We begin this evening with the President's latest tariff threats and joining us live for more. Right here in our Washington Bureau is Peter Navarro, White House, Senior Counselor for Trade and Manufacturing. Welcome back to Bloomberg TV and Radio. Peter, It's good to see.
You, al it was great to be with you and Jel.
When we consider the remarks the President made to NBC yesterday suggesting most of our trading partners could see a tariff rate of between fifteen and twenty percent being implemented, was that the President just riffing or should we expect that the baseline ten percent rate currently in place is going to go higher.
The baseline way to think about this is to look at the original levels of reciprocal terroriffs and the letters that have just gone out where the President has lifted the terroriffs from the ten percent to a higher rate. Roughly track what the reciprocal rates were originally.
Some are a little lower, some are a little higher.
But the problem, Kayley, that this country faces, and it is an urgent national emergency, is we run this massive trade deficit. Every year concumulatly has been like eighteen trillion dollars of deficits over the last several decades, and that represents a transfer of our wealth abroad. It represents the transfer of our factories and our jobs. So the process now for investors, I think is working quite well. People talk a lot about one certainty, this kind of thing
like that. I think it's pretty clear where we're going. It's an ongoing negotiation. We've had every major country in the world and a lot of smaller ones come to us, and they're fully engaged in negotiations.
We're getting to a place.
But what we're learning is that the more a country takes advantage of us, the less willing they are to.
Give up the good thing they got going.
So that's the tension, but the president is not going to tolerate that.
That's where we're at.
I would say that for the American people, these tariffs are a great boon that brought A chart here shows that we've already collected like one hundred billion dollars of terroriffs.
A record for US loan single fiscal Yeah.
And one of the things that really bothers me is that we're up to eighteen billion now or so with China alone on the fentanyl terrafs and so they're willing to give US eighteen billion dollars in terraffs and they still won't do what they promised back in twenty nineteen directly from the President of China, which is to stop killing Americans. So the terrorsts are working, and they were these kind of revenues that we're getting. It's a very important part of the big beautiful Bill in terms of
financing that as well. So we've got an external revenue service that's going to augment the internal revenue service. And we're moving for a structural reset of the international trading environment, which by any measure is skewed against US.
And when you talk about killing Americans, they're a freeing of fentanyl here, right, I'm a free off because you spoke passionately about fentanyl, the scorge of fentanyl last time you joined US, specific to Canada and Mexico.
At that point, and also China.
Yeah, but with Canada now with a thirty five percent traff threat, I'm just wondering, as a point of clarification, so I can see what you're pursuing here, and you've you've made the case for this, does that come with the USMC a carve out. Would that be extended to Mexico as well?
The thirty five percent terriff is not on USMC, I got it.
Okay, I'm going to.
Talk candidly about Canada.
I think going back.
To again President Trump's first term, I remember in the very first days of the administration, Bob Liteheiser, Wilbur Ross, self, Negotia were negotiating directly with the Canadians, many of whom are still in charge of their trade policy. And we were negotiation with both the Mexicans and the Canadians. And the Mexicans were pure joy to deal with. You know, they were tough negotiators, but they were reasonable, fair negotiators. The Canadians were very, very difficult, and they've always been
very difficult. And I think what the Canadian leadership needs to understand, as opposed to the Canadian people.
Which we love, is that this.
Waving this big batter retaliation at the United States of America. I mean, no, they shouldn't be doing that kind of thing. They just don't have the weight in terms of any advantage they might have at US.
So I would just.
Urge Canada to the Canadian citizens to urge their leaders to negotiate fairly with us, because look, every country that we're negotiating with, it's just a fact they have higher tariffs than we do, they have bigger non tariff barriers, and we run these massive trade deficits with many of them. How does that happen if trade's fair?
It doesn't.
So that's all we're President Trump, going back to the eighties, has promised to correct this well.
And of course it's not just about country by country, it's also sector by sector. The President suggested this week that we could see a two hundred percent tariff on pharmaceuticals, for example, but that could be on a longer time horizon, a year plus out, to allow supply chains time to reorient themselves toward the United States. Could we see a similar delay in other sectors that they're Section two thirty two investigations into, like semiconductors, for example.
Well, let's talk about the Section two thirty two, because there's a number of different ways that the President has.
A legal authority to raise tariffs.
Section thirty two to thirty two basically goes on the presumption that ifs are basically putting American capacity out of business in a way which harms the United States, he has.
The right to offset that.
So whether it's steel and aluminum, or whether it's copper where we just made an major announcement on that, or whether it's pharmaceuticals, the endgame for the two point thirty two terriffs is to strengthen our defense industrial base or manufacturing base, and in the case of pharmaceuticals, our health
industrial base. Again, as a veteran of the first Trump term, I was the guy, the Defense Production Act policy coordinator who was in charge of getting all the medicines and the PPE and getting the vaccine thing jump started.
And all of that, and we learned some very harsh lessons there.
Certainly, there was just incredible rhetoric from China at one point where they were going to drown us in a sea of virus and withhold things from us if we dared say that the virus from was from the Wuhan lab. I mean, that's out there, just go go look at dad. But it was also true that every one of our allies, when push came to show, they weren't with us.
So it was every nation on their own.
So we learned pharmaceuticals are particularly critical to have on shore for national security purposes.
I want to get to J. Powell with you, and I'm going to try to show it this way because I heard you talking recently about the Big beautiful bill that the President just signed.
It's a law.
There have been questions about whether it adds to deficit and debt, and you have said just the opposite, that combined with tariff revenues, you will turn two to three trillion dollars in deficit spending to a two to three trillion dollars surplus. That would be a big deal. Can you do that? How cutting interest rates?
Well, that's yeah, we could do it with out J. Pollo cutting interest rates because the numbers are so swhelming. Okay, because he's looking. But how I mean, let's not conflate those two. Let me let me talk first about the Big Beautiful Bill.
Economics. It's it's fairly straightforward.
The way it works is there's this thing called the Congressional Budget Office. We talk about it a lot when Yeah, I'm when you when you do a bill like that. It's the CBO that does the official forecast dynamic and historically they've just been far more wrong than right, dating back to the first first term, and so all you got to know about the CBO forecast this time around is that it assumes a one point eight rate of
economic growth, which we think is way too low. And from that one point eight, and they don't put in any dynamic effects to speak of. And when they try to do that, they screwed that up to whatever. They came up with a two to three trillion increase in the debt. Okay, it's like, no, wait a minute, here's what you're not doing.
Two things.
One is that if you simply increase the growth rate by one percent, like we did in the first term, CBO got it wrong. Same way in the first term, you raise a couple of trillion dollars of that, so you get almost to zero.
Okay, you get the neutrality.
They didn't count the tariff revenues, and that's like, that's are.
Executive branch, not from Congress. They can't technically.
Oh, but but they should have counted it because it counts towards the debt.
I mean, look at look at it.
One hundred billion dollars in I don't know the first six months, we're gonna we're gonna have a situation where if you simply do the numbers right for the big beautiful bill. It's this significant reduction in the debt and what that'll do, if you want to segue to J. Powell, what that'll do is it'll actually lower yields and interest
rates because we'll have to finance less. Now, with respect to Powell, I think there's a strong argument that can be made that he's at least fifty basis points above where he should be, and we should be in a place where we should be fifty basis points lower now moving towards even lower. And let's just deconstruct what fifty basis points too high means.
That's about a quarter to a half point of.
GDP growth reduction, and that in turn means about five hundred thousand to seven hundred and fifty thousand fewer jobs that will create because of J.
Powell.
It's a couple one hundred billion dollars in lost output, and there's billions lost in tax revenues. Then when you go from there, and I was watching Laloe, I'm sure you have Lalo brainers. I saw her on an other network yesterday and she has no clue. It's like she was talking about the Big beautiful Bill and Powell and all this stuff. Twenty to thirty percent of our debt.
Is financed by short term debt. That's the way they roll that.
So if you look at a half point more on the short term debt, that's a couple hundred billion dollars that you build into the debt over ten years. That's real money. Mortgage rates average family four hundred thousand dollars thirty year mortgage. That's one thousand over one thousand dollars a year. And then we got this last point a trillion dollars of revolving credit card debt. That's about five billion dollars more that consumers pay.
So and so this idea of.
What's wrong with waiting, I'll tell you what's wrong with waiting all those costs and what's wrong with lowering them now.
And if you get it wrong and.
Place heats up, just put it in reverse. We used to do that. Fesciolicy used to be uncertain by design to keep the bond market and everybody else with discipline. We got this like weird concept now where we got to telegraph a year in advance what that is.
And it doesn't.
Work with the bond market. It's not so much the FED funds rate. It's the bond market that dictates things like mortgage rates and overall borrowing costs. Is there a risk that public pressure on the FED chairman when he does cut then creates a credibility problem for the Fed? The bond market no longer trust the Fed, and you still run into these same problems.
I don't hire rate.
I don't think there's any risk at all of that. I think the bond market. Frankly, thanks, Jerome Pile is a clown at this point because of what he did, and I can go over the three major mistakes he makes, but the bond market will do what the bond market does. Seeing the data, and when you see ten year yields going down significantly like they have been doing, that should tell Jerome Powell that the short run rates should be coming down significantly and that's not happening.
And let me just on the pole thing. Let's be clear.
It's like this op ed I had in the Hill. UH basically looked at all of the FED chairman we've had over the last I don't know forty years and ranked them who is good to the worst.
And there's an argument that he was the worst.
And if you look at like Arthur Burns seventy two, helps Nixon get reelected, sets off the stagflation. Ge William Miller is in the middle of that mix, sits on his hands. He was the other lawyer in the mix besides Powell, totally unqualified.
He went through green Span brand green Span.
Getting not understanding how the dot com was going to bring productivity and allow you to go forward out inflation. But Berne But but Powell has made three major blunders.
In first term he raised rates too fast. He was like too early.
Powell, and that's been documented by the Fed itself.
He made a mistake. And the second term this is what and you you, you folks were right here on this set.
Now, I wonder why you might not have been asking about Jay Powell. Hey, Jay, are you going to say anything about all these bills they're passing contributed to inflation?
Jay, why do you await.
The ralitary policy? Not fiscal policy?
No?
No, but no, Actually, I'll give you my favorite FED chair besides Paul Volker, William McChesney Martin. Most famous quote in FED history is job of the FED chair is to take the punch bowl away before the party gets too good, right, and what but McChesney Martin did, which
was so profound. When Lyndon Johnson was prosecuting the Vietnam War and refusing to trade off guns for butter Chesney but chesse, Martin started raising race and LBJ demarched him down to his ranch and tried to read him the Riot Act, and Martin said.
No, you're, you're. You got to choose one or the other.
And so Powell should have said a lot during that time.
He didn't, and one of the reasons was.
He wanted to be reappointed to the fat He's a political animal.
Let's be clear about that.
They're wrapping me. This is the longest interview we've ever done on the show. I want you to know Peter Navara right here, that's absolutely here for Kayley. Do you want to fire Philip Swiegel or J Powell before we go?
I don't fire anybody.
I just I just will be like them back here and I just love coming to your studios.
Well, let's keep this conversation going.
Appreciate it, and we'll have another baby on the planet.
When I come back.
Congratulate absolutely, White House Senior Counselor for Trade and Manufacturing, Peter Navarro. We thank you so much for being with us on Bloomberg