White House Economic Adviser: Effects of U.S.-China Trade Dispute ‘Wildly Exaggerated’

‘You gotta do what you gotta do,’ said Kudlow. ‘This is worthwhile doing…’

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Larry Kudlow/IMAGE: CNBC via YouTube

(Todd Shields and Ben Bain, Bloomberg News) The White House’s top economic adviser, Larry Kudlow, signaled that President Donald Trump will stick to his guns on the trade war with China and predicted that the impact on the U.S. economy would be minimal from higher tariffs assessed on Chinese goods.

In his first interview since high-level talks between Chinese and American officials broke up Friday without a deal, Kudlow told “Fox News Sunday” that China has invited U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin back to Beijing.

No date has been set so far for fresh talks, he said. It was likely Trump would meet with Chinese President Xi Jinping during the G20 meeting in Osaka, Japan, in late June, Kudlow said.

Kudlow conceded that U.S. importers and consumers, not China, pay the tariffs on imported Chinese products imposed by Washington as Trump has suggested. But he said China feels the impact, too, in terms of a hit to its own economic growth. “Both sides” suffer the impact of the tariffs, he said.

Losing some U.S. jobs and taking a hit to growth was a reasonable risk to take to correct “decades” of unfair trade practices by Beijing, especially since the U.S. economy is strong, said Kudlow.

‘EXAGGERATED’ FEARS

He said, though, that estimates of the hit to U.S. growth and the employment market from the current tariff regime were “wildly exaggerated” compared with internal White House estimates. The U.S. might lose 0.2% of GDP, Kudlow said.

“You gotta do what you gotta do,” said Kudlow. “This is worthwhile doing.”

The ongoing trade spat between the world’s two biggest economies is roiling markets and weighing on projections for global growth.

The Trump administration last week upped the ante further by increasing tariffs on $200 billion in Chinese goods to 25% from 10% and giving Beijing a month to seal a deal or face tariffs on all its exports to the U.S.

Lighthizer said the administration would release details of its plans for tariffs on roughly $300 billion in imports from China on Monday.

Kudlow said Sunday it could be “months” before more tariffs go into effect.

Washington’s tough talk comes as Trump tries to cast the row in a way that benefits him as he gears up for a re-election campaign that’s expected to lean heavily on strong U.S. economic growth.

Meanwhile, the Chinese have also shown no sign of backing down.

Late Friday, Vice Premier Liu He said that to reach an agreement, the U.S. must remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand and ensure that the text of the deal is “balanced” to ensure the “dignity” of both nations.

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