Surveillance: Tariffs Have Many Uses, Peter Navarro Says

Let's start with first principles, what do you actually do on sanctions? Like Mr manut Sin comes up with a twenty page document, how's it work? I think you've got to separate what the rhetoric out of the administration is

versus the reality. What's the reality of the reality. In some instances of the sanctions that have come out, they have been focused and targeted on certain industries and sectors and really sought to achieve an objective, which is to force a change in behavior, to seize assets of bad people. At times we get that conflated with creating very lengthy lists of people who don't really have assets in the US who don't travel to the US and thus it

gives the appearance of doing something without doing something. But is it a document out of Treasury? Is it a document out of a congressman that runs a committee. So it's typically the policy element of sanctions is driven out of the administration through State and the White House, State through the State Department, but the real nuts and bolts,

the execution, the operationalization of sanctions comes through Treasury. You're actually seeing a bit of a power struggle play out in public because a number of things are talked about now by the State Department around enforcement and criminal prosecution. None of these things that agency has any remit over. Actually who does the Treasury Department the Justice Department over enforcement?

So the question I have just more confusive. We started speaking to Mr. Well, I'm gonna go real simple here. Let's start just with a ran. My understanding was we had already the US government had already put sanctions on pretty much everything that mattered. What's what's left? I guess

there's there's not a lot left. Um, Now, what could be left and what could be significant if we get to the major announcement is there's a concept called secondary sanctions and secondary sanctions forced a choice to foreign companies to choose between doing business with the US and doing

business with Iran, but not both. Those powers were put in place in the Obama administration, used twice, but essentially, you can pick a country in any country, a company in any country in the world, and banned them from doing business in the US if you believe, if the US believes that they've been training with Iran the Obama administration after they were too smaller entities in Asia, banking entities that were found to be trading with Iran, supporting

Iran's refinance of Germany, or that is the thing. They're not going after any significant entities. And even earlier in the Trump administration, there was a small Chinese bank on the border with North Korea that was designated under a different type of authority. Very small bank, but the administration took a victory lap for being tough on Chinese banks, even though no one had really heard of the bank

that they designated in the first place. So, Daniel, as you go about your business talking to boards and C suite executives, what are what are executives doing in a context of our sanctions on are they are they not not on is it Iran or is it China. It's more agnostic than that. It's looking at all of the different areas where sanctions have been imposed. Where are we exposed. If your customers customers do business with some of these countries or companies in Iran or or in targeted areas,

you can be held liable. So it's really trying to assess are we exposed anywhere in our company, because we could be a massive global company not directly do business with Iran, but indirectly through some of our customers, we can end up being caught to facilitate trade with Iran, which could put us in the penalty box with the U S. And then how do the other countries react to the United Kingdom with all their distractions, Germany with

their distractions, and particularly France with a heritage to Persia. We're very unpopular on this right now. I mean the Iran Do they just say no, We're not gonna do it, or that's a bit of the problem. The Iran deal that was put in place in the Obama administration was the permanent five members of the UN Security Council that

came together to form that deal with Iran. You now are seeing a unilateral approach to Iran and the way the US is acting, And actually there is an EU lead mechanism called INSTINCTS that was designed to provide financing for Iran related trade, permissible Iran related trade stuff, it's all humanitarian. The State Apartment over the last few weeks has began threatening that SPV with sanctions because it could be used to circumvent um u S sanctions, which really

isn't the point. So there is a bit of a struggle right now to try and suss out any activity with Iran. The Europeans have been light in challenging the US on this. I think the one wild card to me with this being g twenty week is China. China still is trading significantly with Iran, and reports came out yesterday that their trading volumes have only gone down about a hundred million dollars in the month of May to

about nine hundred million dollars in trade with Iran. To be clear, if we do new sanctions or enforce the present sanctions, are they the kind of materials and goods where China or another country just makeup they doll one eight hundred Tehran and say let's fix us now. Well, so China and Iran are still trading, that's still happening. The US knows this. But is the US willing to risk another dispute with China because of their support of Iran?

I don't think that's really the case. They may pick a softer target within China to take credit for being hard on China. But I think right now that the question of these major sanctions that were talked about on Friday, or that said they were released on Friday, that yesterday, Now they're coming on Monday. It really is hard to tell what's major. But they're going to make a much bigger deal, most likely out of whatever it is than in reality. How effective had the sanctions been on Iran?

How tough has it been in so look, Iran is used to being isolated, They're very good at being isolated. For the last forty or so years, they've been isolated from most of the Western economies. How much of an impact hasn't made. There's clearly been an attempt by the Trump administration to force the hardliners back in power from the moderates to justify the creation of a more legitimate enemy worthy of some of the rhetoric we've seen over

the last few days visa v cocked and loaded. So the sanctions really, if you're trying to bring some of the negotiating table and you're pulling out of a deal that a number of parties negotiated and that no one has violated, how do you trust any Have you ever used in all your work is as a public employee of the United States of America, your different efforts travel lux now with p WC. Price Waterhouse Coopers, did you ever use the fraight locked and loaded, cocked and loaded,

or cockton loaded. No, I have not used used. I've used other colorful rhetoric in the government, but not quite that Flower, Jim. I'm thank you so much always locked and loaded for a great discussion. Tom. We often talk about geopod politics and how and the impact on the market, and that's certainly a big issue. This is going to be a big issue this week as the G twenty meets later this week. It's always a big issue for economics and the markets, but now with the trade tensions

between China and the US, even more so. Uh, We're very fortunate to have our next guest to help us kind of pass through this very lovely is that Peterson Institute Senior fellow, UH Syracuse University professor as well. She joins us on the phone from Syracuse. Mary, thanks so much for joining us. We do have the G twenty later this week. It appears at Presidents Trump and g will meet on the sidelines. Should we is the best if we just keep our expectations low here? Yea good morning.

We're gonna have a lot of spectacutor sports this week, aren't we. Um, Well, it's pretty hard to do. I think all of us are ready for an end to this, just to move on to more productive types of engagement between the two countries. So I think it's pretty hard to have our keep our expectations in check this week. So what do you think China wants here? I mean, they're gonna have an opportunity here to maybe move this discussion for what do you think China really wants at

this stage? Well, China has all along wanted to seek some kind of negotiated in to this, UH and they also need to uh keep their head high. That is, they can't be seen as cow tewing to President Trump. So that's become more and more difficult as the threats of ratched ratcheted up. Now with this meeting here between the two leaders, there is a possibility that something can be done. We saw a hope of progress each time they've met, of course, uh, unfortunately that hasn't led to

anything except escalating tariffs. So, UM, we're gonna hope for the best this week and UM hope that the magic of the two men meeting can bring us a little further along on this. Otherwise we're looking at some pretty that's pretty tough ride moving forward. How do you extrapolate forward? And this is my lead question for Dr Navarro, Professor Lovely here in forty minutes, Iran, we blinked, Ice, we blinked. If I say to you, the president will blink with

G twenty, what does that actually mean? Do we know what blink means? Okay, I would add Mexico, we blink. Excuse me, I'm sorry, she's like efforting me forward to Navarro. Mexico. We blinked. So what what does blink mean that the G twenty? Mary, Well, you know, he could easily go back to things that were on the table months ago before there was so much uncertainty and angst driven to

you know, American businessmen and women's hearts. Through this, he could go back to a package where we have significant purchases by the Chinese, you know me, not even more than we would have end up with us, certainly more than we have now. Um, he can look at some sort of shallow reforms, which I think is probably what's due given the length of these negotiations, which you know, by the standard of international trade agreements, have not been

very long. Uh, And he could perhaps look back at some other types of reforms that she was willing to make. But I think most of these things would have been on the table in the past, so I think that would be uh, in some sense viewed as a blink by many folks. In fact, I think part of President Trump's problem is that it's hard for him to get a win here. Now. If he does reach an agreement, people will claim as a blink, and if he doesn't, we're going to see the impact on American businesses and

American consumers. So it's it's a little it's a very fraught week firm I think, does the Hong Kong protests and all the dynamics of the past fourteen days does that affect Mr She's options? Well, it certainly makes um

it's harder for him in some ways. Also because you know, we see that there is at least within Hong Kong very deep well uh of resentment almost of the increasing authoritarianism in the mainland, and if the economy slows even more, it's going to make it much more difficult for She moving forward, not justin on the political sphere, but also on the economic sphere, because people's you know, sense of well being, their morale as an important measure of how

the economy will do. So, Mary, as President Trump sits down with President She, what do you think President Trump will view as a win or as a successful Friday Saturday coming up? Wow? Well, I've learned never never wise

to predict what what President Trump thinks. However, clearly, well, you know, I would say from an ordinary sense, we would expect a win to be something that results in uh, you know, greater purchases for US agricultural exporters, uh, greater freedom for our American service providers, particularly business service providers in China UM and perhaps liberalization on some tariffs, certainly some liberalization in terms of FDI caps or ownership caps,

but you know that's sort of normal. We're looking at politics here, so he may be looking for some gigantic uh sign that he has one, that he has somehow brought the Chinese to the table in a way that no one else could. And I think that's where the danger lies, because that's what the Chinese are not going to want to give him. Very lovely, thank you so much,

greatly appreciate it. With the person of course, with Syracuse University, the Interview of the Day, Paul Swone and Tom Keane, with his Peter Kent Navarro, Amertus Professor, University of California at Irvine, and certainly within the White House, the President's chief guider on our discussion with China, our discussion on trade and manufacturing policy. Professor Navarro, you have been a good friend of the show. We've always gone from many

different opinions. I want to begin with a moment we're in right now. After Iran and delay, after Mexico, and delay after Ice and delay over the weekend, why should my listeners worldwide think of anything except out of G twenty further delay with China. Well that's a great set up there. Um, Look, we're in the glide path. Now to Osaka, Well, who talks will resume UH, going into that, Let's see what happens. What the President has said was will either get a great and fair deal or we won't.

I think what's important for your listeners to understand is what we're fighting for and what we're fighting about. There's basically seven problems structurally that we face with China. It's the cyber intrusions into our business networks, forced technology transfers a condition of market access, totally illegal under the w t O. We lose a couple of hundred billion dollars

a year alone in intellectual property seft. There's an ongoing problem with dumping a product, huge over capacity and stealing aluminum in UH China growing over capacity, and auto's robotics UH. Number five, we've got the history of currency manipulation. Number six, it's the state owned enterprises, which are basically the tip of the Chinese mercantilis spirit. And then of course the issues.

So these are discussions we're having Tom And as you know, we had a hundred and fifty page plus agreement UM that we worked literally for over a year on and Okay, I want to go to the immediately, Professor Naval, you talk about a mercantilist China. Are we going after a mercantilist China by becoming a mercantilist America? No, I think, Uh. I think what's important for your listeners to get the

big picture on is this. We are in an international trading system where the United States faces significantly higher caariffs around the world under the World Trade Organization if you know this, Tom, but under the most Favored Nation rules of the World Trade Organization, is perfectly legitimate for country uh to charge the United States significantly higher tariffs and on the products that we charged them, and it's it's endemic, uh.

And what that does, really, this unreciprocal trade, it creates a large trade deficit over half a billion what I think, it's like almost a year we're approaching. But my point is this is like you you're asking me about mercantile is and whatever. We we have the lowest terrorists, lowest trade berries in the world, and as the President has said, we're being treated like a pe manage. Okay, I want to Peter, I want to get to where we are right now. I don't need a rehash what we've done

for the last two years on TRIGG. You wrote about most Favored nation status in the Wall Street Journal a number of months ago, summer of last year, your colleague Emritus Professor sarez Villa at Irvine wrote a scathing note and he really got to the heart of the matter, which is the game theory of the moment. Professor suarez Vila talked about a global trading system that can impose countermeasures. Is China imposing countermeasures on what they perceive as the

trade war you and President Trump are beginning. Tom, I don't want to really speculate on what China does or doesn't do. What we see as a chessboard here where a big thing that we need to do this summer is past the United States, Mexico, Canada agreement that that for US is high on the priority list because if we do that, we'll create half a million jobs, will get another point of g d P, will create seventy five thousand jobs in the auto sector. And that's that's

something that Congress can do within a matter. Can you do that? By Lincoln? Okay? What we focus on, I mean, I understand you want to talk Peter, is no okay, but Peter, to be fair to you, you are not conflating trade policy with immigration. Polo. See, can we get a successful new NAFTA even as a president conflates that

policy with the immigration. Absolutely. I think that the recent use of tariffs UH to get Mexico to significantly tightened their border security has brought these these nations closer to each other. We're working very well now with Mexico UH. And I think that that was an important thing. I remember that the tariffs have many different uses. In that case, UH,

they were used to address the national security crisis. And when the President announced that, people went crazy, and then two days later they hailed it as a great victory, and that's what it is. So UM I think. I think that from an investors point of view, the important thing to see is that the US economy is rock solid.

All of financial indicators are pointing bullish, and the terror of policies that we're using doctor working in different ways to help our economy and help restructure the international trade environment in a way which is more fair and therefore more expansive. And but as it relates dr virus relates to terrorists, what do you believe has been the impact on US consumers and US businesses zero. And that's that's

shown in the data. And that's that's counterintuitive. I mean, there were a lot of people who were saying that we were going to have tremendous price inflation from from all of the terrorists we put in, whether it was aluminum steel or whether it was China, we've seen zero. Now in the case of China, it's very clear what's happened. Uh. They devalued their currency to take the bite out of

the terrors. They've lowered their prices. We've seen them bearing the burden of the tariffs to lower exports, lower profits. The Chinese government itself, um is is burying that. But are those are those tariffs? Are those are paying nothing? There's no. You can't point to any inflation in this economy, which is why the others. The other piece out there,

tom as you know, UH, is the federal reserve. I mean, a rate cut and passage of U S M c A would get us easily over Well, the President just tweeted out that we would see four or five percent. I believe he assumes real g d P. And I can't find many people that would agree with that ductor navi of so critical moment here with is the bluster and policy that we've been doing. And as someone mentioned brilliantly over the weekend, maybe it's talked loud and carry

a small stick. What kind of stick does the president take to the G twenty meeting, tom As I said at the outset, we're on the glide path going in. Let's just see what happens. I think that uh the important thing here if you're an investor, just to see the chessboard. You got a strong economy, uh, and that will continue, and that's bullish for the markets. That's all that matters. We've had the tariffs in for over a year, tom and we've seen no negative impacts whatsoever on the

US economy. In fact, the Q one we actually we came in a little over three percent growth rate, and the full point of that was due to our reduction in the trade deficit, primarily because of the China tariffs. So let's not let's not. I think if people want to get excited about things right now, they should get excited about passing the U S m c A agreement, because that's going to be the next leg up on our growth. That should get excited about the idea that

the FED might lower interest rates as they should. Uh. And and let's let's just see what happens with China. We we won't what what would the administration consider a successful G twenty meeting as it relates to China? Uh? And speculate on that. Let's just see what happens. Well, this is the quiet period. Let's just go into Osaka. Let's see what happens. I'm happy to talk about other things, but let's just let's just see what happens. Is multilateral dead, sir?

I mean, with all the books you've written, the anger over China over the years, is a multilateral America dead? The US Mexico Canada Agreement is my multilateral. It's three countries, um in I think the smartest, biggest trade deal in world history. And it's good for all three countries as well as American farmers, ranchers, manufacturers, and workers. So in

that sense, multilateralism um isn't dead at all. And and so no, um, if you have multilateral Transpacific partnership, which is which would have torn apart of auto industry, that's dead. But the U S m c A is hopefully it'll be alive and well and and last for a long time. Peter Navarro, thank you so much. She has Assistant to the President, Director of Trade and Manufacturing Policy at the

White House. That we greatly appreciate his time. Last week we were honored to speak with General McCrystal Admiral Strevidis, and we continue that forward now with another admiral. He has Admiral Sestak of Pennsylvania. But he's different than at Crystal. He's different than Stravidas. He's decided to run for president. He is, I believe, by count candidate uh for a very crowded Democratic Party field. Admiral, we are thrilled to have you with us. As a former congressman, you know

the landscape. Well, why do the Democrats need a candidate to come up the process of defeating President Trump? Hey, thanks for having me aboard. I honestly do believe what America's most want is someone who is actually accountable to them, to them, above self, above party, above any special interest.

That's what they most want. Look, they're looking for a president and also believe or they need a president who has a depth of global experience to restore America's leadership in the world, and that's what protects our American dream at home. And we're walking away from the world. We're retreating from the world and telling her whosed allies left behind?

It's a rap. And finally, I think they really do need someone who can be trusted as I was in my two to one almost Republican district reelected without spending a dime on a campaign. Who's that would be trusted even when we disagree to restructing policies that are too often inequable. That's what they want. I really want to be there for account ability. Okay, we all know Connor Lamb and what he did southwest of Pittsburgh as well.

How are you going to get liberals, progressive social Democrats, democratic socialists to swing over to a moderate Scoop Jackson Democrat like you? How does that work? Well, you know you hit it on the head. I want to actually represent all Americans, all Americans, and so when I someone when I was a congressman, disagreed with me on choice, I invited them in despite the harsh letters that were

often written written on that issue. And you had to care, you had being at eight o'clock in the morning on a Saturday, and sixty showed up to voice their opinion. But you can't find me ever going back to them in a harsh term, but listening and saying what my opinion is. The next time, forty showed up. The next time twenty the Key Party patriots asked after my tenth town Carol Town Hall to have a picture with me. Why I'm going to do it is what a good

captain does on a ship. He goes down the mystics and listens and hawks, but he states what he believes in. Am I going to do it by spending my time living in Iowa? Sure? I am? Just like I walked for one or twenty two miles across Pennsylvania. Yeah, I did that this week. I walked for in twenty two miles this weekend. Let me bring in my colleague Paul Sweeney please. And then I got a bridge for sale in Arizona. Let me bring in my colleague Paul Sweeney

right now with presidential candidate. So add it's just a question, first of all, just on timing here. It is a very crowded field, as we all know. Are you concerned that you're coming in too late here? I mean even the debates are are starting. So first it's just all be too little, too late here, Uh, Paul, you play

with the cards you're dealt with. I had my daughter I bring cancer for which is where I stopped being an independent to take and took after she was recovered, became a Democrat to run healthcare, which is I Similarly, the cancer came back and over the last year we dealt with it. And frankly I got dealt a good set of cards because her health care doctors who saved her last time one came out of retirement to the brain operation. We're now in a safe harbor, and so

it's a good desk step card. She's safe. And so this is the only time I could get in. But you know what, she gave me a sign that said life is not about avoiding the storm. It's about learning to dance in the rain. And so, yeah, it's a little tougher right now, but you know the message I have, having stood up at times to my own party, in that walk across Pennsylvania where I was told to stop

walking just fundraies. But I told her the man who called me the senator, about the Republican who called out as I walked through a small town ad Maamma a Republican. But I love what you're doing that I actually want to go to the people. And actually I mean this not that they have to know me, that I have to show them I know them and what they need. And so no, I think it's okay because of what happened to my daughter that I'm very fortunate with deca

cards I'm dealt with with her. Right, Well, good news there, Admiral Um. What I mean, obviously, what I the key issues that has to be done initially by all candidates is to try to differentiate themselves. How do you do that? Well, I think I bring something just because I've been blessed by this nation to invest in me. That's fairly unique.

You actually have a presidential Kennedy who has a breath in depth of understanding of the world, who has come to understand issues of our military that militaries can stop a problem, but they can never fix a problem. And so Democrats and Republicans alike voted for that reckless war for example in Iraq. Never understood either the complexity of the world nor did they understand the issue that I said, And so we Unleashia gains Sonny soon he gets Shia.

And here's the issue. Very few understand that. And second, no one has ever been going to be held accountable for voting for that. More so, I bring accountability which is unique, and I bring a breath of understanding why our American dream is only protected by restoring leadership to the world. The Democrat out of Pennsylvania, he is running for president. He has a former admiral of the U. S. Navy emial cystic. You commanded the Samuel B. Roberts to

all sorts of acclaim uh floating around the Atlantic. You did that with a repaired Samuel B. Roberts, which I believe was hit by a mine five or six years before off of Iran. You know about what our navies at risk in Iran right now. Stravitas was scathing in his interview with US last week. Describe as a Navy guy what the President did last week with the um

not hysterics, but the sequence of events on Iran. Well, let me talk to that directly, with the beginning of the wrong action in that sequence, breaking America's word on the deal of the Nia Nuclear Accord. When Iran kept theirs is unforgivable, and that's why we're here today. We'll step back. Our navy can't even survive in the Persian Golf we are. Sonar doesn't work, and there's nineteen many

submarines there. We operate in two areas there with the Carriage Battle Group, go back and forth, back and forth the launch plans. So if we have to strike, I know I've been there. We will have to remove ourselves from the Persian Golf and do strikes from Afar. And this is not Iraq. It would take us weeks or months if we ever have them get their nuclear infrastructure back buried under three feet of rock to destroy it, as they could rain missiles, hundreds of them down on

Israel and our regional basis. Remember what I said about Iraq. Militaries can sup the problem. Militaries don't fix it. Our diplomatic effort to rid them for a year as of most at the minimum of a nuclear capability, gave America security and safety. And what the administration did by walking away and breaking our words, admiral of our security, how

much does this nation? Miss? General Madis at Pentagon? Add General Maddis, who I worked for when I ran the Navy's three fifty billion dollar warfare programs, that he was the Marine equivalent. We were fortunate to have that man that's accountable and his words of wisdom there where, he also spoke about staying in Iranian accord sorely missed and we should be great grateful for his service and if I could, I'm sorry, Well, we're gonna run out of time.

Let's do this, Admiral Saystic. We look forward to speaking to you in our New York studios or in Washington as you may in the coming weeks. Joe Sastek is from Pennsylvania. He has decided, as a former congressman today to run for president of the United States. We greatly appreciate his time. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever of podcast platform you prefer. I'm on Twitter at

Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.