By Matt Peterson

President-elect Donald Trump's selection of a relative moderate for Treasury secretary was met with a sigh of relief in the markets.

The prevailing view is that Scott Bessent, assuming he's confirmed by the Senate, will be a moderating figure on some of the less market-friendly policies Trump has planned, such as tariffs.

But Bessent won't be the only voice in Trump's ear, and with key allies of the president-elect yet to find a role and top economic jobs still unfilled, the relief may be short-lived.

Two prominent trade hawks served in the first Trump administration but have yet to find roles in the second -- Robert Lighthizer, a former U.S. trade representative, and Peter Navarro, a trade and manufacturing adviser in the first Trump White House. Should they end up in prominent roles in the new administration -- notably, the position of U.S. trade representative is unfilled, as is director of the National Economic Council -- that would counterbalance the new sense that the economic hit from tariffs and other policies might be smaller than expected.

To be sure, neither Lighthizer nor Navarro may end up in Trump administration jobs. Neither responded to attempts to reach them for this article. The Trump transition team didn't immediately respond to questions about their potential place in the administration.

But it would be a mistake to overlook either man in considering the new Trump team and its effects on the economy.

Lighthizer is a longtime trade lawyer. He served in the Reagan administration's trade office and spent years in private practice before joining Trump 1.0, where he served all four years and was instrumental in designing tariffs. Those included an imposition of global steel and aluminum tariffs on national-security grounds and sharp hikes of tariffs on China. The steel and aluminum tariffs are largely gone, but the China tariffs remain. Lighthizer also led the negotiations with China that produced the so-called phase one trade deal at the end of Trump's term.

Lighthizer retained connections to Trump in his years out of power. He is chair of the Center for American Trade at the America First Policy Institute. The Trump-aligned think tank's CEO, Brooke Rollins, and board chair, Linda McMahon, have been nominated for cabinet positions in the new Trump administration.

Lighthizer is also on the board of Trump Media & Technology, the public company that owns social-media network Truth Social. Trump is the majority shareholder.

Navarro, too, has impeccable Trump credentials. He was an economics professor before joining the White House in 2017. Trump put him in charge of the National Trade Council. When the group was later disbanded, he became director of the Office of Trade and Manufacturing Policy.

In July, he showed up at the Republican National Convention with a striking message: "Yes indeed, this morning I did walk out of federal prison in Miami." Navarro was convicted of contempt of Congress for not answering subpoenas from the Jan. 6 Committee. (He argued he was protected by executive privilege.) He served four months.

Navarro believes China is an existential threat to the U.S. He supports aggressive trade measures against China itself, but also believes the U.S. should crack down on states such as Vietnam that have benefited from shifts in supply chains. He doesn't spare Europe, either.

"Too many European nations are compromised by Communist Chinese influence to ever project a united front," Navarro told the Economist from prison.

Lighthizer argues the U.S. is a victim of countries with trade surpluses, prominently including China. That should prompt a rethink of the entire global trading system. He would like to see the revocation of a U.S. trade policy known as permanent normalized trade relations toward China. Countries covered by that policy are subject to generally low tariffs, and revoking it for China would automatically cause some tariffs to rise to 35% and others as high as 100%, depending on the good. The revocation would take an act of Congress, making the policy difficult to undo.

Lighthizer has also urged Congress to "legislate a capital access fee on inbound investment, meaning that buying up our assets would be more expensive."

Candidates on the campaign trail can make it seem like all policies come directly from their mouths. That is true for presidents to an extent, but in reality much of the governing has to be delegated to appointees. Putting more trade hawks in the administration will add to the chorus full-heartedly backing aggressive moves abroad.

The selection of either man for an administration job would signal to investors that Trump is -- just as he says -- serious about his plans to disrupt the global trading system.

Write to Matt Peterson at matt.peterson@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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November 25, 2024 16:22 ET (21:22 GMT)

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