Exclusive — Peter Navarro: China Underestimated Trump’s Resolve to Win the Battle for Our High-Tech Future

US President Donald Trump (L) sits with Chinese President Xi Jinping (R) during a bilateral meeting at the Mar-a-Lago estate in West Palm Beach, Florida, on April 6, 2017. / AFP PHOTO / JIM WATSON (Photo credit should read JIM WATSON/AFP/Getty Images)
JIM WATSON/AFP/Getty Images

Senior White House adviser Peter Navarro, director of trade and industrial policy and director of the White House National Trade Council, joined SiriusXM hosts Rebecca Mansour and Joel Pollak on Tuesday’s edition of Breitbart News Daily to talk about President Trump’s tariff showdown with China.

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“Tonight we’re releasing a report that my office spent about six months on that identifies all the different things that China does to try to dominate the economy,” he said.

“In the technology space, China has this thing called China 2025. It’s basically a blueprint to take over and dominate the emerging technology industries of the future – things like artificial intelligence, robotics, high-tech shipping, aerospace,” he explained.

“The president has said, correctly, these are the industries of the future. If we don’t have them, America doesn’t have a future,” he warned.

Navarro outlined four tactics China uses to dominate these industries.

“They steal from us,” he began. “It’s physical theft, in terms of espionage. It’s cyber theft. It’s pure theft.”

“They also have this practice called forced technology transfer,” he continued. “Basically, if you’re an American company and you want to produce and sell into the Chinese market on Chinese soil, the condition of access to the market is that you’ve got to turn over your technology. That’s an extraordinary devil’s bargain that’s not a win for this country, or that company.”

“The third thing they do is they evade export controls,” Navarro said. “We had controls on them since the Tiananmen Square massacre back in the Eighties. They like to buy sensitive military equipment. We don’t let them do that. They run very complex shell games, front companies, money laundering operations to try to evade those.”

“And then last, all the money we ship them every year, in the form of our trade deficit – it’s about a third of a trillion dollars per year – that’s really coming back to haunt us now as these big Chinese sovereign wealth funds, state-backed funds, are coming and scouring Silicon Valley, Boston, Austin, and everywhere in between for basically the crown jewels of our technology,” he said.

“The president knows that China is doing that,” Navarro said. “The trade team that works for the president knows this. The president said, ‘You can’t do that anymore.’ This goes back to Inauguration Day, where we set up a Mar-a-Lago process – the president had a summit with the Chinese, we presented our demands and concerns to them.”

“Nothing happened,” he reported. “There was a hundred-day period after that in which they were supposed to come up with some structural changes to address our concerns. Nothing happened. We sent a team to Beijing to negotiate face-to-face with the Chinese team, and we weren’t even allowed to actually negotiate that, because of the way the trip went. Nothing happened. They come here, nothing happens.”

Navarro said that not only are the Chinese making no progress on addressing America’s concerns, but they won’t even admit to what they have done in the past.

“This is a strategic competitor that is very difficult to negotiate with,” he said. “I think the flaw in their whole negotiating strategy is they’ve really underestimated President Donald Trump. He knows where this nation needs to go. He knows what China is doing to this nation in terms of unfair trade practices and industrial espionage. I think they’ve underestimated his resolve.”

“He’s imposed tariffs on these high-technology industries to protect our own companies here in America, and as China has been foolish enough to retaliate against us, the president has increased the amount of tariffs,” he said.

“That’s where we stand. We are not interested in anything except free, fair, reciprocal, and balanced trade. We sure are not getting that from China,” he declared.

“The United States trade representative, at the direction of the president, did an investigation of China’s abuses with respect to our technology and concluded that there’s just rampant, flagrant behavior,” Navarro said. “On the basis of what is an excellent report by the USTR, the president recommended an initial 25 percent tariffs on $50 billion of China’s exports to this country that are basically in the high-technology space. The logic of the tariffs in this particular situation is simply to prevent the Chinese from using their predatory model to dump product into our market in that space and put our companies out of business.”

He presented the example of China attempting to take the lead in robotics technology but going overboard with excess production capacity, creating a danger that cheap robotics tech could be dumped into U.S. markets and put American companies out of business.

“We’ve seen this playbook before,” he noted. “This has gone on in numerous industries over the last 17 years after China joined the WTO, the World Trade Organization. We lost things like appliances, air conditioners, machine tools, shoes, and just about everything in between – steel, aluminum, solar, and wind.”

Navarro said the wind industry is of particular interest because it was a combination of China dumping products into the U.S. market with a “very sophisticated industrial espionage” campaign. He described President Trump’s tariffs as an effort to shield the tech industry against a similar strategy.

“When the Chinese retaliated against us with the threat of $50 billion of their own – an illegitimate retaliation, as opposed to our legitimate defense – the president decided that he would direct the USTR to compile a list of $200 billion more. So that’s in process. We’ve done everything by process in a meticulous way,” he said.

Navarro said the Trump administration does not wish to engage in an escalating war of tariffs with the Chinese, but “they really have left us no choice.”

“They are stealing our stuff. People need to understand that. They are forcing technology transfer, which is against the rules of the World Trade Organization. They engage in illicit acts to evade our export controls, and they have literally a ton of money, trillions of our dollars, that want to buy our high-tech jewels and cart them off to Shanghai, Guangzhou, Beijing, and beyond,” he said.

“That’s where we stand. The president has the courage to stand up for the American people. Barack Obama did not. George Bush did not. And Bill Clinton got us into this mess to begin with. The president has the vision to see where our economy is going. One path leads to poverty and stagnation, if China grabs the industries of the future. The other path leads to economic prosperity and a solid national defense, if in fact we are able to hang on to our defense innovation base,” he said.

Navarro said it was important for Americans to consider the full history of China’s behavior since joining the World Trade Organization to judge whether short-term economic disruptions from tariffs, including inflated consumer prices, are worth achieving the administration’s long-term strategic goals.

“What we’ve seen with China’s unfair trade practices, which are documented quite in detail in the report that’s coming out tonight from the White House, what we saw over the 17-year period was the loss of over 70,000 factories, the loss of over 5 million manufacturing jobs, the stagnation of our wages, the deterioration of many of our communities in the manufacturing states like Ohio, and Michigan, and Pennsylvania, and Wisconsin, and North Carolina,” he recalled.

“We saw people in those communities suffer. If we’ve learned anything over the last 17 years, it’s that cheap prices from China have a very high cost, and the high cost can be measured in terms of the loss of employment opportunities, the loss of our manufacturing base, downward pressure on our wages,” he advised.

“We just have to simply remember that when we take action now against the Chinese and their economic aggression, what we’re trying to do – what the president is doing – is moving to a world where we have free and fair trade, not ‘fool’s trade,’ as he has called it. That will provide us with good jobs at good wages, the restoration of our manufacturing base, a strengthening of our tax base,” said Navarro.

“These are the things we need to think about as each of us shop at the store, and we look at the label were things are from, and we look at the consequences of our actions. This is where the president is exhibiting great courage in taking these steps, because these are the kinds of questions that will be asked. If we simply worry only about price in the short run, we will keep doing what we have been doing, which is losing our economy, our technology, our manufacturing base, and our future to China,” he cautioned.

Navarro laid out the administration’s tariff actions in detail, beginning with “the 201, which was used to put tariffs on solar and washing machines” based on “import surges.”

“That’s been a very successful action, because what we’ve seen is a restoration of those industries and tremendous new investment in those industries,” he said.

“The 232 section is used for national security, broadly defined, including economic security,” he continued. “That was what was used for the steel and aluminum tariffs and is being contemplated for the auto tariffs.”

“With the steel and aluminum tarriffs, what we’re concerned about is not which country sends us the imports, but the imports collectively themselves – which in the case of steel and aluminum were damaging and weakening these industries to the point of extinction,” he explained.

“The 301 action against China, the broad rubric there is basically burdensome, discriminatory, and unfair trade practices,” Navarro said. “Certainly China’s behavior in the technology space is a poster child for that.”

“The auto industry action is being contemplated simply because the automobile industry and its supply chain is a vital part of our manufacturing and defense industrial base. We have countries from around the world taking advantage of our auto industry, each in their different ways,” he said.

“For example, Japan sells us over a hundred cars for every one we sell to Japan. That’s the result of high non-tariff barriers. Germany, on the other hand, sells us three cars for every one we sell them. The problem there is a combination of tariffs, which are four times higher than ours, plus a value-added tax which they strategically use to keep out imports and bolster their exports,” he explained.

Navarro noted that America runs a $150 billion trade deficit with Europe as a whole, compared to $376 billion with China. “Right there you’ve got half a trillion dollars in trade deficits alone,” he said.

“What the president is trying to do is say, hey, look, why is it that Uncle Sam is Uncle Sucker for the world? Why is it that the United States of America has turned into the piggy bank for the rest of the world, free to exploit us using these unfair trade practices? We have the lowest tariffs and non-tariff barriers among any of the major nations of the world. Because of that, we don’t get free, fair, reciprocal, and balanced trade – we get exploited,” he contended.

“We’re trying to get to a world where we have the textbook model of free trade, which is also fair, reciprocal, and balanced, but we are a long way from that, so the president needs to take these tough actions. It will strengthen our manufacturing base, strengthen our defense industrial base, strengthen our tax base so we can pay for things like Social Security and our defense. This is the Donald Trump vision, and this is what he ran on as a candidate. Wow, what a surprise! A president is actually fulfilling his promises!” he exclaimed.

Navarro said that one reason other countries maintain high tariff and non-tariff barriers is so they can keep production on their home soil.

“That’s not fair to us. When you have a situation with China coming into the World Trade Organization in 2001, and their tariffs on cars are 25% and ours are 2.5% on their cars, guess where the auto production is going to go? It’s going to go to China,” he said.

“We will lower our tariff barriers if the other countries will lower theirs to our levels. If they don’t, we should have the ability to raise ours, so we can defend our nation against these unfair trade practices,” he contended.

Navarro observed that China’s economy grew from $1.4 trillion in 2001, the year it joined the WTO, to $12 trillion today, using a program of high tariffs, government subsidies, and regulatory barriers to foreign competition, while simultaneously defying the common Western assumption that economic engagement would lead to political liberalization.

“There’s also the Breitbart insight that corporate America was driving a lot of it, and they benefited from all the offshoring, and they didn’t really care much about the men and women in places like you grew up in, and who are the people that President Donald J. Trump represents,” he added.

Navarro argued that comparing the China threat today with the overinflated image of Japan as an unstoppable economic competitor in the 1980s is fallacious because Japan is an “island nation with very little territory and virtually no energy resources,” a situation entirely different from China’s vast size, huge population, and abundant resources.

“Japan was able to harness the labor and resources of Southeast Asia, and for a brief, shining moment it was a miracle,” he recalled. “What happened was simply that the dragons Japan was relying upon grew up around it and became economies of their own – Taiwan, Singapore, Hong Kong, others. Soon Japan basically saw the rising sun begin to set on their miracle.”

“China is a totally different entity,” he proposed. “It’s roughly the same size as the United States in land mass. It has five times as many people. It’s blessed with substantial energy resources. It has a lot of the key raw materials that are needed for these industries of the future, so it’s positioned well there. It’s not going to fall to the same fate as Japan.”

“This is going to be a long run marathon,” Navarro anticipated, referring to Michael Pillsbury’s book The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower.  

“China has gotten to the point where they’re industrialized, they’ve taken enough technology from us so that they’re a near-peer military competitor, so your children and their children are going to be engaged in this rivalry,” he said. “The only question is whether it can be peaceful and prosperous.”

“President Donald J. Trump thinks that the best way to make this a prosperous relationship, and a peaceful one, is to make it a fair and balanced one. We can’t keep letting China exploit the United States. We can’t let China keep transferring massive amounts of our wealth, factories, and jobs through these unfair trade practices they engage in. This is what these actions ultimately are about,” Navarro concluded.

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