History in the making: where did Trump get his tariffs idea?

By Dr Ovidiu Tierean, Senior Advisor, PKF Malta

Trump's obsession with China is different from the trade war imposed on the EU, the other major target. In many commentators’ opinion, Trump does not really have well-established strategies. He has some clearer or vague directions, desires, leanings based on pride and the desire to win, but quickly changes his mind 180 degrees. He also often throws out some directions and lets those under him do the strategy.

The man is, as his biographer Michael Wolff put it, "a genius and an idiot". A genius because he knows what his audience wants and how to capture it, but an idiot because he understands almost nothing about substantive issues and has no strategic intelligence. But there are a few constants and objectives. China is among them.

Let me tell you an interesting story that explains some of the tariff madness now. And not just tariffs.

Somewhere around a decade ago Trump asked his son-in-law, Jared Kushner to find him an economic advisor. What did Kushner do? He went to Amazon and searched for economic book titles. One caught his eye: Death by China by Pete Navarro. He was a hard-liner on tariffs, believing that other countries were hurting America because they were selling less than they were buying and he believed that China should be hit with a trade war. Navarro also based his theories on the research of a “top economist”, Ron Vara, whom he cited frequently in his books.

Trump hired Navarro as a trade advisor, fascinated by the theory of fighting China. He later won the 2016 presidential election. What was discovered next was that Ron Vara did not exist. Navarro created a fictional character named Ron Vara, who was presented as a trade expert in his books and articles. The name “Ron Vara” is actually an anagram of Navarro's own last name. This fictional character was used to bolster Navarro's arguments against trade with China, often being quoted as a credible source. The truth about Ron Vara was exposed in 2019 by an Australian researcher, sparking debates about ethics in academia and politics. Navarro later claimed it was a harmless joke or literary device, but not before sending fake emails signed Ron Vara that circulated throughout Washington and influenced economic policies.

There is, of course, some truth about China, a country with dubious economic practices that should be contained. But is that the solution? Trump also imposed tariffs in his first term, especially on China. Some had spectacular effects, for example the tariffs on washing machines that led to their price increasing by over 30%. But he never went as far as today. In his second term, Trump hired Navarro as an advisor again, mind you, after he had spent several months in prison for the pro-Trump riots of January 6, 2021, with the invasion of the Capitol. Another “tariff hawk”, Howard Lutnick, became Secretary of Commerce. He even further defined Trump's views on tariffs and apparently thought up much of the plan. Elon Musk, owner of Tesla (-41% year-to-date share value) called Navarro “dumber than a sack of bricks” on tariffs.

To be clear, Trump has been pro-tariff for many years, now he has just hired radicals and charlatans, if we think about Navarro, who have influenced him even more in that direction. One of Trump's central ideas is not just to “stop China from plundering America”, but to put it on a global scale. Not just economically, but also politically. He wants to win with China.

This desire explains many other things. For example, why Trump is so soft on Putin. Because, on the one hand, he wants his hands free in Ukraine so he can focus on China. On the other hand, all signs point to him wanting to recruit Russia against China. I consider such an assumption rather naive and very risky as a strategy because it leaves Europe offside and throws away a good part of America's influence in Eurasia.

Disengagement from Europe also partially plays this role. Simplistically, he believes that this way he has more space to defeat China. It is not a new policy, both Obama with his “pivot to Asia” and Joe Biden with his well-calculated strategic positioning after half a century of understanding America's interests, tried to shift the centre of gravity towards containing China. It's just that they did it much more intelligently, keeping Europe close.

Beyond freeing it from burdens, Trump believes that he is bringing Europe to obedience and making it follow him after attacking it, insulting it and after throwing an economic catastrophe at them. Tariffs are also a form of bringing it to obedience that Europe has the nerve to reject. With or without Europe, the tariffs imposed on China are Trump's main weapon.

The weakness of the strategy is that it does not seem at all intelligent to wage a trade war with China and the whole world at the same time. The problem is that Beijing is not only unimpressed but is showing signs of optimism that the current situation means that America's power and influence may decline, and China may take its place in more parts of the world. Until then, the stock market carnage continues, and the risk of recession increases. The latest probability is 60%, according to Goldman Sachs.