Wall Street Quislings

White House adviser Navarro warns Wall Street 'globalists' over China

By Katie Lobosco and Donna Borak

University of California at Irvine Economics Professor Peter Navarro arrives in the lobby of Trump Tower in New York, U.S., on Thursday, Jan. 5, 2017.

White House trade adviser Peter Navarro took a shot at Wall Street Friday, warning "globalist elites" against meddling with the Trump administration's policy on China.
Bankers are putting a "full court press" on the White House to make a deal that would end the escalating trade war between the two nations, Navarro said during a speech at the Center for Strategic and International Studies in Washington, DC.
"If and when there is a deal, it will be on President Donald J. Trump's terms -- not Wall Street terms," he said.
"If Wall Street is involved and continues to insinuate itself into these negotiations, there will be a stench around any deal that's consummated because it will have the imprimatur of Goldman Sachs and Wall Street," Navarro added.
Navarro, a former economics professor, accused billionaires and hedge fund managers of engaging in "shuttle diplomacy" between the United States and China, which he says weakens the President and his negotiating position.

His remarks come ahead of President Trump's expected meeting with Chinese dictator Xi Jinping at the G20 summit later this month in Argentina. 

The administration has sent mixed messages about whether the two are nearing a truce that would lift more than $250 billion in retaliatory tariffs on an array of goods ranging from chemical products and motors to luggage and hats.
The comments reflect the ongoing divisions inside the Trump administration between 'globalists' -- including those with Wall Street backgrounds like Treasury Secretary Steven Mnuchin and economic adviser Larry Kudlow -- and the patriots, who hew to the "America First" stance laid out during the campaign and early months of Trump's presidency by former chief strategist Steve Bannon.
"Wall Street is a very easy boogeyman to attack in situations like these," said Rufus Yerxa, a former US trade official who now leads the National Foreign Trade Council, in an interview with CNN. 

"But look, the concern about making sure that the US gets the right results in China without provoking a trade war comes from Main Street, and from the American companies that make things, produce jobs and export stuff."

Yerxa said his members, which include companies like Google, Walmart, Visa, General Electric and Caterpillar, have been offering input to the Trump administration wherever possible, but notes there's still "a bit of confusion" over which direction the White House may be going given ongoing internal discussions.
"We don't have any clear sense of where they are," said Yerxa, referring to any developing proposals. "A lot of the business community isn't being brought into details of that."
President Trump earlier this week promised a positive meeting with Xi.
"We'll have a good meeting and we're going to see what we can do," the President said at his Wednesday news conference following the midterm elections.
But fault lines between the US and China were on clear display Friday during a meeting between senior military officials, who challenged each other over the South China Sea, Taiwan, religious freedom and trade.
President Trump has made it a priority to take an aggressive stance against China for its unfair trade practices, including intellectual property theft and forced technology transfers. 

He's threatened to escalate the trade war further by taxing the remaining Chinese goods sold to the United States.
Many American manufacturers, farmers and lawmakers from both sides of the aisle say they appreciate the administration's efforts to change China's trade policies. 

But some argue the tariffs aren't the best way to address the issues. 

They pose a dilemma to US importers who must decide whether to absorb the higher cost of the goods or pass it on to consumers, and some exporters are hurting from China's retaliatory tariffs.

In his remarks Friday, Navarro also blamed Wall Street for the decline in manufacturing and the opioid crisis.
"If they want to do good, then spend their billions in Dayton, Ohio, in the factory towns of America where we need a rebirth of our manufacturing base and end to the opioid crisis -- which they helped create by off-shoring our production," he said.

Trade War

Trump economic advisor Larry Kudlow bashes China for decades of misdeeds on trade

By Berkeley Lovelace Jr. 

NEC's Kudlow says to China: "You're no longer a developing nation, act like it" 

White House economic advisor Larry Kudlow told CNBC on Monday that President Donald Trump is warning China about its trade practices with tariffs.
"This president's got some backbone, others didn't and he's raising the issue in full public view, setting up a process that may include tariffs. Hopefully, it will be mostly negotiations," Kudlow said on "Squawk on the Street." 

"I don't know if we'll have tariffs or not."
"[Trump] is responding to decades of misdeeds by China [on] trade," said Kudlow, an ex-CNBC contributor and a former Wall Street economist. 

"It's high time we did that."
"Somebody's got to do it. Somebody's got to say to China, 'you are no longer a Third World country. You are a First World country and you have to act like it,'" he said. 

"The president's got to stick up for himself and the United States."
In a tweet early Monday, Trump called out China again for what he has said are unfair trade practices by the world's second-largest economy.
The president unveiled a list of Chinese imports last week that his administration aims to target as part of its crackdown on China. 

Shortly after the announcement, China announced additional tariffs. 

China's Foreign Ministry blamed the United States on Monday for trade friction and said that it was impossible for negotiations to take place under current conditions.
Stocks were higher Monday as the Trump administration tried to soften its tone regarding trade relations. 

During a "Fox News Sunday" interview, Kudlow tried to calm trade war fears but added Trump was "not bluffing" on tariffs. 

Treasury Secretary Steven Mnuchin said Sunday he does not expect a trade war between the U.S. and China to take place.
Trump last month picked Kudlow to succeed Gary Cohn as director of his National Economic Council. 

Cohn, former No. 2 executive at Goldman Sachs, resigned from the White House role shortly after losing his fight to persuade the president not to impose import tariffs on steel and aluminum, an earlier move separate from the latest China tariffs over Chinese companies' theft of American intellectual property.
Saying he supports almost all of Trump's policies, Kudlow on Monday reminded viewers he did not like the across-the-board steel and aluminum tariffs announced last month. 

But he said Trump fixed that with the exemptions that included Canada and Mexico, pending a successful reworking of the 1994 North American Free Trade Agreement.
"I have no specifics to offer this morning, but I will say progress is being made on renegotiating and recalibrating NAFTA. Good progress is being made on that," Kudlow added.

Top US Treasury official slams China's 'non-market behavior'

• David Malpass, Treasury's undersecretary for international affairs, accused Beijing of "patently non-market behavior"
• The United States needed stronger responses to counter it.
• Market-oriented, democratic governments were awakening to the challenges posed by China's economic system, including from its state-owned banks and export credit agencies.
• China had stopped liberalizing its economy and was actually reversing these trends.

Reuters

David Malpass, Under Secretary of the Treasury for International Affairs.

The U.S. Treasury's top diplomat ramped up his criticisms of China's economic policies on Wednesday, accusing Beijing of "patently non-market behavior" and saying that the United States needed stronger responses to counter it.
David Malpass, Treasury's undersecretary for international affairs, said at a forum in Washington that China should no longer be "congratulated" by the world for its progress and policies.
"They went to Davos a year ago and said 'We're into trade,' when in reality what they're doing is perpetuating a system that worked for their benefit but ended up costing jobs in most of the rest of the world," Malpass said, at the event hosted by the Jack Kemp Foundation.
He said market-oriented, democratic governments were awakening to the challenges posed by China's economic system, including from its state-owned banks and export credit agencies.
He reiterated his view that China had stopped liberalizing its economy and was actually reversing these trends.
"One of the challenges for the world is that as China has grown and not moved toward market orientation, that means that the misallocation of capital actually increases," Malpass said.
"They're choosing investments in non-market ways. That is suppressing world growth," he added.
China said that its state-owned enterprises operate on free-market principles and is battling within the World Trade Organization's dispute settlement system to be recognized as a
"market economy" — a designation that would weaken U.S. and EU trade defenses.
Malpass said the Trump administration was "pushing back" against such policies in international forums such as the G20, and was seeking to join "like-minded" countries to press for changes.
But he did not provide any details on the responses that the Trump administration is considering, which include potential trade sanctions against Beijing under a "Section 301" investigation into China's intellectual property practices and technology transfer requirements for foreign companies.
The administration is also considering steep global tariffs on steel and aluminum, largely aimed at curbing excess production in China, on national security grounds.

Trump Should Sanction China for Destabilizing South Korea

As Secretary of Defense James Mattis tours Asia to pledge support to our allies, the best form of reassurance would be action against China’s provocative moves in the region.
By GORDON G. CHANG

Secretary of Defense James Mattis is now ending his “Mission Reassurance,” the first foreign trip by a Trump administration official. 

He spent two days in Seoul and is finishing up in Tokyo.
The SecDef has been issuing strong words confirming America’s commitment to defend South Korea and Japan. 

That’s important. 

Now, however, it’s time for President Donald Trump to back up the reassurances with stiff economic sanctions on China for destabilizing North Asia.
Mattis’s staff, sounding pitch-perfect, characterized his inaugural foreign tour as a “listening trip.”
Yet the former Marine Corps four-star general was also there to speak. 

“I want there to be no misunderstanding during the transition in Washington that we stand firmly, 100 percent shoulder-to-shoulder with you and the Japanese people,” he said on Friday to Japanese Prime Minister Shinzo Abe.
“We stand with our peace-loving Republic of Korea ally to maintain stability on the peninsula and in the region,” Mattis said earlier in the day in Seoul. 

“America’s commitments to defending our allies and to upholding our extended deterrence guarantees remain ironclad: Any attack on the United States, or our allies, will be defeated, and any use of nuclear weapons would be met with a response that would be effective and overwhelming.”
What is neither effective nor overwhelming is America’s response to provocative Chinese actions directed against Seoul. 

For more than a year, Beijing has been trying to prevent South Korea from basing on its soil the Terminal High Altitude Area Defense system, designed to shoot down incoming missiles. 

From a location in the South, THAAD, as the Lockheed Martin-built system is called, can protect South Korea, Japan, Guam, and the United States. 

Beijing objects to deployment as it is worried that THAAD’s powerful radars can peer over the border into China and hit its missiles as well as North Korea’s.
Beijing has pulled out the stops in its campaign against Seoul, threatening to cut diplomatic relations and issuing media tirades. 

Moreover, it has used the Chinese economy as a club. 

It has, for instance, barred South Korea’s K-pop groups from performing in China, ended charter flights to the South, limited Chinese tourists going there, and banned the import of South Korean cosmetics.
And Beijing has gone after Lotte Group. 

The South Korean chaebol, the country’s fifth largest, is thinking of swapping land, a golf course, with the country’s Ministry of Defense so that the government can get a suitable parcel for the first THAAD battery.
There is talk of a boycott of Lotte Chinese outlets and “continuous sanctions.” 

Last November, the Chinese government also ordered an audit of an affiliate of Lotte and a fire-safety inspection of a Lotte store.
So far, the pressure on the conglomerate is working. 

On Friday, the board of directors of Lotte International, the group unit that owns the land in question, again deferred a decision to approve the deal. 

Perhaps significantly, the company did not announce a future board meeting.
In response, Seoul has stopped approving visas for Beijing’s Confucius Institutes in South Korea. That’s a brave step, but the South does not have the heft to significantly affect Beijing’s calculus on the matter.
The United States, however, does. 

The American market is critical to China, and closing it—or threatening to do so—would make Beijing rethink its intimidation of Seoul.
China is itself vulnerable to U.S. pressure. 

In 2015, China ran a trade surplus in goods and services of $336.2 billion. 

The surplus looks like it was slightly smaller last year, but it was nonetheless substantial. 

China could not sustain a sudden cut off of trade with the U.S.
Of course, America would be hurt as well, but the damage would be far smaller. 

The U.S. is not dependent on trade with China and its economy is far larger than China’s, thereby better able to withstand shocks. 

Last year, China’s gross domestic product, as reported by the official National Bureau of Statistics, was $10.83 trillion. 

America’s, according to the first estimate of the Bureau of Economic Analysis, was $18.86 trillion. 

In reality, the disparity is almost certainly larger due to Beijing’s overreporting.
Trump, while campaigning for the presidency, talked about a 45 percent tariff on Chinese goods to counteract the effect of Beijing’s increasingly predatory trade practices. 

Many objected to the cost of such a levy, but no cost is too high to get the earliest warning of a North Korean—or, for that matter, Chinese—launch of a nuclear weapon.
It’s outrageous that China has armed North Korea’s Kim regime and is now threatening “a small country”—Beijing’s demeaning term for South Korea—for trying to protect itself, but it’s understandable why it’s trying to get away with that. 

It is not explicable, however, why Washington allows the Chinese to get away with such intimidation.
It’s good for Mattis to issue reassurances to jittery American allies, but it would be even better for his boss to show real American commitment by imposing costs on China.
The best form of reassurance, after all, is action.