.China has retaliated forcefully to Washington’s tariffs, with 125% levies on US imports against the US’s total of 145% border taxes on goods moving the other way. The trade war has prompted turmoil on financial markets since Trump first revealed tariffs on every country in the world on 2 April. Since then he has partly retreated on the highest levies on most trading partners for at least 90 days, but has doubled down in his spat with China.The White House offered further relief over the weekend with an exemption from the steepest tariffs for electronics including smartphones, laptops and semiconductors. Trump officials later appeared to walk that back with the commerce secretary, Howard Lutnick, saying such devices would be “included in the semiconductor tariffs which are coming in probably a month or two”.Trump said on Sunday night on his social network, Truth Social, that “NOBODY is getting ‘off the hook’”, highlighting that smartphones are still subject to 20% levies and suggesting they could still rise higher.However, investors on Monday appeared unconvinced by Trump’s attempts to play down the retreat. Japan’s Nikkei gained 1.2% while Hong Kong’s Hang Seng rose by 2.2% and the Shanghai and Shenzhen exchanges climbed by 0.8% and 1.2%, respectively. European stock market indices also jumped in opening trades, with London’s FTSE 100 up by 1.6%, Germany’s Dax up 2.2%, and France’s Cac 40 up 2%.“The sky won’t fall” for Chinese exports,” China’s Lyu said. “These efforts have not only supported our partners’ development but also enhanced our own resilience”.The customs report also played up China’s “vast domestic market”, and said “the country will turn domestic certainty into a buffer against global volatility”. China has increasingly tried to stimulate private consumption.skip past newsletter promotionafter newsletter promotionChina’s president, Xi Jinping, on Monday criticised the US tariffs, during a visit to Vietnam. Vietnam has in recent decades grown to become the eighth largest source of goods for US consumers, but it is facing the threat of 46% tariffs when Trump’s 90-day pause expires.In an article in a Vietnamese newspaper, Xi said that a “trade war and tariff war will produce no winner, and protectionism will lead nowhere”. More