White House economic adviser Larry Kudlow claims that China’s economy is collapsing and that the U.S. will ultimately win the trade war.
“The Chinese economy is crumbling. It’s just not the powerhouse it was 20 years ago,” the veteran financial guru and former Ronald Reagan adviser told CNBC.
Kudlow said that “any long chart of Chinese investment” or economic metrics shows “a steady downdraft.”
“Their GDP, which is probably inflated by several points, is coming in lower and lower,” added Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
Kudlow also said President Donald Trump wants to continue trade talks with China and the Trump administration is still planning to host a Chinese delegation for further talks in September.
"He would like to make a deal," Kudlow told CNBC, adding that it would have to be the "right" deal.
"He would like to continue negotiations," said Kudlow, assistant to the president for economic policy and director of the White House’s National Economic Council.
“We’re willing to negotiate. Movement towards a good deal would be very positive and might change the tariff situation. But then again, it might not,” said Kudlow, who served as the Trump campaign's senior economic adviser.
The Trump administration formally labeled China a currency manipulator late Monday in a tit-for-tat escalation of the dispute between the world’s two largest economies. The U.S. action followed China allowing its currency to weaken and ending purchases of American agricultural products, in response for new tariffs Trump announced last week.
Economic tensions ratcheted upward after Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer returned from meetings with counterparts in Shanghai last week without progress toward a deal to resolve American complaints about China’s economic practices. Trump ordered 10% tariffs on about $300 billion in Chinese imports to begin Sept. 1, barring a breakthrough in negotiations.
Kudlow said movement toward an agreement could change the outlook for U.S. tariffs, adding, “It takes two to tango.”
He added that the U.S. economy was still in good shape and said he saw no signs of a global recession on the horizon despite growing concerns the U.S.-China standoff is slowing manufacturing activity around the world.
Kudlow sees the U.S. as having a clear advantage as the impasse continues, adding that the tariff burden “is falling almost 100% on China.”
“The American economy is in great shape. It’s booming, there is no inflation,” Kudlow said. “We’re in terrific shape. The Chinese, regrettably, are not,” said Kudlow.
“The U.S. economy is very strong. The rest of the world is not. We’re the engine that makes it go. Frankly, I see no signs,” Kudlow said, when asked about the prospect of a global recession. “The economic burden is falling vastly more on them (China) than us.”
Kudlow said Washington was forced to make the currency designation given a 10% drop in China’s currency since April 2018, and said other members of the Group of Seven (G7) industrialized countries supported the action.
“At some point in time, if they are violating our laws, WTO (World Trade Organization) laws and, frankly, G-20 laws of currency stability ... we have to take the action,” he said. “They brought it on themselves.”
Material from Bloomberg and Reuters has been used in this report.
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