Squawk on the Street+ Top Trade Advisor Peter Navarro 2/12/25

Summary

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Squawk on the Street+ | Interview with Peter Navarro on Reciprocal Tariffs

Date: February 12, 2025
Hosts: Carl Quintanilla, Jim Cramer, David Faber (CNBC)
Guest: Peter Navarro, White House Senior Counselor for Trade and Manufacturing

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Episode Overview

This episode focuses on the Trump administration’s trade policy plans, specifically the proposal for reciprocal tariffs. CNBC anchors interview Peter Navarro about the strategy, its motivations, potential impact, and the broader economic and geopolitical consequences. Navarro robustly defends the approach, drawing on historical context and past Trump administration outcomes, while fielding skeptical questions from the hosts.

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Key Discussion Points

The Push for Reciprocal Tariffs

• [01:24] Navarro explains the rationale behind new reciprocal tariffs:

  • U.S. has the "lowest tariffs in the world" and minimal non-tariff barriers.
  • Many other countries, such as India and EU nations, impose significantly higher barriers.
  • VAT in the EU acts as both a subsidy for their exports and a tariff on U.S. imports.
  • Trump’s position: If other countries do not lower their barriers to U.S. levels, the U.S. will raise its own in return.

  Navarro [01:40]: “It's the most common sense thing in the world... if they won't lower their tariffs to ours... we're going to raise ours to theirs.”

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Concerns About Business Impact & Inflation

• [03:08] Host raises concerns on potential negative impact on business planning and costs, especially for manufacturing and consumer goods.

• [03:42] Navarro’s counterargument:

  • Draws historic parallel to pre-1913 America, which relied on tariffs for revenue.
  • Asserts U.S. prosperity and security under such a regime.
  • Claims steel and aluminum tariffs led to increased market caps and investment, both domestic and foreign.
  • Maintains that rather than raising prices, tariffs “force” exporters to lower their prices, create currency adjustments, and ultimately boost domestic productivity and real wages.

  Navarro [05:19]: “None of that happened. We didn’t have inflation. We didn’t have any problem. Everybody prospered in the Trump economy and so crying the inflation wolf this time around...”

  • Promises the next Trump administration will pair tariffs with “drill baby, drill,” deregulation, and tax cuts, arguing this package will further enhance domestic prosperity.

  Navarro [07:39]: “This is the time to be bullish in the Trump economy... the future looks bright. What do they say? I need shades right?”

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Mechanics and Limitations of Tariffs

• [09:19] Host (Mike) challenges the logic:

  • If tariffs are absorbed by exporters and exchange rates, there might be no price signal to spur U.S. domestic production.
  • Notes the contradiction: If imports remain high to generate tariff revenue, the goal of reshoring production isn’t achieved.

• [10:09] Navarro responds:

  • Cites the objective during Trump’s first term to boost steel/aluminum capacity utilization above the 80% threshold needed for industry health.
  • Criticizes Biden administration for letting industry utilization fall by easing tariffs/exemptions.
  • Emphasizes intention to remove country and product exemptions, and expand tariffs to include more downstream products to close loopholes used by countries to evade tariffs.

  Navarro [11:44]: “We eliminate all country exemptions. Eliminate all product exclusions... we expand significantly the amount of downstream products that are covered.”

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Broad Objectives: Security and Middle Class

• [12:14] Host presses on the domestic transformation goal:

  • Will the U.S. end up going back to making low-value goods?

• [12:48] Navarro frames the end game:

  • Rising real wages for blue-collar America
  • Rebuilding the defense industrial base for national security
  • Ending reliance on foreign nations for essential goods and manufacturing
  • Correcting the “trillion dollar trade deficit”
  • Cites Warren Buffett’s warning that the deficit results in selling off U.S. assets

  Navarro [13:32]: “The ultimate goal is rising real wages for blue collar Americans, a thriving middle class... and our nation [not] dangerously vulnerable... for medicines or metals or anything in between.”

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Geopolitical & Alliance Risks

• [14:49] Host brings up Mitch McConnell’s op-ed warning about U.S. isolationism:

  • Suggests that surprise tariffs may undermine alliances at a sensitive time.

• [15:24] Navarro’s rebuttal:

  • Dismisses criticism from McConnell, Paul Ryan, and the Wall Street Journal as responsible for offshoring American jobs and suppressing wages.
  • Argues that the “America First” economic program serves the broad national interest and underpins industrial growth.

  Navarro [15:24]: “When I hear it from Mitch McConnell, I mean, come on, come on... all that has done following the Pied Piper of the Mitch McConnell's of this world is decimate our economy and export our factories and jobs.”

  • Predicts the Kentuckian economy (McConnell’s home state) will benefit from the new trade approach.

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Notable Quotes & Memorable Moments

• [01:40] Navarro: “The central idea here is that you have the US with the lowest tariffs in the world... so reciprocity. President Trump has embraced that... It’s his philosophy.”
• [05:19] Navarro (on inflation): “None of that happened. We didn’t have inflation. Everybody prospered in the Trump economy. So crying the inflation wolf this time around...”
• [07:39] Navarro (on future Trump economy): “This is the time to be bullish in the Trump economy... What do they say? I need shades, right?”
• [11:44] Navarro (on enforcement): “We eliminate all country exemptions... expand significantly the amount of downstream products that are covered...”
• [13:32] Navarro (on policy goal): “The ultimate goal is rising real wages for blue collar Americans, a thriving middle class... and our nation [not] dangerously vulnerable...”
• [15:24] Navarro (on McConnell’s criticism): “When I hear it from Mitch McConnell, I mean, come on, come on... all that has done... is decimate our economy and export our factories and jobs.”

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Timestamps of Important Segments

• [00:45] — Introduction to interview; reciprocal tariffs announcement
• [01:24] — Navarro explains reciprocal tariffs and rationale
• [03:08] — Host concerns on business impact and inflation
• [03:42] — Navarro’s historical context and defense
• [05:19] — Navarro dismisses inflation concerns
• [09:19] — Deeper challenge on mechanics of tariffs (Mike)
• [10:09] — Navarro details how implementation would address loopholes
• [12:48] — Navarro explains ultimate policy objectives
• [14:49] — Debate over international ramifications and McConnell’s criticism
• [15:24] — Navarro’s strong response to McConnell

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Summary

This episode provides an in-depth discussion of the Trump administration's revived reciprocal tariff plans, as articulated by Peter Navarro. Navarro forcefully presents the case for tariffs as a means of restoring economic fairness, protecting key industries, and rebuilding the American middle class—all while deflecting criticism about potential inflation, global alliances, and business uncertainty. The interview is marked by pointed exchanges, particularly Navarro’s repeated dismissal of critics and his focus on structural economic change over sector-specific concerns.

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Transcript

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[News Anchor]

President Trump's trade advisor is reportedly finalizing plans today for reciprocal tariffs that Trump said he would impose on any country that charges duties on U.S. imports. Get the latest from Peter Navarro, White House Senior Counselor for Trade and Manufacturing, joins us live from Washington. Peter, it's great to see you. Welcome.

[Peter Navarro]

Great to be back. I'm just wondering is Kramer like going to spend like a week in the Big Easy celebrating the Eagles? I mean what the deal?

[News Anchor]

Probably he gets a vacation. He can get one vacation, but he is probably in celebration. It's also his birthday week. Peter, what can you tell us about what can you tell us about the reciprocal tariffs? Where are you on that?

[Peter Navarro]

I can tell you why the President might act. I can't tell you when it's not my my job to break that kind of news here. But the reciprocal issue really goes back to the first term. The President had the reciprocal trade act up in front of Congress. He's been talking about how governments and nations around the world like stick it to this country. The central idea here is that you have the US with the lowest tariffs in the world and importantly the lowest non tariff barriers or what the President likes to call non monetary barriers. And that's not fair. And the notion here is that if in the first term was that if they won't lower their tariffs to ours and non tariff barriers, we're going to raise ours to theirs or vice versa. It's the most common sense thing in the world. And if you just go around the world you have India, India, the maharaja tariffs, they have some of the highest tariffs in the world. The EU particularly has a VAT tax, a value added tax. And it's not well understood that that acts. It's like a two punch. When they're sending us stuff, it acts as an export subsidy. When we're sending them our stuff, it acts as a tariff and the net result is we don't sell any cars there. And then of course you got the problems with all the other countries around the world. So reciprocity. President Trump has embraced that going back to the first term is his philosophy.

[News Anchor]

I get the issue of fairness, especially on places that haven't been fair to us on trade. Peter Question is, though, if, if it's going to have a damaging effect on business, business confidence, business spending, business planning, because you know that they've been doing business this way for a long time and now there's great uncertainty about higher costs, potentially of imports that they would have to pay, changing their cost structure, and also potential more reciprocal or retaliatory tariffs. Once we do this, I think you.

[Peter Navarro]

Have to step back and look at the broader structural readjustment we're having with the whole global environment here. The birth of the External Revenue Service is going to take us back to a future that looked a lot like McKinley and Jefferson and Hamilton, where this country prior to 1913 relied almost exclusively on tariff revenues. And we prospered and our nation was secure. And what the president, President Donald John Trump wants to do is get to, to that kind of world. And it's going to be a great world. If you look just micro at what happened this week in the steel and aluminum tariffs, we've seen billions of dollars added to the market. Cap companies collectively, Nucor, Cleveland Cliffs, U.S. steel, Century Aluminum. And we expect not only those companies to prosper as they did back in the first term, but we're also going to see a lot of investment come both domestically and from abroad to come inside the perimeter of the United States to be able to produce. So this is.

[News Anchor]

The steel companies may have rallied, Peter, but the auto companies are warning about it and they are not rallying. And this could be a huge headache and a huge expense for them, not to mention other companies. I mean, just we were talking to Coke yesterday, aluminum costs are going to go up, cans are going to go up. I mean, there are, there are others affected by these.

[Peter Navarro]

Sir, here's the beauty of this. If I were sitting here as I did back in 2018, you would say the same things based on the things that those industries were saying. The problem they have, and now I can share with you, is none of that happened. We didn't have inflation. We didn't have any problem. Everybody prospered in the Trump economy and so crying the inflation wolf this time around. And I can walk you through the reasons why we don't observe inflation when we have tariffs, despite seeing the seeming logic of it. And the first thing that happens is when we put a tariff on is that these export dependent economies of producers lower their prices significantly so they're to not they don't lose market share. The next thing that happens is a currency adjustment. Both the governments do manipulation and adjust because we have a lower trade deficit. Supply chains adjust and then as we get more investment in the industries we get higher productivity, real wages go up and I remind you here that the one of the proudest things I think we have for the first term was real wages, real inflation adjusted wages went up significantly in the Trump term and down significantly in the Biden term. So this whole inflation, I mean CPI comes out today. I mean this dog bites man. It's Joe Biden bites the American people. It's it's a combination of a mismanagement of our supply chains by Biden and dramatic, dramatic overspending. I mean it's like Rick Santelli's worst nightmare to watch Joe Biden for four years add trillions and trillions and trillions to the deficit and look helps on the way. We're going to have drill baby, drill. That's going to take care of a lot of what happened today in the CPI with things like fuel oil cost. We're going to have deregulation plus the plus being the doge effort and that's a positive supply shock. So that's going to come on down. We're going to have a lot of investment here. Tax cuts which are going to be paid for in large part by the tariff revenues. And folks, this is the time to be bullish in the Trump economy. I know the day traders are having a little fun today, but the future looks bright. What do they say? I need shades right?

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[Interviewer Mike]

Restriction supply Peter how do all these things fit together? If the tariffs are not inflationary because they're absorbed by the exporters and the currency and it kind of comes out in the wash, that doesn't create an incentive for domestic production because there's no price signal effect, there's no opportunity for market share on the. And then on the other hand, if you're relying on a across the board tariff on last year, $3.3 trillion in goods import imports, I mean to even become a material bit of revenue for the federal government, you're going to have to keep that level of imports up and put tariffs across the board and there's going to be no demand impact on it. I mean not everything can actually come out favorably from, from imposing tariffs on the revenue side, on the inflation side and on the domestic production side.

[Peter Navarro]

Yeah, Mike, I've always loved the way you think going back to the columns you used to writing everything. It's like the macro way of everything fits together and, and so let's, let's talk about how some of these adjustments are going to take place. I mean again, history is on my side on this. During the first term, our objective was to get the capacity utilization rates in the steel and aluminum industry up to 80% which is above that threshold. That's where you have profitability and investment right down now. And we got there. But then Biden came along, gave up all these country exemptions, product exclusions, didn't let the Customs and Border Protection like look at things and they slid back to near 70% in steel. It's astonishing. Like it's 52% in aluminum and meanwhile Australia is at 90% capacity utilization dumping stuff in. What this policy does, Mike, is protect these industries from dumping. The bigger problem in steel and aluminum, massive, massive global overcapacity propagated by massive government subsidies and predictable dumping. And so what the steel and aluminum tariffs do, it's not just that we have the tariffs at 25% raising aluminum from 10 to 25, it's that we eliminate all country exemptions Eliminate all product exclusions. And importantly this wasn't noticed very much. We expand significantly the amount of downstream products that are covered because as you know what countries do when you put tariffs on slab is then they turn some slab into something else and they send it over here and they're non tariffs. But I'll tell you, I mean Brazil's dumping slab at the low end, Japan's dumping high value added stuff at the high end, China is Mexico micro here.

[Interviewer Mike]

On these couple of import categories. I get it. You know we kind of worked it most of the tariffs but we're not talking about across the board, you know, first of all trying to counter European value added taxes to which kind of aren't really a tariff with tariffs of our own. It just feels as if you can understand why businesses are like it seems like the rules are moving around and we're not really sure how this actually plays to our benefit down. I mean are we going to be making T shirts and towels in North Carolina again? What's the ultimate goal here in terms of reworking our own economy?

[Peter Navarro]

Well, okay, the ultimate goal is rising real wages for blue collar Americans, a thriving middle class. We have a strong defense industrial base and manufacturing base for our economic security and our national security. And when we are in times of crisis, Mike, we aren't dangerously vulnerable to foreign nations for medicines or metals or anything in between. And the trillion dollar trade deficit, this is a big thing with President Donald John Trump. We run a trillion dollar trade deficit every year. As Warren Buffett of all folks has pointed out correctly. That's a transfer of assets to foreigners of a trillion dollars every year. That turns into purchases of land and things like that. We got to stop draining that problem. And so the end state is a much more robust and secure American economy and I think a better world because these imbalances aren't good for anybody.

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[News Anchor]

Peter, on the better world thing, I mean Mitch McConnell has an op ed out today sort of warning about the isolationism and how we have to protect American interests and tighten our friendships and be a reliable partner. Do you think about the broader implications here of of the geopolitical sphere at a time where we need our allies imposing tariffs, surprise tariffs, getting them all upset about this having them, it makes us an unreliable partner. Do you worry about that?

[Peter Navarro]

Not at all. That when I hear it from Mitch McConnell, I mean come on, come on, come on. Mitch McConnell, Paul Ryan, the Wall Street Journal. These are the folks for the last 30 years that have encouraged our jobs to move offshore and our open borders to welcome illegal immigrant railroad to drive down wages for the benefit of a small portion of America. And all that has done following the pied piper of the Mitch McConnell's of this world is decimate our economy and export our factories and jobs.

[News Anchor]

No but there's security.

[Peter Navarro]

It's time for Mitch.

[News Anchor]

I think he channels something other investors.

[Peter Navarro]

Into this good night because because he of all people has been responsible for a lot of delays in up on the hill in terms of getting good policies done. So I'm not Mitch. Mitch doesn't have a lot of credibility. Should look at some of the metals industries and energy industries in the state of Kentucky that are going to boom from President Donald John Trump.

[News Anchor]

Peter Navarro, thank you very much for coming on to talk through the motivation here. Good to talk to you.

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