I. THE LAW AND THE PROTESTS
1. Peter Navarro talks tariffs on CNBC 💣

<tr><td class="embed-responsive embed-responsive-16by9"><iframe class="embed-responsive-item" src="https://www.youtube.com/embed/2CSE4Op-G38"></iframe></td></tr><tr><td class="nl-post"><p class="caption">CNBC Television</p><p><strong>After the Trump administration</strong> announced tariffs on Mexico, Dr. Peter Navarro, Director of Trade and Manufacturing Policy, went on CNBC to explain the reasons and rationale.</p><ul><li><strong>As part of that </strong><a href="https://www.youtube.com/watch?v=2CSE4Op-G38" target="_blank">CNBC video interview</a>, he began at the 5m mark to correct our misconceptions about how tariffs work, echoing President Trump.</li><li><strong>President Trump has put forth </strong>such views about tariffs – but in sound bites.</li><li><strong>To hear these</strong> conveyed all together woven into arguments is stunning.</li></ul><p><strong>Here is a lightly edited</strong> transcript from Dr. Navarro’s CNBC interview beginning at five minutes in. <a href="https://www.youtube.com/watch?v=2CSE4Op-G38">Watch for yourself here.</a></p><table class="intable"><tr><td class="intable-border"><h5>White House advisor Navarro on Trump's tariff threats against Mexico</h5><p><strong><em>CNBC: ‘Tariffs hurt the American consumer.’</em></strong></p><p><strong>‘This is one</strong> of the most misunderstood aspects of the Trump tariffs.’</p><ul><li><strong>‘China bears the burden</strong> of the tariffs in the form of lower exports, lower prices for their products, lower profits for their companies.’</li><li><strong>‘The government of China</strong> has borne the burden of those tariffs in the form of lower tax revenues and a lower rate of growth.’</li></ul><p><strong><em>CNBC: ‘But so has the American consumer – importers pay the tariffs.’</em></strong></p><p><strong>‘‘The governments</strong> of China and Mexico will pay for it and the producers in Mexico and China pay for this.’</p><ul><li><strong>‘Here's how it works.</strong> A tariff goes on that puts pressure on the Chinese or the Mexican producers to lower their prices – otherwise they can't sell.’</li><li><strong>‘With China,</strong> when we put the tariffs on China, we could buy the competing products in places like Vietnam or produce them here – that forced the Chinese to lower the prices.’</li><li><strong>‘So we bear</strong> a very small burden of these tariffs.’</li></ul><p><strong>‘If you just look</strong> at this from the macro level.’</p><ul><li><strong>‘We’ve had tariffs</strong> on dishwashers and solar panels - half of Chinese exports to this country – steel and aluminum, and we see virtually no inflation in our data yet.’</li><li><strong>‘So these people</strong> who say that somehow American consumer is going to pay. for this that's simply not true.’</li><li><strong>‘These countries</strong> are paying for the tariffs.’</li></ul><p><strong>‘Corporate executives</strong> are recognizing that the supply chain is better off in other places in the globe or better yet bring that here.’</p><p></p></td></tr></table><p><strong>What follows</strong> here in separate items are Dr. Navarro’s key points – on tariffs:</p><ul><li><strong>‘So these people</strong> who say that somehow American consumer is going to pay for this – that's simply not true.’</li><li><strong> ‘The producers</strong> in Mexico and China pay for this. Here's how it works. A tariff goes on that puts pressure on the Chinese or the Mexican producers to lower their prices – otherwise they can't sell.’</li><li><strong>‘Corporate executives</strong> are recognizing that the supply chain is better off in other places in the globe or better yet bring that here.’</li><li><strong> ‘We’ve had tariffs</strong> on dishwashers and solar panels – half of Chinese exports to this country - steel and aluminum and we see virtually no inflation yet.’ [dishwashers/solar panels and steel are covered in two separate items.]</li></ul><p><strong>The counter arguments. </strong>The problem with finding sources that counter Dr. Narvarro’s assertions (and implicitly President Trump;s) is there just too many of them. So, I’ve limited these here to three:</p><ul><li><strong>New York Fed </strong>(discussed in an earlier post)</li><li><strong>Center for</strong><strong>Strategic & International Studies </strong>(CSIS)</li><li><strong>Peterson Institute</strong><strong>for International Economics</strong> (PIIE)</li></ul><p><strong>If you would like</strong> to see more, just let me know.</p><p><strong>Also, see the note</strong> from an earlier edition on Peter Navarro and his ‘Death by China’ book and movie, <a href="https://www.chinadebate.com/newsletter/how-china-sees-trumps-trade-war#article3" target="_blank">here.</a></p><ul><li><strong>You might the views</strong> expressed in the CNBC interview less surprising.</li></ul></td></tr></tbody></table>

2. Navarro : ‘The producers in Mexico and China pay for this. Here's how it works. A tariff goes on that puts pressure on the Chinese or the Mexican producers to lower their prices – otherwise they can't sell.’

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a7625a662ab1e784e317_david%20e%20weinstein%20Columbia.png" alt="CHINADebate"></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">David E. Weinstein | Columbia University</p><p><strong>The counter from the NY Fed:</strong><strong>‘</strong><strong>The magnitude of these costs</strong> depends on how a tariff affects the prices charged by foreign exporters and the U.S. demand for imported goods.’</p><ul><li><strong><a href="http://www.econ.ucla.edu/pfajgelbaum/RTP1.pdf" target="_blank">‘Studies</a></strong><strong>, including our own</strong>, have found that the tariffs that the United States imposed in 2018 have had complete passthrough into domestic prices of imports, which means that Chinese exporters did not reduce their prices.’</li><li><strong>‘Hence,</strong> U.S. domestic prices at the border have risen one‑for-one with the tariffs levied in that year.’ </li></ul><p><strong><em>Read the full analysis: </em></strong><a href="https://libertystreeteconomics.newyorkfed.org/2019/05/new-china-tariffs-increase-costs-to-us-households.html" target="_blank"><strong><em>‘New China Tariffs Increase Costs to U.S. Households,’</em></strong></a><em> Liberty Street Economics, New York Fed, by</em></p><ul><li><strong><em>Mary Amiti</em></strong><em> (NY Fed), <strong>Stephen J. Redding</strong> (Princeton), and <strong>David E. Weinstein</strong> (Columbia)</em></li></ul></td></tr></tbody></table>

3. Navarro : ‘Corporate executives are recognizing that the supply chain is better off in other places in the globe or better yet bring that here.’

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a7cb89e27159670729a9_Stephen%20Redding%20(Princeton).png" alt="CHINADebate"></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">Stephen J. Redding | Princeton University</p><p><strong>The counter from the NY Fed. ‘Some firms</strong> may also reorganize their supply chains in order to purchase their products from other, cheaper sources.’</p><ul><li><strong>This tariff-induced shift</strong> in supply chains is therefore called a deadweight or efficiency loss.’ </li><li><strong>(wait ‘til you see the impact</strong> of deadweight loss on the U.S. economy and on consumers in the next item)</li></ul><p><strong><em>Read the full analysis: </em></strong><a href="https://libertystreeteconomics.newyorkfed.org/2019/05/new-china-tariffs-increase-costs-to-us-households.html" target="_blank"><strong><em>‘New China Tariffs Increase Costs to U.S. Households,’</em></strong></a><em> Liberty Street Economics, New York Fed, by</em></p><ul><li><strong><em>Mary Amiti</em></strong><em> (NY Fed), <strong>Stephen J. Redding</strong> (Princeton), and <strong>David E. Weinstein</strong> (Columbia)</em></li></ul></td></tr></tbody></table>

II. POTENTIAL BACKLASH FROM THE U.S.
4. Navarro : ‘So these people who say that somehow American consumer is going to pay for this - that's simply not true.’

<tr><td class="nl-post"><p><strong>The counter from the NY Fed:</strong> ‘Our <a href="https://www.nber.org/papers/w25672.pdf" target="_blank">recent study</a> found that the 2018 tariffs imposed an annual cost of $419 for the typical household.’</p><ul><li><strong>‘This cost</strong> comprises two components’: <ul><li><strong>the first,</strong> an added tax burden faced by consumers, and’</li><li><strong>the second,</strong> a deadweight or efficiency loss.’ </li></ul></li><li><strong>‘Tariffs amount</strong> to a cost of $52.8 billion, or $414 per household.’<ul><li><strong>Of this cost,</strong> $282 per household per year was flowing into government coffers as a tax increase and could theoretically be rebated.’</li><li><strong>However,</strong> deadweight losses accounted for an additional $132 to households per annum and represent a net loss to the U.S. economy that is in excess of any tariff revenue collected by the government.’ </li></ul></li></ul><p><strong>25%/$200 billion tariffs.</strong>‘The likely cost of increasing the tariff rate from 10 percent to 25 percent on $200 billion of Chinese imports’:</p><ul><li><strong>‘The tax portion</strong> of the cost to households actually falls, from $282 to $211 per annum, because the tariff-inclusive price for Chinese imports becomes so high that consumers start to purchase substitute goods from countries like Vietnam instead.’</li><li><strong>‘The annualized deadweight loss</strong> increases from $132 to $620 per household.’</li><li><strong>‘This brings</strong> the total annual cost of the new round of tariffs to the typical household to $831.’</li></ul><p><strong>Here’s the chart </strong>summarizing the findings:</p><img style="width:100%" src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11aa0f96e64045eb8cf45c_New%20China%20Tariffs%20Increase%20Costs%20to.png" alt="CHINADebate"><p><strong><em>Read the full analysis: </em></strong><a href="https://libertystreeteconomics.newyorkfed.org/2019/05/new-china-tariffs-increase-costs-to-us-households.html" target="_blank"><strong><em>‘New China Tariffs Increase Costs to U.S. Households,’</em></strong></a><em> Liberty Street Economics, New York Fed, by</em></p><ul><li><strong><em>Mary Amiti</em></strong><em> (NY Fed), <strong>Stephen J. Redding</strong> (Princeton), and <strong>David E. Weinstein</strong> (Columbia)</em></li></ul></td></tr>

5. Navarro : ‘We’ve had tariffs on dishwashers and solar panels - half of Chinese exports to this country - steel and aluminum and we see virtually no inflation.' — DISHWASHERS & SOLAR PANELS

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a843f9a609627c63d3c6_William%20Reinsch.png" alt="CHINADebate"></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">Bill Reinsch | CSIS</p><p><strong>The counter from CSIS:</strong><strong>‘The question of who pays </strong>for the consequences of the tariffs is also interesting, and there are a couple of recent studies that provide some guidance.’</p><h5>Washing Machines</h5><p><strong>‘<a href="https://bfi.uchicago.edu/working-paper/the-production-relocation-and-price-effects-of-us-trade-policy-the-case-of-washing-machines/" target="_blank">One study by the University of Chicago and the Federal Reserve</a></strong> looked at the president’s 2018 tariffs on washing machines, a result of the domestic industry’s section 201 “safeguard” case.’</p><ul><li><strong>‘That study</strong> concluded that while the tariffs are giving the U.S. Treasury an additional $82.2 million, the price increases associated with the tariffs cost U.S. consumers $1.5 billion per year.’</li><li><strong>‘That works out</strong> to an increase of $86 for each washing machine and, interestingly, an increase of $92 for each dryer.’</li></ul><p><strong>‘That latter statistic</strong> provides a useful lesson in protection.’</p><ul><li><strong>‘The price of dryers went up</strong> even though there were no additional tariffs on them.’</li><li><strong>‘Why?</strong> Because most consumers buy washers and dryers together, and manufacturers realized they could get away with increasing the price of both and simply pocket the extra money.’</li></ul><p><strong>‘Note</strong> also that these numbers refer to all washers and dryers, not just imports, which illustrates the central point of protection—to allow domestic producers to raise prices and make more money so they can recover from the damage done to them by the imports.’</p><ul><li><strong>‘The point of the exercise,</strong> after all, is ostensibly to help the U.S. producers, so if their prices don’t go up in tandem with the prices of imports, they are not benefitting.’</li></ul><h5>Solar Panels</h5><p><strong> ‘Another </strong><a href="https://www.usenergyjobs.org/" target="_blank"><strong>study</strong></a><strong>,</strong> this one on solar panels, also shows that the outcome of trade protection is not always what one expects.’</p><ul><li><strong>‘Solar panels</strong> also benefitted from tariffs because of the same kind of section 201 case; they were 30 percent in 2018 and this year will decline to 25 percent and by 2021 will be 15 percent.’</li><li><strong>‘The data suggests</strong> that the tariffs so far added about 10 percent to the cost of solar installations, which, in turn, has contributed to the reduction in the number of those installations.’</li><li><strong>‘In addition,</strong> according to the Energy Futures Initiative, solar manufacturing jobs <a href="https://subscriber.politicopro.com/trade/article/2019/04/us-solar-manufacturers-shed-jobs-despite-tariffs-1378629" target="_blank">declined </a>from 51,410 in 2017 to 46,539 in 2018, the opposite of what one would expect.’</li><li><strong>‘It appears</strong> that declines in demand, in part related to the tariffs, had something to do with that, along with the fact that new facilities are less labor-intensive than older ones.’</li></ul><p><strong><em>Read the full analysis: </em></strong><a href="https://www.csis.org/analysis/tariff-game-who-pays" target="_blank"><strong><em>‘The Tariff Game: Who Pays?’</em></strong></a><em> Center for International and Strategic Studies (CSIS), April 29, 2019, by </em></p><ul><li><a href="https://www.csis.org/people/william-alan-reinsch" target="_blank"><strong><em>William Reinsch</em></strong><em>,</em></a><em> Scholl Chair in International Business, former president of the National Foreign Trade Council, former Under Secretary Of Commerce For Export Administration.</em></li></ul></td></tr></tbody></table>

III. CONGRESS & THE PRESIDENT REACT
6. Navarro : ‘We’ve had tariffs on dishwashers and solar panels - half of Chinese exports to this country - steel and aluminum. And we see virtually no inflation.’ — STEEL

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11a87289e2710903072a70_gary%20hufbauer.jpg" alt="CHINADebate"></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">Gary Hufbauer | PIIE</p><p><strong>The counter from PIIE:</strong><strong>‘</strong><strong>The underlying purpose</strong> of tariffs and quotas was to make imported steel far more expensive, permitting domestic US steel producers to raise their own prices to higher levels.’</p><p><strong>‘The argument</strong> that new restrictions could be imposed cost-free is no less dubious.’</p><ul><li><strong>‘Calculations show</strong> that Trump’s tariffs raise the price of steel products by nearly 9 percent.’</li><li><strong>‘Higher steel prices</strong> will raise the pre-tax earnings of steel firms by $2.4 billion in 2018.’</li></ul><p><strong> ‘How much more</strong> will <em>steel-using</em><em>firms</em> pay owing to Trump’s gift to steel firms?’</p><ul><li><strong>‘The arithmetic</strong> suggests that US steel prices will be 8.9 percent higher in 2018 than in 2017 thanks to tariffs and quotas.’</li><li><strong>‘In 2017,</strong> the value of steel sales was about $63 billion ($775 per ton times 81.6 million tons).’</li><li><strong>‘The 8.9 percent</strong> protectionist increase in US steel prices will deliver a hike in steel user costs of about $5.6 billion (8.9 percent of $63 billion).’</li></ul><p><strong>‘Yes, these actions</strong> create 8,700 jobs in the US steel industry.’</p><ul><li><strong>‘Yet for each new job,</strong> steel firms will earn $270,000 of additional pre-tax profits.’</li><li><strong>‘And steel <em>users</em></strong>will pay an extra $650,000 for each job created. [total $920,000 per job]. Wow!’</li></ul><p><strong>‘Whatever President Trump </strong>and his lieutenants may have said about guarding national security or creating steel jobs, the tariffs were never about military strength or American workers.’</p><ul><li><strong>‘Their purpose</strong> was to enrich steel firms.’</li><li><strong>‘They succeeded</strong>—but at an exorbitant price.’</li></ul><p><strong><em>Read the full analysis:</em></strong><a href="https://piie.com/blogs/trade-investment-policy-watch/steel-profits-gain-steel-users-pay-under-trumps-protectionism" target="_blank"><strong><em>‘Steel Profits Gain, but Steel Users Pay, under Trump’s Protectionism,’</em></strong></a><em> Peterson Institute for Interational Economics (PIIE), December 20, 2018 by</em></p><ul><li><a href="https://piie.com/experts/senior-research-staff/gary-clyde-hufbauer" target="_blank"><strong><em>Gary Hufbauer,</em></strong></a><em> Non Resident Senior Fellow, former Marcus Wallenberg Professor of International Finance Diplomacy at Georgetown University, and former Deputy Assistant Secretary For International Trade And Investment Policy of the U.S. Treasury. </em></li></ul></td></tr></tbody></table>

IV. EXTRADITION LAW:PRO & CON