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US is ‘doing very well with China, and talking!’: Trump’s trade war optimism as economic clouds gather

“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 USA and meet with our principals to continue the negotiations and the talks,” Kudlow added.

Kudlow and Peter Navarro, President Donald Trump’s trade adviser, made multiple appearances on Sunday talk shows to discuss the economy and China trade prospects after a tumultuous week in financial markets that included an 800-point dip in the Dow Jones Industrial Average on Wednesday, its worst rout of the year.

Economy is key

The state of the economy will be key to Trump’s re-election prospects in 2020; a downturn would dim the outlook for a president whose approval ratings have stayed stubbornly low. Major US equity indexes, often referenced by Trump as a litmus test of his success, are essentially flat over the past 12 months.

“There’s no recession on the horizon,” Kudlow said on Fox. He added that there were no plans for additional fresh measures to boost the economy, and that the Trump administration would stay the course on its current agenda.

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“Consumers are working. At higher wages. They are spending at a rapid pace. They’re actually saving also while they’re spending – that’s an ideal situation,” he said on NBC’s Meet the Press.

Navarro, on ABC’s This Week predicted “a strong economy through 2020 and beyond.”

On CNN, Navarro disputed that the US had seen an inverted yield curve, often a forerunner of recession because it signals market expectations for weaker growth ahead.

“Technically we didn’t have a yield curve inversion,” he said on State of the Union. “All we’ve had is a flat yield curve.” And that, said Navarro, was “the result of a very strong Trump economy.”

As the stock market was tumbling on Wednesday, Trump lashed out at Federal Reserve Chairman Jerome Powell on Twitter, specifically citing the “CRAZY INVERTED YIELD CURVE.”

Wall Street had its worst day oif the year last week.

Wall Street had its worst day oif the year last week. Credit:AP

Navarro once again criticised Powell and the Fed on Sunday. “The Federal Reserve chairman should look in the mirror and say ‘I raised rates too fast,'” he said on CNN.

Additional Fed rate cuts beyond the quarter-point move in July will be a good thing, Navarro said, and a potential easing by the European Central Bank in September will help Europe’s struggling economy.

US-China trade tension boiled over this month after a brief detente. The US officially declared China a currency manipulator, and the country responded with a boycott of American farm products and by signaling that its currency can help cushion the tariff blow.

Navarro said the US still has “significant structural issues” with China. Kudlow, while laying out a potential timetable for new meetings, provided no specifics on the as-yet unrevealed “positive news” out of recent discussions.

“President Trump has said, he’s willing to negotiate. He’s willing to make a deal. It’s got to be the right deal to protect American interests,” Kudlow said.

Free Trade

At a time Trump is pursuing trade disputes with China, Europe and others, an NBC-Wall Street Journal poll released Sunday showed support for free trade among Americans is on the rise.

Almost two-thirds – 64 per cent – see free trade as good for the US, an all-time high for the survey series and up 7 percentage points from the last time it was asked, in 2017. Only 27 per cent believe it’s bad, citing damage to key US industries.

Kudlow, on Fox, discussed Trump’s decision last week to delay some planned 10 per cent tariffs on Chinese imports to December from September. The administration is giving companies time so they won’t “jack up prices,” he said.

Trump and his top aides have said repeatedly that Beijing, not US companies or consumers, are bearing the brunt of the tariffs imposed on imports from China.

Who Pays?

Navarro on CNN rejected a study by researchers at the University of Chicago, the Federal Reserve Bank of Boston and elsewhere that found US importers are shouldering the vast majority of price changes from the tariffs, versus China’s 5 per cent. “That dog won’t hunt,” he said. Tariffs “aren’t hurting anyone in the United States.”

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One key measure of US inflation increased in July, driven by costs of shelter, apparel and used cars, and gained the most in a decade in the past two months, the Labor Department reported this month. Economists say the boost in inflation shows the tariffs are gradually filtering through.

The tariff war has increased prices for goods, and US companies are paying the higher levies, according to a survey by the Federal Reserve Bank of New York. The US government collected $57 billion in customs duties in the fiscal year that began Oct. 1, according to the Treasury Department.

At a rally in New Hampshire on Thursday Trump pushed the economic rationale behind his run for another term, saying even Americans who hate him “have no choice” but to vote for him or face a stock market collapse.

“You have no choice but to vote for me because your 401(k), everything is going to be down the tubes,” Trump told the crowd in Manchester. “Whether you love me or hate me, you’ve got to vote for me.”

The US jobless rate has fallen under Trump, continuing its post-recession trend, and wages have started to tick higher. A breakdown of income numbers suggests wealthier Americans, who own stocks and have earnings from dividends, continue to benefit the most.

Bloomberg

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