Recession? White House economic adviser says not 'at all'
Top White House economic adviser Larry Kudlow said Sunday he does not forecast a recession “at all,” despite warning signs exhibited by the bond market last week.
“First of all, I don’t see a recession at all,” Kudlow told “Fox News Sunday.” “Second of all, the Trump pro-growth program, which I believe has been succeeding – lower tax rates, big rollback of regulations, energy opening, trade reform – we’re gonna stay with that. We believe that’s the heart of the free enterprise. We want an incentive-oriented supply-side economy, providing opportunities for everybody across the board.”
Markets last week flashed a warning signal of a looming recession, as the spread between the 2-year Treasury note and 10-year note inverted for the first time in more than 10 years. Typically, the yield of the 10-year note is higher than that of the 2-year note. The inverted spread caused investors to sell stocks and flee to the bond market and, as a result, the Dow Jones Industrial Average suffered its worst day of 2019 on Wednesday, closing 800 points lower.
Kudlow said the next steps for the White House on the trade and economic front include the trade agreement with Mexico and Canada (USMCA), and trade deals with the European Union and Japan.
“[USMCA] would be very important and would add a half a point of GDP and 180,000 new jobs per year if we get that through,” the White House economic adviser noted. “Again on the trade front, a good beef deal with the European Union. And finally making great progress on Japan with respect to agriculture and various telecommunications. So those are new initiatives.”
Meanwhile, as the trade war with China continues, delegations from Washington and Beijing are likely to further efforts to reach a deal on trade, according to Kudlow, who said the U.S. team had a “successful” teleconference call with their counterparts in China.
“In that conference call they agreed with the Chinese team that their deputies will be meeting by teleconference in the next week or 10 days,” Kudlow said. “If those deputies’ meetings pan out, as we hope they will, and we can have a substantive renewal of negotiations, then we are planning to have China come to the U.S.A. and meet with our principals to continue the negotiations and continue the talks.”
Kudlow reiterated that tariffs on China are working and continue to weigh on the Chinese economy. China’s industrial production in July grew at the weakest pace since February 2002, while the retail sales in the nation also slowed, growing 7.6 percent in July from the prior year, down from 9.8 percent in June.
“China is in some economic trouble,” he said. “President Trump is using tariffs in order to put more pressure on the Chinese economy. I think his strategy is, in fact, working.”
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The White House economic adviser added that the administration has given “some relief” to larger U.S. consumer businesses by excluding them from the 10 percent tariff on $300 billion of Chinese goods, noting that the tax on the remaining Chinese goods – which Trump pushed back from the Sept. 1 deadline – is likely to take place on Dec. 15.
“We gave some relief to big American consumer companies for Christmas, because they had already locked in their orders in dollar terms and prices,” Kudlow said. “So we’re gonna give them some relief and exclude them.”