By David Chance and Roberta Rampton

WASHINGTON (Reuters) - An economist who believes that Chinese goods are literally poisoning Americans, advocates ending Washington's "One China" policy and says trade deals have weakened the United States economically with the connivance of U.S. business has emerged as the big winner from renewed turmoil in the White House.

While Peter Navarro says he is not in the running to replace Trump's top economic adviser Gary Cohn, who has said he will quit, he will be a big winner from the departure of a person seen as a bulwark against economic protectionism.

Sidelined under Cohn to whom he has reported since late last year, Navarro, who is Trump's trade adviser, would now appear to have free rein. He has publicly backed Trump's proposed steel and aluminum tariffs in a series of media appearances after being out of the public eye for months.

 

Navarro has endorsed withdrawal from the North American Free Trade Agreement as well as from a trade deal with South Korea. He believes the World Trade Organization allows unfair tax practices like value added tax that penalize American business.

But his main target has been China. He has backed a 45 percent tariff on imports from China to combat what he says is Beijing's policy of illegal export subsidies, currency manipulation, intellectual property theft and lax worker safety and environmental regulations.

He has challenged Washington's "One China" which recognizes Beijing and not Taipei diplomatically.

"Just as these Chinese leaders have been exploiting American

weakness by cheating in the trade arena, they will acknowledge the strength and resoluteness of Trump and rein in their mercantilist impulses," Navarro and now-Commerce Secretary Wilbur Ross wrote in an economic paper for the Trump 2016 election campaign.

Trump said on Wednesday he had demanded action from China on trade that appeared to align with Navarro's policies. Treasury Secretary Steve Mnuchin also chimed in on taking action on China, telling Fox Business Network the United States would get "reciprocal trade with China."

"China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States," Trump wrote in a post on Twitter on Tuesday, mistakenly referring to a deficit where Beijing runs a surplus.

According to official data, China ran a trade surplus of $375.2 billion with the United States in 2017. Overall the U.S. trade deficit with other countries was $566 billion in the year.

White House spokeswoman Sarah Sanders said that the issue had been raised with a Chinese delegation last week. President Xi Xinping's top economic adviser Liu He held talks with the administration last week. Sanders said that she was not aware of any Chinese response so far.

Navarro, 68, has a Harvard doctorate in economics and is a Democrat. He is the author of several books highlighting the danger of China's economic and military rise, including "Death by China: Confronting the Dragon - A Global Call to Action".

He has also attacked Germany, saying its companies have benefited unfairly from an undervalued euro. Trump has threatened to impose hefty tariffs on European car imports.

Navarro's ire isn't reserved just for other countries. He believes American company executives have aligned themselves with China's agenda due to their "narrow profit-maximizing interests".

"Indeed, with their bread now being buttered offshore, so-called 'American' organizations like the Business Roundtable and National Association of Manufacturers transformed from staunch critics of Chinese mercantilism into open, and often very aggressive, soldiers in the pro-China Lobby," he wrote in Death by China.

“Unscrupulous Chinese entrepreneurs are flooding world markets with a range of bone-crushing, cancer-causing, flammable, poisonous, and otherwise lethal products, foods, and drugs,” he also wrote in that book.

ODDBALL OR VISIONARY

Navarro's economic views have been dismissed by most economists as "fringe" and "oddball" although Trump has hailed him as a "visionary". He emerged unheralded as a China commentator in 2006 after years writing about energy regulatory issues as a professor at the University of California-Irvine.

He and Ross in their campaign paper for Trump calculated that had the United States been able to eliminate its $500 billion trade deficit in 2015, it would have bolstered the economy by 3.38 percentage points and produced a growth rate of 5.97 percent.

Those calculations were derided as "magical thinking" at the time by many economists, who noted that the trade deficit is determined by the difference between saving and investment, with rising imports caused by less savings and not by "perfidious foreigners and incompetent trade negotiators" as Trump has suggested, a report by the Peterson Institute for International Economics said at the time.

Trump says that America will emerge as a winner in any trade war as its imports are so large that other countries will be forced to negotiate.

"Our jobs have been stolen from us, our businesses have been taken," Trump told a press conference on Tuesday.

(Additional reporting by Makini Brice, Jeff Mason and Steve Holland; Editing by James Dalgleish)

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