White House assistant for trade and manufacturing Peter Navarro on U.S. trade tensions with China, Federal Reserve policy and the state of the economy. Navarro responded to criticism by 'The Wall Street Journal' for overruling other economists that advise Trump and that his policies may lead to a recession. Transcript, via FOX Business:
MARIA BARTIROMO, FBN ANCHOR: Joining me right now is the assistant to the president for trade and manufacturing policy, Peter Navarro.
And, Peter, it is good to see you this morning. Thanks very much for joining me.
PETER NAVARRO, WHITE HOUSE ASSISTANT FOR TRADE AND MANUFACTURING: Good morning, Maria.
BARTIROMO: What is your answer to the discussion that you just heard in terms of these debtor nations having to pay back loans and they're doing it with devalued currencies as a result of these trade issues?
NAVARRO: I think that's overblown. Basically what happen when China devalues their currency in Asia, competitors like the Philippines, Thailand, South Korea basically have to follow suit so that they can continue to have a strong economy. So that's just a -- an adjustment that we're seeing in Asia. The root of the problem, of course, is the Chinese yuan devaluing.
Since we put on the tariffs last year, the yuan's gone down 12 percent. And we put on tariffs at 10 percent. The yuan goes down 12 percent. And they're basically trying to offset the effect of the tariffs. But it does have ripple effects.
But this is not -- this is not something that -- that's -- that's threatening to the global economy. It's -- it's an adjustment. The good news is that President Trump, by branding China a currency manipulator, has stopped China's currency manipulation in its tracks. China has stated it will stabilize the yuan, and that's the first step back towards getting more stability in the currency markets.
BARTIROMO: Yes, but -- but, Peter, you've -- you've seen "The Wall Street Journal" op-ed out this morning, the editorial board talking about you, writing a piece called “A Navarro Recession.”
BARTIROMO: The board writes this, Multiple reports out of the White House say President Trump overruled all his economic advisories, other than Peter Navarro, when he decided to impose new tariffs on China. Global and American economic conditions have been heading south ever since. So perhaps we should call this the Trump-Navarro trade policy slowdown, which could be leading to a Navarro recession.
Your reaction to this op-ed this morning?
NAVARRO: Well, it's no secret that "The Wall Street Journal" has opposed President Trump's trade policies going back to 2016. When “The Main Street Journal” starts criticizing President Trump and myself, that's when we'll worry. In the meantime, we've created over half a million manufacturing jobs compared to a loss of 200,000 manufacturing jobs in the Joe Biden-Barack Obama years. We've created over six million jobs. President Trump's gotten seven million people off food stamps, rising wages, particularly for blue collar workers, historic unemployment rates for blacks, Hispanics and women.
And this economy is solid as a rock. But the -- President Trump doesn't want a very good economy, he wants a great economy.
NAVARRO: And the two things, Maria, that have to happen right now don't have anything to do with China. They have to do with the Federal Reserve lowering interest rates and the Congress passing the U.S.-Mexico-Canada agreement. The Fed lowering interest rates is important. When Jay Powell took assumption of the chairmanship there, he raised interest rates by 100 basis points. That has suppressed investment directly and suppressed exports indirectly through currency effects.
NAVARRO: We saw that in the Q2 data, but they did cut a quarter point. They ended quantitative tightening, which is so important. So that's on the right track for investors.
NAVARRO: And then the USMCA is going to be important as well. So let's stay focused on what is a bullish stock market, a strong economy. We just need to move forward.
BARTIROMO: Yes, I understand that, but the economy is solid, but it's not as solid as it was last year, right? We've seen the numbers come down. And as "The Journal" writes today, the trade policy is contributing to exchange rate instability and the stronger dollar. "The Journal" writes, when he slaps tariffs on China, he reduces the demand for the Chinese yuan, also encourages capital flight to safe havens into dollar instruments.
The president has complained about a stronger dollar and yet these policies seem to be invigorating a strengthening dollar.
NAVARRO: So, look, "The Wall Street Journal" will write what it writes. It doesn't sounds a lot different from the people's daily in terms of the news that it puts out. But at the end of the day, for your investors, I think it's just important to look at the chessboard. What do we have here?
We have a rock-solid economy that's based on four points of the Trump policy compass. It's tax cuts, it's deregulation, it's cheap energy and a level playing field on trade. Going back to the day after the election, when I was sitting in a chair like this on a financial news program --
NAVARRO: -- futures were heading down. I predicted 25,000 on the Dow based on those four points of the compass.
BARTIROMO: Yes, no, and -- and I predict --
NAVARRO: We've gotten there and I think we get --
BARTIROMO: And I predicted it as well, Peter. And I said that this -- this -- if president -- if Donald Trump wins --
NAVARRO: "The Wall Street Journal" -- yes.
BARTIROMO: His policies are going to be positive for business --
BARTIROMO: And positive to the economy. I get you. But the worry is --
NAVARRO: And "The Wall Street Journal" did not.
NAVARRO: "The Wall Street Journal" was --
NAVARRO: Basically the sky was going to fall.
BARTIROMO: But you did -- and so -- and so did I because the tax -- the tax cuts and the deregulation are obviously very positive for the economy --
NAVARRO: And trade.
BARTIROMO: That was unable to grow past 2 percent. But now the worry is, is that the trade policy is going to unwind all of that.
Peter, let me ask you this. Do you think that maybe we won't have a deal with China and that the president has a plan b? And what is it? How far are you willing to go while this fight continues to impact markets?
NAVARRO: So all of those questions, I think, are unnecessarily going to stir up anxiety among investors. What matters here? Here's what I'll tell you exactly what matters. What matters is that Ambassador Robert Lighthizer and Treasury Secretary Steven Mnuchin are working with the Chinese to come up and work their way through significant structural issues. And that's all that matters. And all the speculation that goes on around that really is designed to create volatility for day traders to make money.
NAVARRO: And I'm not going to go there.
NAVARRO: So, I think, again, what's important, look, there's -- there's a lot of money to be made here by just looking at the chessboard where we have a rock-solid economy here in the U.S. This is the place to be. Money has to go into the stock market here because it's the best investment in town. On the other hand --
BARTIROMO: But it's also going into the dollar. So it's going into dollar denominated assets and pushing the dollar up.
NAVARRO: Under -- understood. Understood and -- and --
BARTIROMO: That's going to be a negative for earnings, isn't it?
NAVARRO: And that's why the federal -- well, the earnings were -- were very good this last time. But that's why the Federal Reserve really needs to evaluate its interest rate policy. We can't have this large spread between U.S. interest rates and the rest of the world and expect good things to happen.
So I -- you know, I believe that by the end of the year, we'll have 75 to 100 basis points cuts, not because this economy is weak, but because of this -- this spread problem we have and because -- here's the important point, Maria. Anything else I say, remember this, please, there's no inflation to speak of in this economy. It's 1.6 percent on core and the Fed worries about a 2 percent target.
We have plenty of room to grow here with lower interest rates and we hit -- in Q2, look, Maria, 2.1 percent.
BARTIROMO: Plenty -- plenty of reason to grow and yet let --
NAVARRO: We should have hit 3 percent --
NAVARRO: In Q2. And the only reason why we didn't, to be --
BARTIROMO: But we didn't.
NAVARRO: Well, the only reason why we didn't, to be clear, was the Fed had raised interest rates, suppressed investment, suppressed exports. And you can see it right in the data. So the good news is --
BARTIROMO: Some might -- some might say the only reason we didn't get to 3 percent was because of the uncertainty around trade policy. Peter, let's face it --
NAVARRO: So --
BARTIROMO: You had cap-ex spending up big after the president's deregulation and after the president's tax cuts. And then, all of a sudden, that dried up. Companies are once again sitting on cash. Cap-ex is down. So that business investment is an important indicator, you know that. And it's down, because of the uncertainty around trade.
NAVARRO: True. So I just look at the numbers, Maria.
BARTIROMO: Me too.
NAVARRO: Q2 -- Q2 we came in at 2.1 percent. We lost two-thirds of a point to reduced exports, and that was a -- a Federal Reserve effect. The good news is, we lost 0.8 to down in inventories.
BARTIROMO: What (ph)?
NAVARRO: Now we'll bounce back because -- hang on.
BARTIROMO: No (ph).
NAVARRO: Because the consumer spending is and will be so strong. And, by the way, I loved the guest from Unicorn (ph) last -- last hour --
NAVARRO: When you asked her point-blank, have you had to raise your prices because of the China tariffs?
NAVARRO: And she said no.
BARTIROMO: Right, and it's -- and it's a mixed bag.
NAVARRO: And she said no because of the adjustments she had made.
BARTIROMO: Let me ask you this. You keep saying that the economy is solid. We've got a great growth story in U.S. I don't disagree. But if they --
NAVARRO: Do you disagree with that?
BARTIROMO: No. No, I don't. But if things were so great, why are you pushing so aggressively for lower interest rates? Why do we need four cuts?
NAVARRO: Yes, let me -- let me repeat what I said a few minutes ago. It -- we need to cut, not because our economy is weak, but it's because we want to make a good economy and a very good economy great. We have plenty of room to run. The Fed cannot have interest rates which are several hundred basis points above the rest of the world and expect good things to happen.
So -- so the fed --
BARTIROMO: Do you -- do you think USMCA is going to come to the floor in the fall?
NAVARRO: So let's shift gears on that.
BARTIROMO: Yes, real quick, Peter, we've got to jump.
NAVARRO: Absolutely I do, because Ambassador Robert Lighthizer has been working well with both sides of the aisle. This -- this is a deal that I think is above partisan politics.
BARTIROMO: You would think.
NAVARRO: And it will -- it will propel this economy -- you get our Fed cuts, get USMCA, we get 30,000 on the Dow at least by Christmas as our present. And it's a great deal.
BARTIROMO: All right.
NAVARRO: So hopefully -- the two things Congress agrees on right now is USMCA and China.
BARTIROMO: Yes. Yes. Peter --
NAVARRO: Capitol Hill is behind us on China.
BARTIROMO: Great to have you this morning. Thanks so much, Peter Navarro.