Kudlow Warns Trump Tariffs Could Harm US Consumers, Companies

President Donald Trump's plans to raise tariffs on imported steel and aluminum is a "blunt instrument" that could have adverse effects on consumers and companies in the United States, economist Larry Kudlow warned Friday.

"Across-the-board tariffs like this damage the users of the commodity," Kudlow told CNBC's "Squawk Box."

"What are you going to do about cars? All manner of transportation, buses, trucks, SUVs? The energy business. Airplanes, they all use steel."

Kudlow also told CNBC that he wants White House chief economic adviser Gary Cohn to remain, responding to multiple media reports about Cohn's future with Trump after he was not able to convince the president not to impose the tariffs.

"I am urging [chief economic adviser] Gary Cohn to stay and fight for another day," said Kudlow. "He's done a great job. He and [Treasury Secretary Steven] Mnuchin have been terrific on this, including the opposition to tariffs. He's got a great staff and i want him to stay and fight for another day, because NAFTA is the big thing."

Trump said Thursday during a meeting with national steel and aluminum industry executives, that he plans to announce a 25 percent tariff on steel imports and 10 percent on aluminum next week.

"Believe me, I know it was pushed over yesterday [that] theory dictates the prices can rise by 25 percent," said Kudlow. "If it's a little less than that, call it 20 percent, that is unhelpful. You've got also 155 million Americans who are working. It's incalculable but so many of them, the middle, lower middle income are going to be hurt by this tax."

Kudlow added that he heard a steel company spokesman comment on Thursday that the tariffs could add "just $35 a car" once the tariffs are added in, but he disagreed with that estimate.

"He doesn't know that because they haven't made their pricing decisions," said Kudlow. "I think it's going to be higher than that — $50, $100 a car over a period of time.'

In addition, the tariffs could hit the nation's infrastructure costs, energy costs, and lead to higher home heating costs, Kudlow warned.

"Anything that damages the consumer outlook, it will be a lot more than that," he said. "It will be painful. Tariffs are taxes and the ones who suffer most are the users."

Kudlow also noted that tariffs are a "blunt weapon" that has been used in the past, including by late President Ronald Reagan. However, the difference is that Reagan would only use temporary small tariffs "on specific items to make a point" before negotiations.

"Trump did this across the board," said Kudlow. "That is very unusual, and that's why he's getting so much opposition from Congress."

Kudlow said he also believes that Trump has been "itching to say something because he campaigned on this...I don't think there [are] any negotiations with our major steel partners. I don't think they negotiated, they just went."

He said he does believe Trump has been "great" on lowering the nation's tax burden and rolling back regulations, which is making the United States more competitive.

"We are open for business, as he said, in Davos, and he's 100 percent right," said Kudlow. "He's done such great work on that."

However, he continued, the nation's steel companies are not satisfied with easy ways to bring their cash home to the United States, but they want another "tax, called a tariff."

"Past history is not kind to that industry," said Kudlow. "Not only are they shrinking and not competitive, but profits tend to go to the executive suite. I'm not a class warfare guy, but I'm telling you, that’s the history. The workforce continues to shrink. This is just bad of all the things to go after. I wouldn't have chosen steel. Sorry."

Kudlow also said he thinks it's highly likely Trump won't wind back some of his call on tariffs, and he's worried the move could affect the North American Free Trade Agreement.

"That's what the stock market's worried about," said Kudlow. "You have trade war periods. During the campaign whenever trade wars became front page news, the markets sank. NAFTA is a key. We're going after a major NAFTA ally, Canada. Even with [Justin] Trudeau, they're still our pals."