Recession Fears Prompt Many to Rethink Global Economic Integration
Downturn now could lead to major realignment of global trade
BERKELEY HEIGHTS, NEW JERSEY - President Donald Trump’s top economic adviser is playing down fears of a looming recession after last week’s sharp drop in the financial markets and predicting the economy will perform well in the second half of 2019.
Larry Kudlow said in Sunday television interviews that consumers are seeing higher wages and are able to spend and save more.
“No, I don’t see a recession,” Kudlow said. “We’re doing pretty darn well in my judgment. Let’s not be afraid of optimism.”
A strong economy is key to Trump’s reelection prospects. Consumer confidence has dropped 6.4% since July. The president has spent most of the week at his golf club in New Jersey with much of his tweeting focused on talking up the economy.
Kudlow acknowledged a slowing energy sector, but said low interest rates will help housing, construction and auto sales.
Kudlow also defended the president’s use of tariffs on goods coming from China. Before he joined the administration, Kudlow was known for opposing tariffs and promoting free trade during his career as an economic analyst. Kudlow said Trump has taught him and others that the “China story has to be changed and reformed.”
“We cannot let China pursue these unfair and unreciprocal trading practices,” Kudlow said.
Democratic presidential candidate Beto O’Rourke said the U.S. needed to work with allies to hold China accountable on trade. He said he fears Trump is driving the global economy into a recession.
“This current trade war that the president has entered our country into is not working,” O’Rourke said. “It is hammering the hell out of farmers across this country.”
What is a recession?
Last month, the Federal Reserve reduced its benchmark rate — which affects many loans for households and businesses — by a quarter-point to a range of 2% to 2.25%. It’s the first rate cut since December 2008 during the depths of the Great Recession. Federal Reserve Chairman Jerome Powell stressed that the Fed was worried about the consequences of Trump’s trade war and sluggish economies overseas.
“Weak global growth and trade tensions are having an effect on the U.S. economy,” he said.
Breaking with historical norms, Trump has been highly critical of Powell as he places blame for any economic weakness on the nation’s central bank for raising interest rates too much over the past two years.
Peter Navarro, who advises Trump on trade policy, shared that sentiment.
“The Federal Reserve chairman should look in the mirror and say, ‘I raised rates too far, too fast, and I cost this economy a full percentage point of growth,’” Navarro said.
Navarro also said that U.S. consumers are not affected by the administration’s trade war with China, though tariffs are taxes paid by U.S. importers, not by China, and are often passed along to U.S. businesses and consumers through higher prices.
Kudlow himself told Fox in May that U.S. consumers and businesses ultimately end up paying the tariffs that the administration imposes on billions of dollars of Chinese goods.
Trump acknowledge at least a potential impact when he paused a planned 10 percent tariff hike for many items coming from China, such as cellphones, laptops, video game consoles, some toys, computer monitors, shoes and clothing.
“We’re doing (it) just for Christmas season, just in case some of the tariffs could have an impact,” the president told reporters in New Jersey.
Navarro would not go even that far, saying Sunday “there’s no evidence whatsoever that Americans consumers are bearing any of this.”
Kudlow was interviewed on NBC’s “Meet the Press” and “Fox News Sunday.” O’Rourke spoke on NBC, and Navarro appeared on CNN’s “State of the Union” and CBS’ “Face the Nation.”
Trump’s trade war with China has been a target of criticism by Democrats vying to challenge him in 2020.
“There is clearly no strategy for dealing with the trade war in a way that will actually lead to results for American farmers or American consumers,” said Mayor Pete Buttigieg of South Bend, Indiana, a Democratic presidential candidate. He said on CNN that it was “a fool’s errand” to think tariff increases will compel China to change its economic approach.