America First is alive and well — this is the Trump staffer to thank for it

Many people are claiming that President Trump’s aggressive trade rhetoric during the campaign has been permanently overridden by the realities of the presidency. Indeed, several media articles have recently suggested that Peter Navarro, director the new White House National Trade Council and leading architect of America First policy, is losing influence due to the decision to compromise with China on many economic issues due to geopolitical considerations.

However, Canadian lumber has just been hit with large tariffs after years of indecision on the matter, the administration has launched a major investigation of steel imports using the Trade Expansion Act of 1962, several new measures against Chinese imports have progressed, existing trade pacts are being studied for renegotiation or at least much tighter regulation, and the president continues to rally workers and companies with his Teddy Roosevelt-styled “bully pulpit” to the “buy American, hire American” cause. One can see it’s clear that Navarro’s influence remains substantial.

{mosads}One should also realize that if there is no progress on reducing geopolitical risks, the recent U.S. compromises with China will likely reverse into secondary trade sanctions against Chinese firms, including financial and quasi-sovereign institutions. America First policies would likely accelerate against Chinese firms, as well. Unlike the past, most U.S. politicians and the U.S. military will likely weigh heavily against any pro-trade objections to such sanctions and actions, and, thus, there will likely be increasing trade spats between the two countries.

Within this context, Navarro’s influence will rise further. It is noteworthy that the 1962 law could be used for a host of other industries, particularly in the technology field, in which the U.S. military would prefer more domestic production (or by very strong allies). The law certainly entails a much faster process than the current anti-dumping laws.

Moreover, like the new “self-initiation” process for anti-dumping suits, the 1962 law does not require an industry sponsor to initiate a case. Multinational companies often are wary of complaining about dumping or foreign subsidization lest they upset the country where they are trying to sell their products, but they will likely be forced to cooperate if the U.S. government initiates a case.

As widely known, the administration will not pass new trade laws, but rather implement current ones more aggressively. Besides all the ones mentioned so far in the media, it does not take much imagination to envision even more aggressive use of Section 301 of the U.S. Trade Act of 1974 to apply sanctions to countries that violate intellectual property rights. Doing so would likely entail a relatively rapid and wide-ranging set of sanctions.

It is worth noting that Navarro seems to have Jared Kushner’s support, who is said to also have similar views as the president’s on China’s economic challenge, and yet is pragmatic regarding the need to try to approach geopolitical problems with a cooperative spirit at first with the country. If Navarro were routed from influence, there would be no one of major stature to replace him, as academic and professional orthodoxy is strongly free trade. Thus, Kushner, Wilbur Ross and President Trump would be left without any academic support for their policies, something that they very likely do not wish to occur.

For all these reasons, it is likely wrong to doubt the future influence of Navarro or America First policies. On the other hand, President Trump wants a strong economy in order to keep his approval ratings high and to encourage business to invest, so he is somewhat loathe to hurt confidence within the stock market and business community.

Thus, the question is, how far is he willing to push towards this populist trend in order to achieve longer-term economic goals such as increased domestic production and better jobs? And to what degree will geopolitical goals translate into greater trade conflicts with China? Investors and businessmen globally will likely need to face squarely these factors not only in the short-term, but also in the long-term, as the Democrats can never allow their labor base to be stolen again and, thus, will support America First policies.

John Vail is chief global strategist for Nikko Asset Management, a global investment firm with more than $165 billion in assets under management.

The views expressed by contributors are their own and are not the views of The Hill.