For Trump, China is at the heart of U.S. economic problems

Email a Friend

Republican presidential nominee Donald Trump speaks during a acampaign rally in Jackson, Mississippi, U.S., August 24, 2016.   REUTERS/Carlo Allegri - RTX2MXQO

Watch Video | Listen to the Audio

HARI SREENIVASAN: But, first: Trade, globalization and the impact on wages and jobs are issues that have spoken strongly to voters throughout this presidential campaign.

Both Donald Trump and Hillary Clinton are talking very differently about the subject than prior nominees. And for Trump, it’s been a major focus of his campaign.

As part of our continuing coverage of the issues, our economics correspondent, Paul Solman, is spending the next three weeks focused on those questions.

Tonight: how Donald Trump sees it, and some of the concerns about that approach, part of our weekly Making Sense series, which airs on Thursdays.

DONALD TRUMP (R), Presidential Nominee: China. China. China. China. China. China. China. China. China all the time. China.

PAUL SOLMAN: Given Donald Trump’s persistently pointed pivot to Asia, small wonder that among his favorite films is “Death by China.”

NARRATOR: China has stolen thousands of our factories and millions off our jobs. Multinational corporation profits are soaring, and we now owe over $3 trillion to the world’s largest communist nation.

PAUL SOLMAN: And small wonder the film’s writer/director, Peter Navarro, sounds like the candidate.

PETER NAVARRO, Economic Adviser, Trump Campaign: We’re going right down the toilet, and it’s a made-in-China toilet.

PAUL SOLMAN: Navarro, a Harvard-trained professor at University of California, Irvine, is the sole Trump economic adviser with a Ph.D.

So how’d you get interested in and worried about China?

PETER NAVARRO: I teach MBAs. And I noticed, starting a few years after China joined the World Trade Organization, that a lot of my students were no longer employed. They were still coming to get their MBA, but they’d lost their jobs. And I started to ask questions why. And, at that point, all roads were leading to Beijing.

PAUL SOLMAN: Navarro has done plenty of technical work in economics, is a pioneer in online learning. But he began focusing on China just a few years ago.

PETER NAVARRO: The defining moment in American economic history is when Bill Clinton lobbied to get China into the World Trade Organization. It was the worst political and economic mistake in American history in the last 100 years.

PAUL SOLMAN: In the last 100 years?

PETER NAVARRO: In the last 100 years, yes.

China went into the World Trade Organization and agreed to play by certain rules. Instead, they are illegally subsidizing their exports, manipulating their currency, stealing all of our intellectual property, using sweatshops, using pollution havens.

What happens is, our businesses and workers are playing that game with two hands tied behind their back.

PAUL SOLMAN: Navarro says you can even see the effects at U.C. Irvine, where, he says, Chinese students, paying triple the in-state tuition rate, are displacing native Californians, while the Chinese parents are scooping up local real estate.

PETER NAVARRO: Generally all cash deals.

PAUL SOLMAN: So your argument is, unfair trade practices, they amass dollars, they bring the dollars back here, they buy up property, and they drive up real estate prices?

PETER NAVARRO: That’s right. And they drive up rents for younger people. They will drive up home prices for first-time homebuyers. So it’s not just that we’re losing jobs and factories. We’re giving away our homes, our businesses, our companies, our technologies.

PAUL SOLMAN: But, of course, we heard the same alarm about Japan in the 1980s, a false alarm. But China is different, says Navarro, so much bigger.

DONALD TRUMP: We are going to enforce all trade violations against any country that cheats.

PAUL SOLMAN: So one of the answers your candidate, Donald Trump, provides is that we should have protective tariffs on Chinese goods.

PETER NAVARRO: Wrong word. Wrong word.

PAUL SOLMAN: What’s wrong?

PETER NAVARRO: Donald Trump is not a protectionist. All he wants to do is defend America against unfair trade practices.

PAUL SOLMAN: Well, defend, protect.

PETER NAVARRO: Very different. Trade is good. Tariffs and the threat of tariffs are a negotiating tool to require countries like China to stop their unfair trade practices. That’s the mission.

PAUL SOLMAN: And how much do you imagine it might cost in the increase in the price of goods at, say, Wal-Mart?

PETER NAVARRO: Any increase would be less than the paycheck that all these people would be getting, both in terms of actually having a job, plus wages rising again.

PAUL SOLMAN: If the jobs actually were to come back, that is.

PETER NAVARRO: The Trump trade doctrine is this. America will trade with any country, so long as that deal meets these three criterion: You increase the GDP growth rate, you decrease the trade deficit, and you strengthen the manufacturing base.

PAUL SOLMAN: But isn’t technology responsible for the elimination of American factory jobs?

PETER NAVARRO: Certainly technology has played a part, but the dramatic change from five-and-a-half decades of 3.5 percent rate of growth prior to China entering our markets with illegally subsidized goods and the 1.8 percent afterwards suggests strongly that China has played an enormous role in the decline and downfall of the American economy. And I can show on a blackboard exactly why.

PAUL SOLMAN: Now, your typical economist would hardly agree. But, hey, says Navarro, your typical economist still believes in the old so-called Keynesian approach to reviving the economy.

PETER NAVARRO: Alright, Paul, the growth of any nation is simply four things.

PAUL SOLMAN: More consumption, C., by consumers and more G, government spending. He and Trump, however, will supposedly flip the script, stimulating more I, Investment, by business, via tax cuts for the wealthy and corporations, while boosting net exports through new trade deals.

That’s exports minus imports.

PETER NAVARRO: That’s right.

PAUL SOLMAN: And, of course, if that’s a negative number, that is, you have more imports than exports.

PETER NAVARRO: This is the big kahuna. This is what Donald Trump understands. This is the trade deficit. We run a trade deficit of close to $800 billion a year. And so this directly subtracts from this. This is why we’re stuck in low-growth mode.

PAUL SOLMAN: Well, maybe. The job of a journalist, however, is to ask questions.

What is U.S. GDP 2016?

COMPUTER VOICE: Checking on that.

PAUL SOLMAN: Happily, there’s now Siri to answer them.

COMPUTER VOICE: It looks like the answer is about 18.2 trillion U.S. dollars per year.

PAUL SOLMAN: Thank you, Siri.

In that case, GDP is something like $18 trillion, right? And you’re saying that the trade deficit is — well, it’s less than $1 trillion, right? So, this can’t be a major factor in total GDP, the size of the economy.

PETER NAVARRO: Yes, but when we run these big trade deficits and send our jobs offshore, we hold our wages down and our income down. That feeds right back into the biggest part of this whole equation, consumption. This drags GDP down as well.

PAUL SOLMAN: Or so this story goes.

When you hear the criticism about Donald Trump’s own goods being made in other countries, what’s your reaction?

PETER NAVARRO: Do me a favor. Play Dan Slane’s clip in my “Death by China” movie. It’s priceless.

PAUL SOLMAN: Slane was a plywood manufacturer in Bowling Green, Kentucky, whose competitors moved to China.

DAN SLANE, Business Owner: And I opened up three factories in China and delivered to the customer in the United States 50 percent cheaper than I could make it in Bowling Green.

PETER NAVARRO: He winds up selling product back here into the U.S. at cost. How did he make his money?

DAN SLANE: Every month, the Chinese government would send me a check for 17 percent of my exports, and that was my net margin and my profit.

PAUL SOLMAN: So, is Donald Trump getting checks from the Chinese government?

PETER NAVARRO: That’s how the game works.

PAUL SOLMAN: But he could use American companies. There are lots of people who actually say made in USA and use that as a marketing tool.

PETER NAVARRO: The point here is, he can’t. The competitive forces that force a Dan Slane to take his furniture company to China, they’re real, OK? And if you try and take the high ground and produce here in America, when China’s dumping product in and manipulating their currency, you go out of business. You just go out of business.

PAUL SOLMAN: What about the character issues that surround Donald Trump?

PETER NAVARRO: Well, look, I don’t go there. I focus on policy. That’s my job.

PAUL SOLMAN: And you have no problem with the failed companies?

PETER NAVARRO: No one should be surprised just because somebody isn’t successful 100 percent of the time. The percent here, he’s a billionaire. He’s successful.

PAUL SOLMAN: And no matter how much money he actually has or hasn’t got, given that Donald Trump is the Republican candidate for president of the United States, no can argue that he isn’t successful — to date, at least.

“NewsHour” economics correspondent Paul Solman, reporting from Irvine, California.

HARI SREENIVASAN: And next week, Paul will look at Hillary Clinton’s approach to trade, and how she has changed over time.

The post For Trump, China is at the heart of U.S. economic problems appeared first on PBS NewsHour.