Peter Navarro, assistant to the president and director of the office of trade and manufacturing policy, joins CNBC’s “Squawk Box” team to discuss reports the U.S. is considering restrictions on Chinese companies and the latest in the trade talks with China.
WASHINGTON — In the middle of his crowded dinner in Buenos Aires with President Xi Jinping of China, President Trump leaned across the table, pointed to Robert Lighthizer, the United States trade representative whose skepticism of China runs deep, and declared, “That’s my negotiator!”
He then turned to Peter Navarro, his even more hawkish trade adviser, adding, “And that’s my tough guy!” according to aides with knowledge of the exchange.
Now, with talks between China and the United States set to begin this week in Beijing, Mr. Lighthizer, aided by Mr. Navarro, faces the assignment of a lifetime: redefining the trade relationship between the world’s two largest economies by Mr. Trump’s March 2 deadline to reach an agreement.
And he must do it in a way that tilts the balance of power toward the United States. His approach will have significant ramifications for American companies, workers and consumers whose fortunes, whether Mr. Trump likes it or not, are increasingly tied to China.
First, however, Mr. Lighthizer will need to keep a mercurial president from wavering in the face of queasy financial markets, which have suffered their steepest annual decline since 2008. Despite his declaration that trade wars are “easy to win” and his recent boast that he is a “Tariff Man,” Mr. Trump is increasingly eager to reach a deal that will help calm the markets, which he views as a political electrocardiogram of his presidency.
Mr. Trump has repeatedly told his advisers that Mr. Xi is someone with whom he can cut a big deal, according to people who have spoken with the president. On Saturday, Mr. Trump called Mr. Xi to discuss the status of talks, tweeting afterward that good progress was being made. “Deal is moving along very well,” Mr. Trump said.
The administration has tried to force China to change its ways with stiff tariffs on $250 billion worth of Chinese products, restrictions on Chinese investment in the United States and threats of additional levies on another $267 billion worth of goods. China has responded with its own tit-for-tat tariffs on American goods. But over a steak dinner during the Group of 20 summit meeting in Argentina, Mr. Xi and Mr. Trump agreed to a 90-day truce and to work toward an agreement that Mr. Trump said could lead to “one of the largest deals ever made.”
Mr. Lighthizer — whose top deputy will meet with Chinese officials this week ahead of more high-level talks in February — has played down any differences with Mr. Trump and views his role as ultimately executing the directive of his boss. But the trade representative, who declined to be interviewed, has told friends and associates that he is intent on preventing the president from being talked into accepting “empty promises” like temporary increases in soybean or beef purchases.
Mr. Lighthizer, 71, is pushing for substantive changes, such as forcing China to end its practice of requiring American companies to hand over valuable technology as a condition of doing business there. But after 40 years of dealing with China and watching it dangle promises that do not materialize, Mr. Lighthizer remains deeply skeptical of Beijing and has warned Mr. Trump that the United States may need to exert more pressure through additional tariffs in order to win true concessions.
When Mr. Lighthizer senses that anyone — even Mr. Trump — might be going a little soft on China, he opens a paper-clipped manila folder he totes around and brandishes a single-page, easy-reading chart that lists decades of failed trade negotiations with Beijing, according to administration officials.
“Bob’s attitude toward China is very simple. He wants them to surrender,” said William A. Reinsch, a former federal trade official who met him three decades ago when Mr. Lighthizer was a young aide for former Senator Bob Dole of Kansas. “His negotiating strategy is simple too. He basically gives them a list of things he wants them to do and says, ‘Fix it now.’”
Mr. Trump’s selection of Mr. Lighthizer last month to lead the talks initially spooked markets, which viewed the China skeptic’s appointment as an ominous sign. It also annoyed Chinese officials, who had been talking with the Treasury secretary, Steven Mnuchin, a more moderate voice on trade and the primary point of contact for Liu He, China’s top trade negotiator. Mr. Mnuchin has urged the president to avoid a protracted trade war, even if that entails reaching an interim agreement that leaves some issues unresolved.
Mr. Mnuchin, who attended the G-20 dinner, helped Mr. Trump craft an upbeat assessment declaring the Buenos Aires meeting “highly successful” in the presidential limousine back to the airport, according to a senior administration official.
The disparate views among Mr. Trump’s top trade advisers have prompted sparring — both publicly and behind the scenes.
During an Oval Office meeting with the trade team the fall of 2017, Mr. Lighthizer accused Mr. Mnuchin and Gary D. Cohn, the former National Economic Council director, of bad-mouthing him to free-trade Republican senators.
The argument grew so heated that the White House chief of staff, John F. Kelly, quickly pulled the combatants into the nearby Roosevelt Room and away from the president, where the argument raged on for a few more minutes, according to two witnesses.
Emily Davis, a spokeswoman for the United States trade representative, disputed the account.
Mr. Lighthizer has since worked to increase his own face time with Mr. Trump. He has joked to colleagues that he has more influence with Mr. Trump during winter months because he is able to hitch a ride on Air Force One during the president’s flights down to Mar-a-Lago, which is several miles from Mr. Lighthizer’s own $2.3 million waterfront condo in Palm Beach, Fla.
He used that access to argue to Mr. Trump that the United States has never had more leverage to extract structural reforms on intellectual property, forced transfer of technology from American companies and cybercrime. But while Mr. Trump has jumped at the chance to claim victory in changing China’s ways, experts say that what Mr. Lighthizer is demanding would require significant shifts in how Beijing’s central government and its manufacturing sector coordinate their activities, and that might simply not be possible in the short term.
“Good luck with that,” Mr. Scissors said.
Those who know Mr. Lighthizer say he will try to force concessions through a combination of pressure tactics, like tariffs, and public condemnation. Mr. Lighthizer — who described his own negotiating style as “knowing where the leverage is” during a 1984 interview — typically presents few specific demands during initial talks while publicly bashing efforts by the other side.
He used that approach during recent talks with Canada and Mexico to revise the North American Free Trade Agreement, criticizing foreign counterparts as intransigent and characterizing complaints by American businesses as pure greed.
Mr. Lighthizer’s unsparing view of China comes, in part, from his childhood in Ashtabula, Ohio, an industrial and shipping town on the Great Lakes hit by the offshoring of steel and chemical production. For much of his career, Mr. Lighthizer was a lonely protectionist voice in a Republican Party dominated by free traders, alternating between jobs in government and a lucrative private law career representing large American corporations like United States Steel in trade cases against China.
Mr. Lighthizer found his way into Mr. Trump’s orbit through his work in the steel industry, where he gained prominence by filing lawsuits accusing Japan and China of dumping metals into the United States, in violation of trade laws. In 2011, Mr. Lighthizer caught Mr. Trump’s eye with an opinion piece in The Washington Times, in which he defended Mr. Trump’s approach to China as consistent with conservative ideology and compared the future president to Republican icons like Ronald Reagan.
Taciturn in public and self-deprecating in private, Mr. Lighthizer sees himself as a serious player on the world stage: Two recent guests to Mr. Lighthizer’s Georgetown townhouse were greeted by the stern visage of their host staring down at them from an oil portrait on the wall.
The trade adviser is guarded around Mr. Trump, often waiting until the end of meetings to make his points and quietly nudging the president away from actions he views as counterproductive, current and former officials said. That was the case in mid-2017 when he cautioned the president against withdrawing unilaterally from the World Trade Organization, adding for emphasis, “And I hate the W.T.O. as much as anybody.”
He does not always get his way. In the wake of a new trade agreement with Mexico and Canada this fall, Mr. Lighthizer urged Mr. Trump to consider easing steel and aluminum tariffs on those countries and replacing them with less burdensome quotas. Mr. Trump rejected his plan, according to negotiators from all three countries.
A poker-faced Mr. Lighthizer broke the news to his Mexican and Canadian counterparts by declaring the proposal was inoperative, one of the officials said.
The president also ignored Mr. Lighthizer’s advice in early December when he announced that he intended to begin the six-month process of withdrawing the United States from Nafta in order to pressure House Democrats into passing the new United States-Mexico-Canada Agreement.
That threat undermined months of quiet negotiations between Mr. Lighthizer, labor groups and Democrats like Senator Sherrod Brown of Ohio and Representative Nancy Pelosi of California to try to win their support for the new trade deal. Mr. Trump has yet to follow through on his threat, and Mr. Lighthizer continues trying to work with Democrats to get the new trade deal approved.
“Bob is trying to provide stability and focus in a completely chaotic environment,” Mr. Brown said. “I can’t speak for Bob, but I am certain he is frustrated. How could you not be frustrated as the U.S. trade representative for a president who knows what his gut thinks but hasn’t put much of his brains into trade?”
As Congress sees a shutdown as increasingly inevitable, the president sees a chance to show more swagger.
Mr. Trump’s embrace of a shutdown has given lawmakers on both sides the freedom to throw up their hands and claim this whole mess is beyond their control. The mood around the Capitol is less one of urgency and activity than of fatalism. Last week, Richard Shelby, the chairman of the Senate Appropriations Committee, said Congress looked to be “headed down the road to nowhere.”
.. Not only did Speaker Paul Ryan fail to mobilize lawmakers for a vote on Mr. Trump’s $5 billion, but many lame-duck members couldn’t be bothered to show up for work at all. (Nothing like an electoral rout to take the starch out of a conference.) Counting, much less whipping, the vote became all but impossible. By Thursday, House leaders gave up and sent members home for a six-day weekend.
.. On the Senate side, Mr. Schumer’s office is insisting that everything depends on whether the Republican leader, Mitch McConnell, can persuade the president to embrace a deal that Democrats can live with. The latest offer on the table is for a one-year “continuing resolution,” or C.R., that would delay the fight by temporarily funding parts of the government at current levels.
Shutdowns are especially fertile ground for Mr. Trump because they pit him against a political establishment that, as he sees it, obstinately refuses to pay proper deference to his genius. He has repeatedly voiced frustration at Congress’s unwillingness to lie back and let him run things as he sees fit.
Threatening to throw the government into chaos — to furlough, or in the case of personnel deemed “essential,”withhold paychecks from hundreds of thousands of workers, includingFood and Drug Administration inspectors, Transportation Security Administration inspectors and, paradoxically, Border Patrol agents — lets him exact a bit of cathartic payback, reminding lawmakers just how uncomfortable he can make their lives.
Chest thumping and trash talking remain central to Mr. Trump’s brand as a disrupter. His followers thrill to him precisely because of his pugilistic, vaguely unhinged personality. The more he rails against politics as usual, the more his base swoons.
As for those who see Mr. Trump as behaving like a petulant toddler, he doesn’t have to face their electoral judgment for another two years — an eternity in politics.
For now, the president can relish playing the tough guy. Even if he winds up folding, he’ll doubtless toss out some alternative facts and declare victory. As usual, he has ensured that this holiday season’s drama is all about him.
Mexican Economy Minister Ildefonso Guajardo offered advice: Make a key concession to the U.S. to break the logjam. Mexico had bent to U.S. pressure on policies aimed at shifting auto production from Mexico back north, opening the way for Mexico and the U.S. to strike a broader deal a month earlier.
.. For Canada, the equivalent of Mexican cars was dairy. Canadian negotiators had already been thinking along the same lines, and the next day, Canada sent the U.S. a document that included detailed plans for easing curbs on American milk and cheese products, a Canadian official said.
.. Two sectors drew outsize attention in the talks—auto and dairy—that came to be dubbed by some the “cars and cows” negotiations. The path to the deal had plenty of twists and gambits that backfired over the 13 months of meetings, as Mexico and Canada at times accused each other of betraying their early oath to present a united front.
The tone for the Nafta talks was set in October 2017, when Mr. Lighthizer made a number of controversial demands that would recast the pact, such as injecting a “sunset clause” making it easier for a country to terminate the pact and weakening the mechanisms allowing challenges to American trade penalties... At the end of August, Messrs. Trump and Peña Nieto announced a deal that included the requirement that 40% to 45% of North American auto content be made by workers paid at least $16 an hour... Though the Nafta dairy market is worth a fraction of the auto industry—and the U.S. runs a dairy surplus with Canada—it became an important issue for Mr. Trump after he got an earful during an April 2017 visit to Wisconsin. The president made Canadian dairy a staple of stump speeches and tweets complaining about how Canada took advantage of the U.S... Mr. Kushner had come to play a behind-the-scenes role in the Nafta talks, and Canada’s negotiators wanted him to see right away a document that included Canada’s formal offer on dairy. The key concession had been made and the U.S. soon responded by giving in to some of Canada’s key demands.
It is hard to imagine how this would coax the Palestinians to offer more concessions in a negotiation with Israel. What they see is that the United States under Mr. Trump has embraced the views of Israeli right-wing nationalists and tried to take two of their most important negotiating issues — the status of Jerusalem, which Mr. Trump undermined by announcing late last year that the United States embassy would be moved to Jerusalem, and now the right of return — off the table.
Through all the decades of peace negotiations, the Palestinians had believed that the United States, dedicated to Israel’s security, was the only power that could fairly mediate with Israel on their behalf. Mr. Trump has abdicated this leadership role, risking a humanitarian disaster and renewed violence.
“Once I understand what charges might be filed against me, if any at all, I will defer to my new counsel, Guy Petrillo, for guidance,” Cohen said.
Pressed on his past commentary about being willing to do anything for Trump, Cohen again hinted at flipping: “To be crystal clear, my wife, my daughter and my son, and this country have my first loyalty.”
.. Then Cohen resigned as deputy finance chairman of the Republican National Committee by citing not just the investigation he faces, but his disagreement with the Trump administration’s policy of separating families at the border.
.. And Cohen’s interview came with another big signal: the reported end of a joint agreement between Cohen and Trump’s legal team to share information. Such things often presage a more antagonistic relationship or even cutting a deal to inform on someone else. Michael Flynn’s lawyers stopped sharing info with Trump’s lawyers, for example, shortly before he flipped.
Researchers at the University of Illinois and Ohio State University estimate that over four years, a 25% tariff on U.S. soybean imports by Beijing would result in an average 87% decline in income for a midsize Illinois grain farm. The loss would pressure farmland prices, they say, prompting a more than $500,000 decline in the farm’s net worth by 2021.
.. Still, many farmers say they support the Trump administration’s trade goals of modernizing Nafta, shrinking the U.S. trade deficit and combating what they see as unfair trade practices by China. They view the president’s approach as a negotiating tactic and hope it will bear fruit by fall, when farmers will harvest their crops. Some are prepared to sacrifice financially if the U.S. economy benefits in the long run.
.. administration officials have tried to reassure farmers, saying they are considering the use of Depression-era programs, which permit borrowing of as much as $30 billion from the Treasury, as well as other tools to shield farmers from trade-related losses.
.. if farm incomes are significantly squeezed, tensions could emerge between party loyalty and farmers’ wallets. “In a close enough election even a small group can matter,” Mr. Franklin said.
.. Some farmers fear trade battles will jeopardize foreign markets for U.S. agricultural products that took decades to establish.
.. Dairy farmers have been banking on sales abroad to help absorb increasing milk supplies that have pushed down prices. Tariffs imposed on U.S. cheese exports by Mexico, the largest buyer of U.S. dairy products, add insult to injury