Lawrence Kudlow, President Donald Trump’s chief economic adviser, predicted Tuesday that “calmer heads” will prevail in an escalating trade confrontation between the U.S. and China even as he offered few concrete signposts for progress.
The former CNBC analyst’s comments come as U.S. and global markets are slumping over worries that the world’s two biggest economies could trigger a recession with their trade war. Major U.S. markets dropped by at least 3 percent Monday.
He also said he sees “no signs” a global recession is on the horizon. That’s largely because of what he called a “very strong” American economy that powers the world economy.
“The economic burden is falling vastly more on them than us,” he said of China a day after the Treasury Department, for the first time in decades, labeled Beijing a currency manipulator after officials there allowed the yuan to fall below a level widely considered the point at which they were purposely devaluing.
“Pouring money and devaluing currency is not the answer,” Kudlow told reporters outside the White House after a television interview.
Chinese officials on Tuesday said they have taken steps to avoid devaluing the yuan. Asked about that, Kudlow said the White House intends to take a “careful look.”
“The door is open for additional negotiations. We are planning for the Chinese team to come here in September,” Kudlow said. “It must be a deal in our interests, as well as theirs.”
His remarks came one week after Trump tweeted that prospects for a U.S.-China accord were not good.
Stalled trade talks, following a brief session in Shanghai that produced no real movement from the Chinese side, are slated to resume next month in Washington.
China is doing very badly, worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through. Our Economy has become MUCH larger than the Chinese Economy is last 3 years….
— Donald J. Trump (@realDonaldTrump) July 30, 2019
U.S. negotiators are pushing their counterparts to overhaul their trade practices; China has balked at giving American firms a more competitive stance inside China’s vast market.
“Negotiations are always available … It’s their action. They brought this on themselves,” Kudlow said of the currency manipulator tag. “I think you’ll see calmer heads prevail.”
Several reasons for the latest batch of Kudlow’s self-described perennial “optimism”? He said the U.S. unemployment rate — 3.7 percent, according to the U.S. Bureau of Labor Statistics — and growth in the durable goods market are positive signs.
“The US economy is very strong. The rest of the world’s not. … If there’s any consumer impact, it’s very very small,” he said, the latter a reference to Trump’s double dose of tariffs on Chinese-made goods. Economists and Democratic lawmakers, however, say the impact is coming very soon, as price changes ripple through the U.S. market.
Meantime, Trump signaled in a morning tweet that a 2020 round of multi-billion dollar trade aid payments to farmers is possible after China said it will not buy more U.S. farm goods as U.S.-Beijing tensions escalate.
The administration paid nearly $9 billion to farmers in 2018 and will start 2019 payments this month of up to $7 billion.
Ellyn Ferguson contributed to this report.