Navarro: Federal Reserve Can Help Trump In Global Economic "Chess Match"

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Office of Trade and Manufacturing Director, Peter Navarro, spoke with FOX Business NEtwork host Maria Bartiromo Friday morning about the factors impacting the U.S. economic outlook, Federal Reserve policy, and China trade tensions.

"The only way we get a recession in the distant future is if a Democrat’s sitting in the White House, full stop," he said. We’ve got – we start with the Trump economy, solid as a rock, tax cuts, deregulation unleashing the energy sector... Congress has to do their part. I think they will, passing the USMCA. We know that the European Central Bank is getting ready for monetary easing. That’s going to be really good for the U.S. economy because it’s going to boost our export demand, but it’s only good for the U.S. economy if the [Federal Reserve] also lowers rates in that chess match to match their cut."





He also said: "I’d like to see some acknowledgment of the chess match here [from the Federal Reserve]. When other central banks around the world are lowering their rates, that does have negative currency effects and we need to patch them, so that would be very useful."

MARIA BARTIROMO: We have breaking news from China. It has been a wild 30 minutes. Reuters was reporting that Beijing will raise the import tariff rate on $75 billion worth of U.S. goods going into China. Back with me now is the Director for the Office of Trade and Manufacturing Policy, Peter Navarro.

Peter, I want to wrap this up with a look at the economy, and we saw a direct impact of the trade war when Beijing announced these 5 percent to 10 percent tax rates on $75 billion of U.S. goods. Market was up 80 points. Now it is down 144 points. What do you want to say to those people to say this is evidence that the trade tariffs that are in place are worsening economic conditions and market conditions and they are seeing China retaliate, as you expected them to do?

PETER NAVARRO: So let’s start with the observation that smart investors here who are not day traders or short sellers need to see these kinds of events as traps to stay away from, OK? We had a little swing from where the futures were to where they are now, but –

BARTIROMO: Now we’re at the lowest, 165.

NAVARRO: – in the scheme of things – yes, in the scheme of things, here’s the bullish scenario. We’ve got – we start with the Trump economy, solid as a rock, tax cuts, deregulation unleashing the energy sector. Trade reforms are going to get us to 2 percent. The only way we get a recession in the distant future is if a Democrat’s sitting in the White House full stop.

Now, Congress has to do their part. I think they will, passing the USMCA. We know that the Europe Central Bank is getting ready for a monetary easing. That’s going to be really good for the U.S. economy because it’s going to boost our export demand, but it’s only good for the U.S. economy if the Fed also lowers rates in that chess match to match their cut. Other things in play are the German fiscal stimulus possibility and a near certainty that the Brexit issue’s going to be resolved to promote investment.

BARTIROMO: Right, and the other thing in play is the trade fight. The other thing in play is the trade fight.

NAVARRO: And then – well hang on. I’m not done yet.

Globally we’ve had central banks, over 30 of them, continue to lower rates. At some point, that kicks in, in terms of slowdown. And China, I mean, for me the bigger news for China will likely be the announcement of a second fiscal stimulus, which you’ll have through emerging markets and commodities. So if I’m an investor, I’m looking at a very bullish scenario here.

It’s not just the U.S. is strong. It’s that it’s counter cyclical and the positive direction forces are in play now and we just have to be patient.

BARTIROMO: Sorry. I’m going to bring in the panel in a second, but let me ask you this. What do you want to hear from Jay Powell in an hour and half? What’s most important to hear from Jay Powell from your standpoint?

NAVARRO: Number one, that the most important thing is to grow – maximize the growth rate of the economy, not minimize the employment rate and do – grow without causing inflation, so that’s number one. Number two I’d like to see some acknowledgment of the chess match here. When other central banks around the world are lowering their rates, that does have negative currency effects and we need to patch them, so that would be very useful. And the most thing – here’s the most important thing I’d love to hear from Jay Powell today. America, we have your back. That’s all he has to say.

BARTIROMO: OK. All right, well that’s an important point. And the final question here –

NAVARRO: That is the important point.

BARTIROMO: – the final question, Peter, the market is reacting down 175 points to the Beijing move because the market sees the trade war and this retaliation from Beijing as evidence that prices are going to go higher and the economy is going to slow. Do you agree?

NAVARRO: No, I don’t agree. We’ve had these tariffs in place for a very long time. China is bearing the entire burden by slashing their prices, by slashing their currency value. And by the way, they are hemorrhaging – hemorrhaging their supply chain out to the rest of the world and back here in America, and that’s good for America.

So, bottom line is America’s united behind President Trump and stopping China from stealing our technology, our intellectual property, and killing Americans with fentanyl. And I think for investors be assured of this. Negotiations will continue as they have been. They will be done behind closed doors. And following Navarro’s rule, if you hear anything about those negotiations and it doesn’t quote somebody specifically on that trade team, then you’re getting lied to.

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