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Speaker 1: We begin this evening with the President's latest tariff threats

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Speaker 1: and joining us live for more. Right here in our

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Speaker 1: Washington Bureau is Peter Navarro, White House, Senior Counselor for

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Speaker 1: Trade and Manufacturing. Welcome back to Bloomberg TV and Radio. Peter,

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Speaker 1: It's good to see.

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Speaker 2: You, al it was great to be with you and Jel.

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Speaker 1: When we consider the remarks the President made to NBC

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Speaker 1: yesterday suggesting most of our trading partners could see a

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Speaker 1: tariff rate of between fifteen and twenty percent being implemented,

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Speaker 1: was that the President just riffing or should we expect

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Speaker 1: that the baseline ten percent rate currently in place is

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Speaker 1: going to go higher.

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Speaker 3: The baseline way to think about this is to look

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Speaker 3: at the original levels of reciprocal terroriffs and the letters

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Speaker 3: that have just gone out where the President has lifted

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Speaker 3: the terroriffs from the ten percent to a higher rate.

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Speaker 3: Roughly track what the reciprocal rates were originally.

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Speaker 2: Some are a little lower, some are a little higher.

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Speaker 3: But the problem, Kayley, that this country faces, and it

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Speaker 3: is an urgent national emergency, is we run this massive

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Speaker 3: trade deficit. Every year concumulatly has been like eighteen trillion

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Speaker 3: dollars of deficits over the last several decades, and that

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Speaker 3: represents a transfer of our wealth abroad. It represents the

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Speaker 3: transfer of our factories and our jobs. So the process

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Speaker 3: now for investors, I think is working quite well. People

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Speaker 3: talk a lot about one certainty, this kind of thing

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Speaker 3: like that. I think it's pretty clear where we're going.

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Speaker 3: It's an ongoing negotiation. We've had every major country in

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Speaker 3: the world and a lot of smaller ones come to us,

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Speaker 3: and they're fully engaged in negotiations.

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Speaker 2: We're getting to a place.

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Speaker 3: But what we're learning is that the more a country

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Speaker 3: takes advantage of us, the less willing they are to.

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Speaker 2: Give up the good thing they got going.

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Speaker 3: So that's the tension, but the president is not going

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Speaker 3: to tolerate that.

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Speaker 2: That's where we're at.

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Speaker 3: I would say that for the American people, these tariffs

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Speaker 3: are a great boon that brought A chart here shows

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Speaker 3: that we've already collected like one hundred billion dollars of terroriffs.

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Speaker 2: A record for US loan single fiscal Yeah.

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Speaker 3: And one of the things that really bothers me is

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Speaker 3: that we're up to eighteen billion now or so with

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Speaker 3: China alone on the fentanyl terrafs and so they're willing

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Speaker 3: to give US eighteen billion dollars in terraffs and they

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Speaker 3: still won't do what they promised back in twenty nineteen

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Speaker 3: directly from the President of China, which is to stop

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Speaker 3: killing Americans. So the terrorsts are working, and they were

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Speaker 3: these kind of revenues that we're getting. It's a very

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Speaker 3: important part of the big beautiful Bill in terms of

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Speaker 3: financing that as well. So we've got an external revenue

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Speaker 3: service that's going to augment the internal revenue service. And

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Speaker 3: we're moving for a structural reset of the international trading environment,

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Speaker 3: which by any measure is skewed against US.

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Speaker 4: And when you talk about killing Americans, they're a freeing

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Speaker 4: of fentanyl here, right, I'm a free off because you

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Speaker 4: spoke passionately about fentanyl, the scorge of fentanyl last time

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Speaker 4: you joined US, specific to Canada and Mexico.

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Speaker 2: At that point, and also China.

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Speaker 4: Yeah, but with Canada now with a thirty five percent

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Speaker 4: traff threat, I'm just wondering, as a point of clarification,

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Speaker 4: so I can see what you're pursuing here, and you've

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Speaker 4: you've made the case for this, does that come with

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Speaker 4: the USMC a carve out. Would that be extended to

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Speaker 4: Mexico as well?

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Speaker 3: The thirty five percent terriff is not on USMC, I

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Speaker 3: got it.

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Speaker 2: Okay, I'm going to.

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Speaker 3: Talk candidly about Canada.

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Speaker 2: I think going back.

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Speaker 3: To again President Trump's first term, I remember in the

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Speaker 3: very first days of the administration, Bob Liteheiser, Wilbur Ross, self,

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Speaker 3: Negotia were negotiating directly with the Canadians, many of whom

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Speaker 3: are still in charge of their trade policy. And we

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Speaker 3: were negotiation with both the Mexicans and the Canadians. And

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Speaker 3: the Mexicans were pure joy to deal with. You know,

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Speaker 3: they were tough negotiators, but they were reasonable, fair negotiators.

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Speaker 3: The Canadians were very, very difficult, and they've always been

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Speaker 3: very difficult. And I think what the Canadian leadership needs

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Speaker 3: to understand, as opposed to the Canadian people.

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Speaker 2: Which we love, is that this.

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Speaker 3: Waving this big batter retaliation at the United States of America.

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Speaker 3: I mean, no, they shouldn't be doing that kind of thing.

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Speaker 3: They just don't have the weight in terms of any

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Speaker 3: advantage they might have at US.

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Speaker 2: So I would just.

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Speaker 3: Urge Canada to the Canadian citizens to urge their leaders

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Speaker 3: to negotiate fairly with us, because look, every country that

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Speaker 3: we're negotiating with, it's just a fact they have higher

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Speaker 3: tariffs than we do, they have bigger non tariff barriers,

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Speaker 3: and we run these massive trade deficits with many of them.

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Speaker 3: How does that happen if trade's fair?

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Speaker 2: It doesn't.

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Speaker 3: So that's all we're President Trump, going back to the eighties,

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Speaker 3: has promised to correct this well.

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Speaker 1: And of course it's not just about country by country,

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Speaker 1: it's also sector by sector. The President suggested this week

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Speaker 1: that we could see a two hundred percent tariff on pharmaceuticals,

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Speaker 1: for example, but that could be on a longer time horizon,

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Speaker 1: a year plus out, to allow supply chains time to

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Speaker 1: reorient themselves toward the United States. Could we see a

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Speaker 1: similar delay in other sectors that they're Section two thirty

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Speaker 1: two investigations into, like semiconductors, for example.

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Speaker 3: Well, let's talk about the Section two thirty two, because

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Speaker 3: there's a number of different ways that the President has.

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Speaker 2: A legal authority to raise tariffs.

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Speaker 3: Section thirty two to thirty two basically goes on the

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Speaker 3: presumption that ifs are basically putting American capacity out of

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Speaker 3: business in a way which harms the United States, he has.

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Speaker 2: The right to offset that.

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Speaker 3: So whether it's steel and aluminum, or whether it's copper

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Speaker 3: where we just made an major announcement on that, or

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Speaker 3: whether it's pharmaceuticals, the endgame for the two point thirty

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Speaker 3: two terriffs is to strengthen our defense industrial base or

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Speaker 3: manufacturing base, and in the case of pharmaceuticals, our health

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Speaker 3: industrial base. Again, as a veteran of the first Trump term,

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Speaker 3: I was the guy, the Defense Production Act policy coordinator

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Speaker 3: who was in charge of getting all the medicines and

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Speaker 3: the PPE and getting the vaccine thing jump started.

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Speaker 2: And all of that, and we learned some very harsh

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Speaker 2: lessons there.

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Speaker 3: Certainly, there was just incredible rhetoric from China at one

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Speaker 3: point where they were going to drown us in a

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Speaker 3: sea of virus and withhold things from us if we

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Speaker 3: dared say that the virus from was from the Wuhan lab.

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Speaker 3: I mean, that's out there, just go go look at dad.

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Speaker 3: But it was also true that every one of our allies,

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Speaker 3: when push came to show, they weren't with us.

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Speaker 2: So it was every nation on their own.

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Speaker 3: So we learned pharmaceuticals are particularly critical to have on

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Speaker 3: shore for national security purposes.

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Speaker 4: I want to get to J. Powell with you, and

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Speaker 4: I'm going to try to show it this way because

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Speaker 4: I heard you talking recently about the Big beautiful bill

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Speaker 4: that the President just signed.

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Speaker 2: It's a law.

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Speaker 4: There have been questions about whether it adds to deficit

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Speaker 4: and debt, and you have said just the opposite, that

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Speaker 4: combined with tariff revenues, you will turn two to three

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Speaker 4: trillion dollars in deficit spending to a two to three

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Speaker 4: trillion dollars surplus. That would be a big deal. Can

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Speaker 4: you do that? How cutting interest rates?

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Speaker 3: Well, that's yeah, we could do it with out J.

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Speaker 3: Pollo cutting interest rates because the numbers are so swhelming. Okay,

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Speaker 3: because he's looking. But how I mean, let's not conflate

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Speaker 3: those two. Let me let me talk first about the

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Speaker 3: Big Beautiful Bill.

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Speaker 2: Economics. It's it's fairly straightforward.

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Speaker 3: The way it works is there's this thing called the

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Speaker 3: Congressional Budget Office. We talk about it a lot when Yeah,

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Speaker 3: I'm when you when you do a bill like that.

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Speaker 3: It's the CBO that does the official forecast dynamic and

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Speaker 3: historically they've just been far more wrong than right, dating

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Speaker 3: back to the first first term, and so all you

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Speaker 3: got to know about the CBO forecast this time around

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Speaker 3: is that it assumes a one point eight rate of

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Speaker 3: economic growth, which we think is way too low. And

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Speaker 3: from that one point eight, and they don't put in

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Speaker 3: any dynamic effects to speak of. And when they try

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Speaker 3: to do that, they screwed that up to whatever. They

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Speaker 3: came up with a two to three trillion increase in

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Speaker 3: the debt. Okay, it's like, no, wait a minute, here's

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Speaker 3: what you're not doing.

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Speaker 2: Two things.

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Speaker 3: One is that if you simply increase the growth rate

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Speaker 3: by one percent, like we did in the first term,

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Speaker 3: CBO got it wrong. Same way in the first term,

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Speaker 3: you raise a couple of trillion dollars of that, so

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Speaker 3: you get almost to zero.

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Speaker 2: Okay, you get the neutrality.

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Speaker 3: They didn't count the tariff revenues, and that's like, that's are.

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Speaker 1: Executive branch, not from Congress. They can't technically.

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Speaker 3: Oh, but but they should have counted it because it

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Speaker 3: counts towards the debt.

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Speaker 2: I mean, look at look at it.

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Speaker 3: One hundred billion dollars in I don't know the first

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Speaker 3: six months, we're gonna we're gonna have a situation where

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Speaker 3: if you simply do the numbers right for the big

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Speaker 3: beautiful bill. It's this significant reduction in the debt and

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Speaker 3: what that'll do, if you want to segue to J. Powell,

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Speaker 3: what that'll do is it'll actually lower yields and interest

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Speaker 3: rates because we'll have to finance less. Now, with respect

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Speaker 3: to Powell, I think there's a strong argument that can

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Speaker 3: be made that he's at least fifty basis points above

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Speaker 3: where he should be, and we should be in a

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Speaker 3: place where we should be fifty basis points lower now

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Speaker 3: moving towards even lower. And let's just deconstruct what fifty

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Speaker 3: basis points too high means.

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Speaker 2: That's about a quarter to a half point of.

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Speaker 3: GDP growth reduction, and that in turn means about five

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Speaker 3: hundred thousand to seven hundred and fifty thousand fewer jobs

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Speaker 3: that will create because of J.

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Speaker 4: Powell.

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Speaker 3: It's a couple one hundred billion dollars in lost output,

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Speaker 3: and there's billions lost in tax revenues. Then when you

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Speaker 3: go from there, and I was watching Laloe, I'm sure

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Speaker 3: you have Lalo brainers. I saw her on an other

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Speaker 3: network yesterday and she has no clue. It's like she

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Speaker 3: was talking about the Big beautiful Bill and Powell and

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Speaker 3: all this stuff. Twenty to thirty percent of our debt.

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Speaker 2: Is financed by short term debt. That's the way they

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Speaker 2: roll that.

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Speaker 3: So if you look at a half point more on

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Speaker 3: the short term debt, that's a couple hundred billion dollars

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Speaker 3: that you build into the debt over ten years. That's

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Speaker 3: real money. Mortgage rates average family four hundred thousand dollars

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Speaker 3: thirty year mortgage. That's one thousand over one thousand dollars

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Speaker 3: a year. And then we got this last point a

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Speaker 3: trillion dollars of revolving credit card debt. That's about five

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Speaker 3: billion dollars more that consumers pay.

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Speaker 2: So and so this idea of.

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Speaker 3: What's wrong with waiting, I'll tell you what's wrong with

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Speaker 3: waiting all those costs and what's wrong with lowering them now.

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Speaker 2: And if you get it wrong and.

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Speaker 3: Place heats up, just put it in reverse. We used

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Speaker 3: to do that. Fesciolicy used to be uncertain by design

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Speaker 3: to keep the bond market and everybody else with discipline.

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Speaker 3: We got this like weird concept now where we got

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Speaker 3: to telegraph a year in advance what that is.

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Speaker 2: And it doesn't.

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Speaker 1: Work with the bond market. It's not so much the

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Speaker 1: FED funds rate. It's the bond market that dictates things

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Speaker 1: like mortgage rates and overall borrowing costs. Is there a

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Speaker 1: risk that public pressure on the FED chairman when he

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Speaker 1: does cut then creates a credibility problem for the Fed?

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Speaker 1: The bond market no longer trust the Fed, and you

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Speaker 1: still run into these same problems.

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Speaker 2: I don't hire rate.

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Speaker 3: I don't think there's any risk at all of that.

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Speaker 3: I think the bond market. Frankly, thanks, Jerome Pile is

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Speaker 3: a clown at this point because of what he did,

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Speaker 3: and I can go over the three major mistakes he makes,

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Speaker 3: but the bond market will do what the bond market does.

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Speaker 3: Seeing the data, and when you see ten year yields

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Speaker 3: going down significantly like they have been doing, that should

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Speaker 3: tell Jerome Powell that the short run rates should be

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Speaker 3: coming down significantly and that's not happening.

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Speaker 2: And let me just on the pole thing. Let's be clear.

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Speaker 3: It's like this op ed I had in the Hill.

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Speaker 3: UH basically looked at all of the FED chairman we've

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Speaker 3: had over the last I don't know forty years and

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Speaker 3: ranked them who is good to the worst.

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Speaker 2: And there's an argument that he was the worst.

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Speaker 3: And if you look at like Arthur Burns seventy two,

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Speaker 3: helps Nixon get reelected, sets off the stagflation. Ge William

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Speaker 3: Miller is in the middle of that mix, sits on

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Speaker 3: his hands. He was the other lawyer in the mix

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Speaker 3: besides Powell, totally unqualified.

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Speaker 4: He went through green Span brand green Span.

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Speaker 3: Getting not understanding how the dot com was going to

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Speaker 3: bring productivity and allow you to go forward out inflation.

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Speaker 3: But Berne But but Powell has made three major blunders.

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Speaker 2: In first term he raised rates too fast. He was

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Speaker 2: like too early.

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Speaker 3: Powell, and that's been documented by the Fed itself.

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Speaker 2: He made a mistake. And the second term this is

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Speaker 2: what and you you, you folks were right here on

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Speaker 2: this set.

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Speaker 3: Now, I wonder why you might not have been asking

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Speaker 3: about Jay Powell. Hey, Jay, are you going to say

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Speaker 3: anything about all these bills they're passing contributed to inflation?

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Speaker 2: Jay, why do you await.

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Speaker 1: The ralitary policy? Not fiscal policy?

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Speaker 2: No?

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Speaker 3: No, but no, Actually, I'll give you my favorite FED

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Speaker 3: chair besides Paul Volker, William McChesney Martin. Most famous quote

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Speaker 3: in FED history is job of the FED chair is

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Speaker 3: to take the punch bowl away before the party gets

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Speaker 3: too good, right, and what but McChesney Martin did, which

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Speaker 3: was so profound. When Lyndon Johnson was prosecuting the Vietnam

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Speaker 3: War and refusing to trade off guns for butter Chesney

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Speaker 3: but chesse, Martin started raising race and LBJ demarched him

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Speaker 3: down to his ranch and tried to read him the

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Speaker 3: Riot Act, and Martin said.

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Speaker 2: No, you're, you're. You got to choose one or the other.

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Speaker 3: And so Powell should have said a lot during that time.

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Speaker 2: He didn't, and one of the reasons was.

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Speaker 3: He wanted to be reappointed to the fat He's a

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Speaker 3: political animal.

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Speaker 2: Let's be clear about that.

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Speaker 4: They're wrapping me. This is the longest interview we've ever

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Speaker 4: done on the show. I want you to know Peter

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Speaker 4: Navara right here, that's absolutely here for Kayley. Do you

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Speaker 4: want to fire Philip Swiegel or J Powell before we go?

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Speaker 2: I don't fire anybody.

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Speaker 3: I just I just will be like them back here

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Speaker 3: and I just love coming to your studios.

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Speaker 4: Well, let's keep this conversation going.

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Speaker 3: Appreciate it, and we'll have another baby on the planet.

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Speaker 2: When I come back.

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Speaker 4: Congratulate absolutely, White House Senior Counselor for Trade and Manufacturing,

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Speaker 4: Peter Navarro. We thank you so much for being with

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Speaker 4: us on Bloomberg