Bull or elephant?

Malcolm Latarche
Malcolm Latarche

22 December 2016


True to form, President-elect Trump’s latest high level appointment points to him doing his best to bring about some of his election pledges. One of Trump’s promises was to repatriate manufacturing jobs to the US away from China and other SE Asian countries so his choice of economist Peter Navarro, an outspoken critic of China, as the head of the new White House National Trade Council and as director of trade and industrial policy is an interesting one. Navarro has written a number of books critical of Chinese policy and In a recent article for the San Francisco Chronicle, wrote "To Trump, while free trade is good, it must also be fair trade. Otherwise, we will get what we have gotten - a massive erosion of the US manufacturing base, stagnant wages for the last 15 years, and more than 20 million Americans who can't find a good job at a decent wage". In recent years much of the world has bent over backwards to trade with China and that country’s appetite for raw materials and its ability to churn out manufactured goods has been largely the cause of the growth in the world fleet. However, some of the steam has gone out of the Chinese economy over the last year or so and has contributed to the massive overcapacity in the world fleet. It will take some time for the exact direction of Trump’s policies to become clear but perhaps raised duties on Chinese goods imported into the US will come first followed by a return of manufacturing by US corporations as those price rises bite. If that happens then there will likely be many European countries looking on with interest. Trump’s appointment of Navarro and also of that of Scott Truitt as the incoming head of EPA may make him appear as being something of a bull in a china shop, but others will say that some issues have been tiptoed around for too long and it is now time to deal with the elephant in the room.