TRANSCRIPT
Bloomberg: Balance of Power (BLOOM) – Senior Counselor for Trade and Manufacturing Peter Navarro Interview
JOE MATHIEU: And as we promised to you, a conversation with the source when it comes to tariffs at the White House. He's with us right now in studio in our Washington Bureau. That would be Peter Navarro. I want to get the title right. Peter, senior counselor to the president, director of the Office of Trade and Manufacturing Policy at the White House. Welcome back. You're the first person I thought of this morning. I saw the details on Japan and I thought, Tyler, what does Peter Navarro think about this? Because it was a 25% tariff at one point, right? And now we've got a very creative wrinkle with this investment fund. Was this in your vision for trade deals?
SENIOR COUNSELOR PETER NAVARRO: Oh yeah. Look for your viewers and listeners. Let's see where we started, right? We come in, president comes into the administration. We got a two and a half percent tariff. That's basically what we were charging Japan. We went to 25% tariffs on autos through what's called the 232. And then we institute a global tariff on Japan. And what we've got here is a beautiful thing. We go from 25% to 15% on autos for Japan. That was part of what President Trump was trading. The sneaky great thing about this is the 550 billion dollars that we're going to get from Japan, and essentially as a blank check to invest in America. And the thing that really needs to be understood here is it's going to be used to basically cure our supply chain vulnerabilities. Okay? This is really important. We've seen in the pandemic that we were exposed on pharmaceuticals. We know we've got a chip problem where too many of the chips are made offshore. We've seen recently with China, their export restrictions on things like gallium, on rare earth magnets, critical minerals. And so this money, and Howard Lutnick, the Commerce Secretary, I think is going to be the Symphony Orchestra guy on this. We are going to figure out every vulnerability we have in our economy and make sure that we close that gap with now the help of the Japanese. So for me, that's the big thing. Now, the other thing to keep in mind here is because I know you're going to ask me about what's happening with the EU and things like that. What this deal does as what the Indonesian deal did, is it spurs other deals along. Right? In this case, right now, we're in a situation where, for example, German cars are going to be at a disadvantage now to Japanese cars because it's a 25% tariff on German. Same thing with Hyundais from South Korea. So as just watching the boss, I mean, I'm almost getting tired of winning, but I don't think he ever will. Okay. But as I watch him, he's like a maestro. He wasn't doing a Japanese deal. He was doing a synergistic whole deal with the rest of the world. This is just one part of that chess game.
TYLER KENDALL: Well, let's follow on this and talk about the European Union because the Treasury Secretary, Scott Bessent was asked on Bloomberg television earlier today. If the EU has put forth anything innovative such as what we're seeing with this fund, should we use this idea of the fund? Would that be something innovative that the administration is looking for? What are you looking for from the EU in order to clinch a deal?
SENIOR COUNSELOR NAVARRO: Tyler, that's a great question. What I want everybody to know is that we have these large trade deficits with, we call 'em the 15 big ones and including the EU write large. But everyone, they're like fingerprints. Every country, or in this case, EU entity that we deal with has a different set of problems that we got to deal with. So every deal is going to be unique to deal with that fingerprint problem. The problem we have with the EU is that they basically violate the WTO rules in terms of our ag products. So we can't export to them. They've got a tariff, which was four times higher than ours when we got in, but they also have this thing, the value added tax. I'd love to see some relief related to the value added tax, which is unique. What I can guarantee you is once the deal's made, we're going to have a situation where we'd be able to sell more ag products, more autos, and we'll see a dramatic reduction in that trade deficit. But as to what it's going to look like, we'll see.
MATHIEU: Is the design to see GMs and Fords driving around Japan, driving around Europe, or have we realized that that's not going to happen and therefore the investment fund with Japan or something similar with the EU?
SENIOR COUNSELOR NAVARRO: Well, certainly we'd love to see a lot more American cars driving around Europe. Japan's a tough market if you've ever been there. They export a lot more cars than they ever use in the country. It's land constrained and things like that.
MATHIEU: They drive on the left side too, Peter. They've got the steering wheel on the wrong side.
SENIOR COUNSELOR NAVARRO: But I'm not going there. But what we can do with Japan is get them to buy more ag products. And the other part of the deal, which we didn't talk about, is that Alaska LNG, I mean, if you think about Japan's vulnerability, they have a longstanding problem with China. There's over the Senkaku Islands and a whole bunch of other things. And they have to figure out a way to maintain their energy security in a world of volatility in Asia. And they're a lot closer to Alaska than they are to the Persian Gulf. And so doing an LNG deal and using their money to help do it is a really big, big part of this. So look, they're an important ally to us, a long, long-term ally. And this thing works on both economic security and national security. And I got to applaud Jamison Greer, Howard Lutnick and Scotty Bessent. What we've done is every country has a template, right? There's like four or five verticals that we look at in terms of tariffs, non tariff barriers, digital taxes, things like that. And they're just going in and the countries are lining up like they're at a deli pulling numbers, and they want a deal, and the president then comes in and closes it. And by the way, when he closed that deal last night, it started at 400 billion.
MATHIEU: I saw the Sharpie. Yeah.
SENIOR COUNSELOR NAVARRO: Yeah.
MATHIEU: So five 50, come on you. Yeah.
KENDALL: When we are talking about making the deals, I do have to ask you about our Bloomberg news reporting, which is that the EU sees progress towards a US trade deal with a 15% baseline tariff. Is that where these numbers are going?
SENIOR COUNSELOR NAVARRO: Okay. So let's view the spin of the game, right? The Canadians do this probably the best or the worst, depending on what you think of that. But we don't negotiate in public. These other countries aspirationally negotiate in public to try to get us to where they want us to go. So I would say that even though it was reported on Bloomberg, I would take it with a grain of salt. Let's see what happens. Never assume that anything's fixed until the boss says it's fixed.
KENDALL: But should we expect that the baseline rate is tending closer to 15? Japan has 15.
SENIOR COUNSELOR NAVARRO: I wouldn't go there. That's aspirational you. It depends on what they give the boss. I mean, look, here's the problem with the EU besides the high tariffs that they charge us high tariffs, they're non tariff barriers when we've challenged them on meat and pork. In one case is they refuse to abide by the cases. So that's a problem. This I'm telling you, the value added tax, okay? It's like on autos you start with a 10% tariff and you add a 19% value added tax. That's not just a tariff. It's also an export subsidy, the way it works under the rules of the World Trade Organization. And then you got all these digital taxes that the Europeans invented in trying to slap on our big tech companies. So let's see what happens. I never get ahead of the boss. I'm happy to talk about the EU deal. I'll come right back here to talk about it.
MATHIEU: I look forward to that.
SENIOR COUNSELOR NAVARRO: But I caution you that if the EU is putting something out there in the biosphere out here is aspirational rather than maybe what's going to happen.
MATHIEU: We hear you. When it comes to August 1st. Markets, of course, want to know what we can bank on here. Are you in a world where if you get enough of these, you add a couple of more countries? Maybe it's the EU, South Korea, something else that I'm not thinking of here. Do you say, you know what? It's August 1st. Everybody, you're on your own. Or would you extend that to countries that are in talks with the White House?
SENIOR COUNSELOR NAVARRO: Again, I never get ahead of that. My job is to help the trade team figure out what we have to negotiate for. Give you an example. For example, on the whole critical minerals rare earth thing, when we were hit with that by China, that was a major thing. I think in world geopolitics. It's not nothing for China to withhold something as critical to technology as they did. It was a wake up call to the world. But what that has focused our attention on is how do we solve that problem? So now we think in terms of what's Japan? What's the Congo? What's Guyana? Can they contribute? That's one of the verticals. Okay, so again, let's,
MATHIEU: It's going to be case by case as you point.
SENIOR COUNSELOR NAVARRO: Case by case. Yes.
KENDALL: Well, since you did bring up China, the administration moved last week to ease those restrictions. When it did come to Nvidia selling its H 20 ships, I'm wondering if you have any national security concerns around this move, which had been put in place originally because of those things?
SENIOR COUNSELOR NAVARRO: That was not my lane. I mean, basically we're given the H20 and we believe that that's in the interest of the United States. I think that the reporting on that was a little bit over the top in terms of what China was actually getting. But that's not something I want to wax out. Get Howard here or David.
MATHIEU: We've been lucky to have Howard Lutnick, Scott Bessent, and now Peter Navarro all in the same day in this studio, which is pretty remarkable. And we've learned a lot from these conversations.
SENIOR COUNSELOR NAVARRO: They were like my opening acts?
MATHIEU: I think we saved the best for last.
SENIOR COUNSELOR NAVARRO: Sorry, Howard Scotty.
MATHIEU: I think we saved the best for last.
SENIOR COUNSELOR NAVARRO: Or am I the epilogue?
MATHIEU: Well, I don't know. Let's ask the boss when we're done. When it comes to the defense contractors, we can talk about GM, but when Tyler mentioned national security, when you hear Raytheon or Lockheed say, Hey, this steel is eating into our margins when we're making missiles in military hardware, is that the cost of doing business?
SENIOR COUNSELOR NAVARRO: So let's go back to the Japan deal where we just got a hundred more orders for Boeing and we got the Japanese to significantly (CROSSTALK)
MATHIEU: and that offsets the impact on the margin. (CROSSTALK)
SENIOR COUNSELOR NAVARRO: We're going to do our arm sales to them. And during the first term, I was basically the tip of the spear on arm sales. And we were having some big problems with the hill and all, and even within the State Department, and then we just turned that around and started selling F-16s to Bosnia and stuff like that. And that's good for America because it means we don't have to fight the battles. We create jobs at home. So Raytheon's going to be quite happy. And if any Raytheon lobbyists, dares criticize any particular part of the Trump thing, they're not seeing the big picture.
MATHIEU: Okay, because the scale, the increase in business will offset the impact on margin that we're talking about as your point.
SENIOR COUNSELOR NAVARRO: I think that's what the markets have figured out. I remember when the boss first put on the tariffs in the market, the Dow went below 40,000. So I'd be sitting on set like this. I'd say, what are you doing? We're going to 50,000.
MATHIEU: We're at a new all time high here already. 50,000? That's target?
SENIOR COUNSELOR NAVARRO: That'll be easy, we'll do that in our sleep.
MATHIEU: Come back and see us when you get the next deal's. Good to see you as always.
