US economy 'Strong economy through 2020': Trump advisers insist recession is not coming
- Peter Navarro and Larry Kudlow dispute market indicators
- Tariffs are hurting China not US, trade aide insists
Donald Trump’s chief trade advisers insisted on Sunday the US is not facing a recession which markets appear to fear and which could cost the president dearly at the polls next year.
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Speaking to ABC’s This Week, White House trade adviser Peter Navarro defended US policy, predicted a “strong economy through 2020” and disputed the existence of a bond-market indicator of approaching recession that this week sent stocks into their largest one-day sell-off this year.
White House economic adviser Larry Kudlow, meanwhile, insisted on Fox News Sunday: “There’s no recession on the horizon. What’s wrong with a little optimism?”
Pessimism is spreading, however, among Republicans in Washington. Trump’s approval rating remains stubbornly low and fear is rife that economic reversal will lead to defeat at the polls.
On Sunday Navarro, the leader of the White House’s controversial China trade policy, claimed the bond-market indicator – a reversed spread in yields between long-term and short-term bonds – had not in fact occurred.
There’s no recession on the horizon. What’s wrong with a little optimism?
“We did not have a yield curve inversion right now, by technical standpoints,” Navarro told ABC. “It is flat, not for bad reasons, but for good reasons.”
“I can tell you with certainty is that we’re going to have a strong economy through 2020 and beyond,” Navarro said, claiming central bankers had in the past raised interest rates “too far too fast” and “cost us a full point of GDP growth”.
Attempting to calm increasing economic anxiety that on Wednesday triggered an 800-point sell off on the Dow Jones index, Navarro predicted that the Federal Reserve will lower interest rates at its next meeting of governors in mid-September.
“All what needs to happen here,” Navarro told ABC, “is for the Federal Reserve to do what it needs to do, which is begin lowering interest rates”. That would make the economy return to a “bullish cycle”, he said.
Trump told supporters in New Hampshire this week they had “no choice but to vote for me” if they wanted the economy to thrive. But such confidence is not shared by an increasing number of Americans.
According to an NBC/Wall Street Journal poll published on Sunday, Americans are growing more uneasy about the administration’s economic policies. By a 49%-46% margin, Americans still approve of Trump’s handling of the economy. But that is down from 51%-41% in May.
More worrying for the administration are figures that show free trade, as opposed to a tariffs-based policy, is supported by a margin of better than two to one, or 64%-27%, up from 57%-37% early in Trump’s presidency.
That could spell bad news for Trump’s China trade policy, which is partly blamed for poor economic numbers coming out of Germany and Beijing and for growing pain in US sectors including agriculture, usually a bastion of Republican support. On Tuesday, the administration said it would delay 10% tariffs on $300bn of Chinese imports set to go into effect on 1 September.
Trump has repeatedly claimed China is bearing the larger share of the tariff burden, a claim echoed by Navarro if not by most economic observers.
“Tariffs are hurting China,” Navarro told CNN’s State of the Union. “China is bearing the burden by lowering the value of the yuan almost 12%. The pain is on them, not on us.”
Few studies bear that out. According to figures cited by CNN, researchers at Harvard, the University Chicago, the International Monetary Fund and the Federal Reserve Bank in Boston found in May US importers are shouldering about 95% of the price change from the tariffs while China is shouldering 5%.
A study by the Federal Reserve Bank of New York, Princeton University and Columbia University found that US companies and consumers are paying $3bn a month in additional taxes because of tariffs on Chinese goods and on global metals imports.
Nowhere are the tariffs felt more keenly than by US soybean farmers. Such exports to China have dropped 70% from 27.7m tons in September 2017 to May 2018 to 7m tons in the same nine-month period in 2018 and 2019, according to an analysis by University of Missouri.
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“Words and Twitters and tweets, that doesn’t pay the farmers’ bills,” Gary Wertish, president of the Minnesota Farmers Union, told CNN last week. “That doesn’t solve the problem we’re dealing with.”
On CNN on Sunday, Navarro was presented with a comment from the president of the Iowa Soybean Association, Lindsay Greiner, who said US government subsidies “are a poor remedy for trade”.
Navarro accused China of reneging on its commitments.
“If you look at the arc of the negotiations, a hundred days after Mar-a-Lago [when Trump met Chinese president XI Jinping there in April 2017], they didn’t do anything. So we had a[n] investigation, signalling to China, ‘Do things.’
“We had to add tariffs when they failed to do things.”
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