White House Trade Adviser Peter Navarro told CNBC that the Dow Jones Industrial Average could hit 30,000 if a couple of factors come to pass. He said:

“The two things that really have to happen in the short run to get us Dow 30,000, and above are going to be passing the U.S., Mexico and Canada agreement and having the Fed lower interest rates.”

This would add an additional 11 percent to the 15.6 percent gain the Dow has already seen this year and would bring the total return under Donald Trump’s administration to 33 percent. While presidents do not control the stock market, their economic policies affect corporate earnings.

The cut in the corporate tax rate to 21 percent from 35 percent was also a factor in the huge increase. This allowed companies to hold onto more cash to invest in their businesses or return to shareholders as dividends or stock buybacks.

The Fed Was Too Aggressive

Peter Navarro was also critical of the Federal Reserve, saying it had raised rates too aggressively and that’s the reason for some of the economic weakness that’s been cropping up in select corners of the economy.

“The Federal Reserve [hiked] interest rates unnecessarily too fast, too far, and engaged in massive quantitative tightening at a time when they should have been holding pat. And that — what we’re feeling now is kind of the residual effect of that mistake that was done months ago. And the hope is that the Fed will do the right thing here and lower interest rates and get us back on track.”

President Trump’s senior trade adviser also said the USMCA – the replacement deal for NAFTA – was “ready to go” and merely needed some clarity with the Democrats on enforcement issues to pass.

In addition to a stronger stock market, he suggested the deal would result in a full 0.5 percent increase in GDP growth and add half a million jobs to the U.S. economy.

The Tariffs Are Working

Peter Navarro was also positive on the recent developments at the G20 in the trade war with China and clarified the reasons for the war in the first place.

“We have 25% tariffs on $250 billion worth of Chinese products. That’s our insurance policy to keep these negotiations on track. It’s also our defense against Chinese predation. And we know what they do. They steal our intellectual property, they force the technology transfer, they dump products into their markets….what we’re trying to get to is a place with China that it confirms to the rules of international trade as we know them, not as they know them.”

As for the trade war affecting the Dow and U.S. economy, Q2 GDP and earnings numbers will tell the real tale. First quarter GDP came in a robust 3.1 percent.

The decision to impose tariffs on China and start a trade war was heavily criticized, even by pro-Trump business leaders and the Dow’s reaction. Yet the purpose of the tariffs was not to create some kind of long-term policy but to get China to the negotiating table and press U.S. interests there.

Navarro Was Right on the Dow Before

It was a bold and risky move because if China refused to negotiate, the U.S. economy could be severely harmed by the tariffs over the long term. Yet President Xi Jinping is no dummy. He needs to keep the Chinese economy afloat as well, as tariffs aren’t good for his country, either.

Peter Navarro is worth listening to. As he mentioned on the CNBC broadcast, he predicted the stock market would hit 25,000 if Trump’s agenda was implemented.

He was right.

If corporate earnings pick back up – and the economy goes roaring forward as a result of a better deal with China and interest rates – Dow 35,000 does not appear to be out of the question.