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WASHINGTONANDTHEWORLD
TheMostDangerousManinTrumpWorld?
HowPeterNavarrocouldleadusintoaglobaldepressionorworse.
ByJACOBHEILBRUNN|February12,2017
fDonaldTrumpistreatingthestaffingofhisadministrationlikeaglorifiedcastingcall,

I
thenthereisnoshortageofcandidatesforWashingtonsforeignpolicyestablishment
tobooorcheer.Sofar,SecretaryofStateRexTillersonandDefenseSecretaryJames
Mattisoccupytherolesoftheheroes,themoderatingforceswhowillstaredownthe
badguys.ThevillainsarethetwoSteves,MillerandBannon,whoareallegedly
Trumpsideologicalpuppetmasters,plusnationalsecurityadviserMichaelFlynn,who
seemsintentonconfrontationnotonlywithIranbutIslamgenerally.

AmidallthefrettingaboutwhatdiktatsorforeignwarsMiller,BannonandFlynnmightbe
concocting,onefigureonlyintermittentlyflickersintopublicconsciousness:PeterNavarro,
theheadofTrumpsNationalTradeCouncil.Butitwouldbeacostlymistaketoshortsell
hisinfluence.Hesportssomeestablishmentcredentialsmostnotably,aHarvardPh.D.in
economicsbuthisviewsarequiteradical.Hemay,infact,betheloopiestmemberof
Trumpsretinue.

Overthepastfewweeks,Navarro,aformerprofessorattheUniversityofCalifornia,Irvine,
hastriggeredangstnotonlyinAsia,butalsoinEurope.Trumphadalreadyangered
GermansbydeclaringthathewouldconsiderimposingtariffsonGermanautomakerslike
MercedesBenzandBMW,butNavarropiledoninanemailinterviewwiththeFinancial
Times.Intheinterviewduringwhichhealsomadenoisesaboutrepatriatingglobalsupply
chains,anastonishingsuggestionthatwouldbeenormouslycostlyandtakeyearsto
executeNavarroamplifiedTrumpsclaimsaboutGermanybydeclaringthattheEuropean
UnionamountstoaGermaneconomicracketinwhichBerlinartificiallyboostsitsexports
withwhathecalledagrosslyundervaluedEuro.Ofcourse,Berlindoesntgettosetthe
valueoftheeuro.

Navarrosfolderol,however,madeitclearthattheTrumpadministrationisbuckingfora
clashwithoneofAmericasbiggesttradingpartners.Wealreadyknew,ofcourse,that
NavarrowasbuckingforaclashwithAmericasbiggesttradingpartner:China.Hehasa
longandcolorfulhistoryofChinabashing(justcheckouthisbizarrescaremongering
documentaries),whichmakesChineseofficialsnervous.Heseemstothinkthateveryone
ofChineseeconomicsuccessescomesatU.S.expense.

Thistruculentapproachrepresentsanabruptdeparturefromthephilosophythathas
governedU.S.andglobaltradepolicyforthepasthalfcentury.SincetheBrettonWoods
Conferencein1944,thefoundationoftheworldorderhasbeenanopeninternational
economicsystemdesignedtopreventarecurrenceofthetradewarsofthe1930s.TheU.S.
profitedenormouslyfromthisarrangementwhichrestedoninstitutionslikethe
InternationalMonetaryFundandtheWorldBankestablishingwhatthehistorianMelvyn
LefflercalledapreponderanceofpowerinEuropeandAsiainordertocombattherising
Sovietempire.EvenaftertheColdWar,thesystemhasusheredinwhatamountstoa
goldeneconomicagefortheU.S.anditspartners.

Navarroisproposingtoupendallthis.ButdontexpecttoseebiggainsaccruingtotheU.S.
fromhisstringenttradepolicies.Quitethecontrary.Themorelikelyresultisthat
Germany,Mexico,Chinaandothercountrieswillsimplyretaliateagainst,orbypass,the
U.S.,andanisolatedWashingtoncouldfinditselftrappedinthespiralofaworldwide
economicdepression.Byallmeans,fearthepossiblehotwarwithIranthatBannonand
Flynnmightbeplotting.ButalsofeartheconflictthatisfarmorelikelyifNavarrowields
hisinfluencesuccessfully:aglobaltradewar.

Navarroistheobverseofeconomistswhosomewhateuphoricallybelievethattradewill
bringaboutpeacefulrelationswithothercountries,andheposestheoppositeproblem:
Hesahardlinemercantilistwhoinsiststhatmilitaryconfrontationwithsometrading
partnersisalmostinevitable.Inthis,hethrowsEconomics101outthewindow.The
classicaleconomistDavidRicardoofferedafundamentalinsightattheheartofthecasefor
freetradethetheoryofcomparativeadvantage.Henotedthatifonecountrycanproduce
agoodatalowermarginalcostthananother,theycaneachfocusonwhatthey
manufacturebestformutualgainexactlywhatishappeningtoday.Navarrowillhave
noneofthis.Hesazerosumeconomist,who,likeTrump,believesthateveryitemnot
madeintheU.S.representsthetheftofanAmericanjob.

Sofar,NavarrosbugbearhasbeenChina,whichhedepictsasavoraciousenemyintenton
underminingtheU.S.inanywaypossible.FearsofadominantChinahavebeen
percolatingfordecadesin1997,forexample,RichardBernsteinandRossH.Munro
publishedthecontroversialtractTheComingConflictWithChinabutNavarrohastaken
themtoanewlevel.Lessanovelthinkerthanagiftedpopularizerhepublishedessays
everywherefromForeignPolicytotheNationalInterestduringthecampaignandisa
persuasivepublicspeakerNavarrohasadaptedalegitimatedebateaboutChinas
hegemonicaimsintoaseriesofalarmisttractsandfilms,allofwhichareredolentofCold
WarhysteriaaboutMoscowsinternationalredweb.NavarrotakesitasagiventhatChina
isarevisionistpowerthatseekstodestroytheAmericanlaborforce,evictAmericafrom
EastAsiaandestablishanewtotalitarianorder.HeneverconsidersthatChinamighthave
itsownnationalinterestsorthatitsriseishardlyforeordained.Withaslumpingeconomy
andmassiveinternalcorruption,Beijingfacesitsownhostofinternalproblems.

Instead,everywherehelooks,NavarroseesthehandofChinaatwork,subverting
Americanfreedomsandprosperity.NavarrosfirstforayintoChinastudiescameinhis
2006bookTheComingChinaWars:WhereTheyWillBeFought,HowTheyCanBeWon.
ItcontainschaptertitlessuchasMadeInChina:TheUltimateWarningLabelandRed
ArmyRisingTheComingChinaHotWars.Navarrousesmilitarylanguagetoreferto
Chinastradepolicies,referringtoitsconquestoftheworldsexportmarkets,whichhas
vaporizedliterallymillionsofmanufacturingjobsanddrivendownwages.Particularly
disturbingisNavarrosfearmongeringaboutwarwithBeijing.Chinasaspirationsareso
insatiable,heclaims,thateventuallytherewillbeaclashoverourmostbasicofallneeds
bread,water,andair.

Indeed,hehaspropoundedthislinewithmessianiczealinDeathByChina:Confronting
theDragonaGlobalCalltoAction(2011)andagainin2015withhisbookandfilm
CrouchingTiger,thelatterofwhichisaccompaniedbyominousmusicandfootageof
marchingChinesetroops.Iteveninvokesthespecterofdogfightsintheskybetween
ChinaandapotentiallyoverwhelmedAmericanforcewhichcallsintofurtherquestion
theabilityoftheUnitedStatestomaintainairdominanceovertheskiesofthePacific.
Dogfights?AmilitaryconfrontationwithChina,aleadingnuclearpower,couldquickly
turnintoalotmorethanthat,somethingthatdoesnotreallyseemtooccurtoNavarro.

TocounterthemanifoldeconomicandmilitarythreatstheUnitedStatesfaces,Navarro
recommendsasweepingrevisionofU.S.foreignpolicy.Hewantshightariffs,the
repudiationoftradepactsand,aboveall,amassivemilitarybuildupagainstChina.Oneof
NavarrosaspirationsistobeefupmilitarytieswithTaiwan,whichBeijingconsiderspart
ofChina.CallingtheObamaadministrationstreatmentofTaipeiegregious,Navarro
declaredinForeignPolicythatithasbeenrepeatedlydeniedthetypeofcomprehensive
armsdealitneedstodeterChinascovetousgaze.Atthesametime,Navarrowantstoend
sequestrationondefenseandgoonanalloutshipbuildingbingefortheU.S.Navy.Nor
doesNavarroseemtoseeabomberthathewouldnotliketobuild.

Thehystericaleconomicwarnings,thescaryprescriptionsandtheselfdefeatingproposals
wouldsimplybefancifulnonsenseifNavarrowerentwhisperingintheearofthemost
powerfulmanintheworld.Thefactthatheismakesthemdangerous.Ofcourse,where
Trumpwillactuallyheadstillremainsanopenquestion.Afterhisinitialquestioningofa
oneChinapolicy,Trump,inaphonecallwithChinesePresidentXiJinpingonThursday,
seemstohaveendorsedit.Butatthesametime,TrumpisclearlyseekingtouseJapanto
balanceChinesepower,whichiswhyheishostingJapanesePrimeMinisterShinzoAbe
thisweekend.OnFriday,AbeevenpromisedtoinvestinAmericaandjokedthathewould
helpbuildaMaglevtrainthatwouldconveythepresidentwithinanhourfromWashington
tohisManhattanaerie.
Likenotafewpresidentialadvisersinhistory,Navarromaynotbeabletoenacteverything
heproposes.PerhapshewillbreathefireabouttheperfidyofChinaandothercountriesbut
notdecisivelyinfluenceeconomicpolicy.Inthisscenario,Navarrowouldserveasa
convenientreleasevalveforventilatingfrustrationaboutthefurtherlossofmanufacturing
jobsthatislikelytocontinueunderTrump,thanksmostlytotheinexorableriseofartificial
intelligenceandautomation.IntheWashingtonPost,EdHess,aprofessorofbusiness
administrationattheUniversityofVirginia,predictsthattensofmillionsofjobswillbe
destroyedinthenextfiveto15yearsbyemergingtechnologies,and47percentwipedout
overthenext10to15years.

AnotherpossibilityisthatNavarrodoesntgetfreereinbuthastojockeyforpowerwiththe
othereconomicplayersintheadministration,includingStevenMnuchinatTreasury,a
formerGoldmanSachsexecutivewhohasnohistoryofChinaantagonism.Inthisscenario,
TrumpdoesntjettisonNAFTAbutratheraccedestosomecosmeticchangesthatdont
fundamentallyalterthepact.Atthesametime,heretreatsfromhisboguschargethat
BeijingisdepressingitscurrencyitisntandinitiatestradetalkswiththeChinesewhile
alsoworkingwiththemtocorralNorthKoreannuclearambitions.

Buttheresathirdpossibilityonethatweshouldntdismiss.Inthisscenario,theNavarro
lineprevails.TrumpunilaterallyslapsdraconiantariffsonMexicoandChina.Inturn,the
WorldTradeOrganizationsaystheyreillegal.Trump,neveronetodefertothecourts,
pullstheU.S.outoftheWTO,andtheinternationaleconomicorderisupended.With
tariffshighandTrumpbailingoutofinternationalinstitutions,itdoesnttakelongbefore
weendupinaglobaldepression.Thelasttimesomethinglikethisoccurreditleddirectly
totheriseoffascistregimesinGermany,ItalyandJapan,withnationalistleaders
promisingthatdomesticrepressionandexternalexpansionwereaquickandeasyremedy
totheirnationswoes.

Andtoday?Theconsequenceswontjustbefinancialthewholeglobalsystemwillshiftas
countriesgraspatnew,morebeneficialalliances.Mexicoisrethinkingitsrelationshipwith
WashingtonitcouldtryandstrikeupnewdealswithIndiaandChina.Atthesametime,if
Trumpabandons,orevensignificantlycurtails,freetradewithEurope,hewillforce
GermanytomoveclosertoChina.AlreadyMerkelhasinvitedtheChineseprimeminister
toBerlin,andGermanofficialsarelookingtoexpandtradetieswithChinaasquicklyas
possible.Ironically,pursuingtheNavarrolinecouldendupbenefitingChinaenormously.
NavarroandTrumphavealreadystrengthenedChinashandbyjettisoningtheTrans
PacificPartnership.Now,Beijingistryingtopositionitself,atleastrhetorically,asthe
defenderofglobalfreetrade.InJanuary,ChinesePresidentXiJinpingannouncedat
Davos,Weshouldcommitourselvestogrowinganopenglobaleconomy.Noonewill
emergeasthewinnerinatradewar.TheincongruityoftheheadofanominallyMarxist
nationembracingopenmarketsmoreardentlythantheU.S.hasnotgoneunnoticedor
unremarkedaroundtheworld.

Foryears,theU.S.hasreliedonthepostWorldWarIIeconomicsystemundergirdedby
freetradeandinternationalinstitutionstobuttressitsprosperityandpower.Itsnothard
toimaginewhereNavarrosplanstoscrapthatsystemwouldlead.Agarrisonstate,shorn
ofallies,regardedwithsuspicion,ifnothostility,fromBerlintoBeijing,ishardlyarecipe
forthekindofrapidriseinGDPthatTrumpispromising.Itamountstoaflagrant
repudiationofthekindofbeliefinfreemarketcapitalismthatpresidentsfromHarry
TrumantoRonaldReagan,fromBillClintontoGeorgeW.Bushhavechampionedasa
matterofcourse.Thisaloneshouldbeenoughtogiveanyonewithastakeintheworld
economywhichthesedaysisprettymucheveryonethecollywobbles.Trumpshould
shunhisadvice.IfhefollowsNavarroslittleschemes,itcouldrapidlyleadtoaworldcrisis.
Watchthisman.