The clearest articulation of what Trump wants to do to America’s economy comes from one person

Photo: Rob Carr/ Getty Images.

It is sometimes difficult to get a detailed, direct answer from President Trump and his surrogates on their economic policy. During the campaign he slid past substance by making sweeping claims of how, under a Trump administration, the U.S. would ‘”win bigly” and “stop being taken advantage of.”

Those pronouncements continue.

But luckily, there is one voice coming from the White House that clearly articulates the direction in which it wants this country to head economically. That voice belongs to Peter Navarro, the head of Trump’s newly formed National Trade Council.

Over the last few weeks, Navarro has given a number of interviews that explain the administration’s propensity for victimhood, an obsession with Germany, and a deep-seated desire to change the face of the American economy as we know it.

All of these factors have contributed to growing fears that this administration will start a trade war with any of the countries it has scapegoated — Mexico, China, or yes, now, Germany.

“They play the money market, they play the devaluation market, while we sit here like a bunch of dummies,” Mr. Trump said of China and Japan while in a meeting with pharmaceutical industry CEOs on Tuesday.

It sounds a lot like an interview with Navarro the Financial Times published around the same time in which he said that Germany, like China and Japan, was taking advantage of a”grossly undervalued” euro to “exploit” to expand its trade deficit with the U.S. That is to say, Germany sells us more goods than we sell to it.

Those are dramatic words, that could easily lead to dramatic action. So you should know what’s coming.

Crimson mind

Perhaps the most notable thing about Navarro is the work he’s done on China. For one thing, it’s an indication of why he (a Democrat by registration) was chosen by Trump. His 2011 book ‘Death by China’ was turned into a documentary you can watch on YouTube.

In it, he argues many of the things Trump argued on the campaign trail — that China is manipulating its currency in order to export more goods to the United States; that it’s hurting our manufacturing sector.

One expert claims that “China is the only country in the world that is preparing to kill Americans.” Another calls the US “a big chump” for supporting China’s entrance into the World Trade Organisation.

To be fair, the documentary also highlights some real problems with the U.S. economy. Most notably, it sends a clear message about how American and multinational corporations have sold out their employees and customers while worshipping at the altar of their shareholders.

Economists like Lynn Stout of Cornell University have been saying that for years, and corporate America has denounced the idea every step of the way, arguing that’s what’s good for investors must be good for Americans suffering from stagnant wages.

So it’s easy to see where one aspect of the victimhood in Trumpenomics comes from, but that’s not where it ends. In Navarro’s mind enemies are everywhere — from skyscrapers in New York City and Chicago, to politicians in Washington, Beijing and Brussels. Americans need protection, and as such, protectionism.

This is who we are

The reality is that for the past year or so our trade deficit with Mexico and Germany has narrowed without the government making threats or accusations.

And, according to Deutsche Bank, China only accounts for 16% of our trade deficit. And when it comes to service industries like banking, healthcare and technology we’ve been running a trade surplus with China.

US services trade surplus with China

The reality is that the Treasury Department has a specific designation for what makes a country a currency manipulator, and China doesn’t actually fit the bill.

In fact, for years it’s been trying to make its economy more like ours — a high tech, services and consumption based economy where people have purchasing power. Doing that means it needs to have a stronger currency and let go of some of its dependency on exports and manufacturing.

You see in economics there’s something of a zero sum game going on. Resources (human or other) that are applied to one sector cannot also be applied to another. Generally, as we are capitalists in America, we let the market decide where many resources go. The government is used as a buffer between the violence of the market’s lack of compassion for humans and what we consider a basic standard of American life.

Navarro would change that. In his mind, and Trump’s, the government should change the face of the economy and turn it into something different. This is why Trump walked into a room and told a bunch of drug company CEOs they had to lower their prices. This is why he tries to embarrass companies on Twitter.

We have yet to see if this strategy yields any results, but we do know is that this administration seems to have no qualms employing it for just about everything that has to do with the economy, down to its very make-up.

A love hate relationship with Deutschland

“We envision a more Germany-style economy, where 20 per cent of our workforce is in manufacturing,” Navarro told CNBC in a recent interview. “And we’re not talking about banging tin in the back room.”

Again, yes the U.S. economy is the envy of the world for its high tech sector and services sectors, but that isn’t to say that we don’t have a manufacturing sector at all. In 2014, the International Monetary Fund calculated that if the US manufacturing sector stood alone, it would be the 8th largest economy in the world.

Germany’s entire economy comes in 4th.

“Germany has the greatest 19th century economy in the world,” Lee Branstetter, an economics professor at Carnegie Mellon and trade expert with the Peterson Institute of International Economics told Business Insider. “The best Germany can do is make carburetors, they make wheel bearings and fuel injections systems. It’s really strange that the top economist in the administration wants us to be like them.”

That’s where this zero sum game comes in. The Trump administration wants to dedicate more resources to jobs that are being gobbled up by robots more and more by the day, even in Germany and China. This worries a bunch of economists who believe we should play to our strengths.

“We have this incredibly exciting dynamic economy, and part of our economy is vitally dependent on an open free trade and investment system. It is strengthened by the influx of foreign capital and foreign talent,” Branstetter continued.

But Trump’s base is made up of a lot of people who lost their manufacturing jobs to robots — not necessarily to China, Germany or Mexico. The market was (and is) violent, and it tossed them aside. They’re people who policy left behind without an education that prepared them for the advanced economy we have now (an issue the Trump administration has yet to address).

“…and arrogance”

For Trump, those problems are not addressed by education, though. They are addressed by ripping up trade deals and making threats — by trade wars.

After his confirmation hearing on Capitol Hill, billionaire investor and likely incoming Commerce Secretary Wilbur Ross gloated that Trump had put the US in a great position bargaining with other countries, especially Mexico.

“The peso didn’t go down 35% by accident. Even the Canadian dollar has gotten somewhat weaker — also not an accident. He has done some of the work that we need to do in order to get better trade deals,” Ross said according to the WSJ.

Days later, when the Mexican President canceled a meeting with Trump, we found out that wasn’t true.

We found out that countries can ignore the U.S. if they want to, or worse, retaliate. Here’s a few of the levers China could pull to hurt our economy below:

China retaliation

The work of multilateral trade deals has been done, and with some difficulty. But the Trump administration would like to undo them.

“As we’re negotiating with one country here, we’re going to be negotiating with one country here, and another country here,” Navarro said.

Trump said last week that those negotiations would involve him sending countries a list of demands and then retaliating if they did not comply within 30 days. Certainly not market friendly.

Navarro also supports a tax policy called “border adjustment” — essentially a tax on all imports. When reporters at CNBC brought up Wall Street research that said such a policy could hurt retail companies and put thousands of American jobs at risk, Navarro called it “fake news.”

“We are not backing off,” he said, adding, “Yeah, well, the Dow just hit 20,000, how you like them apples? There are winners and losers.”

All of this together smacks of distorted capitalism with a thick smattering of something dangerous — populism. And for what it’s worth, this ideology doesn’t surprise Navarro’s fellow economists.

“The thing about Peter Navarro is that he was never apart of the group of economists who ever studied the global free-trade system,” Branstetter said.

“He doesn’t publish in journals, what he’s writing and saying right now has nothing to do with what he got his Harvard PhD in… he doesn’t do research that would meet the scientific standards of that community. As far as I’m concerned he doesn’t know what he’s talking about in terms of trade policy.”

The opinions expressed in this article are those of the author.