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Trump in ‘imminent danger’ of breaking a key rule for winning fights, ex-Obama advisor says

President Donald Trump's approach to trade sounds like a recipe to send the U.S. into a recession, Austan Goolsbee, who was chairman of the Council of Economic Advisers during Barack Obama's presidency, told CNBC on Thursday.

"My impression is the Trump administration is in imminent danger of violating the gunfighter's credo, which is: Do not pick seven fights if you are carrying a six shooter," Goolsbee told CNBC's "Squawk Box" on Thursday.

"We're going to declare simultaneous trade wars on four of our six biggest trading partners. That doesn't make sense to me. That seems like a recipe to send the U.S. into recession," said Goolsbee, who is currently a professor of economics at the University of Chicago Booth School of Business.

Of all of Trump's policy proposals, the trade issues worry economists the most, Goolsbee said.

"We've gone through rounds of tax cutting and rounds of tax increases in modern U.S. history," he noted. "We haven't really had a big igniting of a trade war belligerence since the Depression era and that's not an era that we want to repeat."

Goolsbee also pointed to the Trump administration's accusations that other countries, including China, Germany and Japan, might be manipulating their currencies to the detriment of the U.S.

But Trump's position appeared counter to the current economic milieu, with the U.S. Federal Reserve "itching" to raise interest rates even if they didn't act on Wednesday, he noted.

Donald Trump speaks during a thank you rally in Ladd-Peebles Stadium on December 17, 2016 in Mobile, Alabama.
Getty Images
Donald Trump speaks during a thank you rally in Ladd-Peebles Stadium on December 17, 2016 in Mobile, Alabama.

"In the face of other countries cutting their rates and loosening their monetary policy, the dollar is going up in a situation like that," Goolsbee said. "To the extent that the Trump administration doesn't like a strong dollar, something has got to give and just yelling at other countries for devaluing when you're raising rates and they're cutting rates is not going to work."

During his campaign, Trump vowed to label China a currency manipulator for the purposes of a competitive trade advantage, even though the country has actually been propping up its currency.

Additionally, the dollar tumbled on Tuesday after Peter Navarro, the head of Trump's new National Trade Council, told the Financial Times that Germany was using a "grossly undervalued" euro to gain advantage over the U.S. and its own European Union partners.

Trump also recently claimed Japan has been using monetary policy to weaken the yen for trade advantage.

Goolsbee added that the administration didn't appear to be relying much on economists' advice.

"They have chosen not to even name a single member of the Council of Economic Advisers. I think they are kind of sending a signal that they don't accept, that they don't want to take traditional economic advice," he said.

The Council of Economic Advisers is a panel of three advisors who are meant to provide the president with objective economic research and advice. Media reports have indicated Trump was considering appointing Larry Kudlow, a CNBC contributor, to chair the council. The chairman must be confirmed by the Senate.

Goolsbee also noted that Trump's apparent policies may work at cross-purposes.

In the president's meeting last week with as many as 10 manufacturing CEOs, Trump urged them to move jobs back to the U.S., but his administration subsequently floated the idea of a 20 percent tariff on everything exported from Mexico to the U.S. "If he had said that before he had met with the manufacturing CEOs, the first thing the manufacturing CEOs would have told him is that most of the big manufacturing companies in the U.S. have worldwide, global supply chains so you can't really do that without having a major negative impact on U.S. industry," Goolsbee said.

He also pointed out that the tariff would be illegal given that Mexico and the U.S. are both members of the World Trade Organization (WTO).

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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