President Trump and his economic advisors fired back against
recession predictions over the weekend. Over the past few weeks, recession fears
have mounted as prospects for a trade deal with China have dimmed, sparking an
800-point selloff in the stock market and an inverted yield curve for bonds,
which is often a leading indicator for economic downturns.
Two top White House advisors made the Sunday talk show rounds
yesterday in an attempt to allay concerns about the trade war. Speaking to Chuck
Todd on NBC’s
“Meet the Press,” Chief White House Economic Advisor Larry Kudlow said, “No,
I don’t see a recession. And let me add just one theme … Just one theme.
We’re doing pretty darn well, in my judgment. Let’s not be afraid of optimism. It’s
a funny sign of our times. And I think there’s a very optimistic economy going
on out there.”
After that appearance, Kudlow popped up on “Fox
News Sunday” with Dana Perino, where he again touted the Trump economy,
saying, “First of all, I don’t see a recession at all. Second of all, the Trump
pro-growth program, which I believe has been succeeding lower tax rates, bid
rollback of regulations, energy opening, trade reform, we’re going to stay with
White House Trade Advisor Peter Navarro showed up on CNN’s
“State of the Union” with Jake Tapper where he argued that tariffs are “not
hurting anybody here” because China was devaluing its currency to a greater degree
than the Trump Administration was imposing tariffs.
President Trump also got into the act, telling
reporters on Sunday, “We’re doing tremendously well. Our consumers are
“And we’re not going to have a recession. But the rest of
the world is not doing well as we’re doing,” Trump said.
“I think our economy is very, very good,” the president said,
but then seemed to acknowledge that the trade war was acting as a brake on the
economy, adding, “We can do a lot of things, but if it slowed down it would be
because I have to take on China and some other countries. Look, you have other
countries that are just as bad as China, the way they treated us.”
When the president had dinner with Apple CEO Tim Cook on Friday,
Cook took the opportunity to bend the president’s ear on the upcoming tariffs
on consumer electronic products. Cook pointed out that the tariffs would affect
Apple more than Korean phone manufacturer Samsung since iPhones are made in China,
but Samsung phones are built in several different countries.
“I thought he made a very compelling argument” about the
difficulty in competing with Samsung, Trump told Bloomberg.
“It’s tough for Apple to pay tariffs if it’s competing with a very good company
This contradicts Trump’s statement
to reporters that “In the case of China, China is eating the tariffs. At
least so far.”
Trump and his advisors crowed over retail
sales numbers released last week, which increased for the fifth straight month,
but other recent indicators are not so rosy. Job
growth was slower than expected in July and housing starts fell by four percent,
the third straight month of declines.
Farmers are also showing signs of discontent with the trade
Wertish, president of the Minnesota Farmers Union, said, “Words and
twitters and tweets, that doesn’t pay the farmer’s bills, that doesn’t solve
the problem we’re dealing with.
“This would is self-inflicted by our president,” Wertish added. “We definitely
agreed with him at the beginning, but it doesn’t appear that there’s a plan B.”
“Short-term, stair-stepped subsidies … stimulate
production but not sales and therefore do little to undo the long-term log jam
caused by not selling soybeans to destinations like China, the world’s number
one customer.” Lindsay Greiner, the president of the Iowa Soybean Association,
said in a statement earlier this year.
also addressed concerns about the inverted yield curve, saying, “Also, when
you go in and analyze the [bond yield] curve, the curve always means that about
two years later, maybe you will go in [to a recession]. That’s a long time, two years. But I don’t
think so. Interest rates are low. I think I could be helped out by the Fed. But
the Fed doesn’t like helping me too much.”
Navarro denied that there was an inverted yield curve at all,
saying, “An inverted yield curve requires a big spread between the short and
long. All we have had is a flat curve. It’s a flat curve which is a very weak
signal of any possibility.”
Most economists and investors disagree with Navarro. The Wall
Street Journal cited uncertainty over the stock market, news that the
German economy shrank 0.1 percent in the second quarter, Brexit concerns, and
Chinese economic figures as pointing towards a slowing economy and pushing
investors towards the more stable bond markets. The Journal noted that the
market warning signs are an “omen of the future, not destiny,” however.
The key to averting an economic downturn is for the Trump
Administration to find a way to make a trade deal with China and call off the
trade war. While some celebrate news of the slowing Chinese economy, the Journal
points out, “a Chinese recession would mean a European recession, which would
send U.S. growth down too.” As I’ve noted before, the Chinese don’t have to
outlast the US economy, they only have to outlast President Trump and, if Trump
loses his one unequivocal advantage in the solid economy, his departure in 2021
would be virtually guaranteed.
Unfortunately, the president does not seem ready to declare
victory and end the trade war, maintaining that China’s economic pains are “why
they want to come to the table,” as well as that “President Xi, I’m sure, likes
me very much.”
“Our country is going to be stronger by far than ever before,”
Trump insisted. “I mean, if I wanted to make a bad deal and settle on China,
the market would go up. But it wouldn’t be the right thing to do. I’m just not
ready to make a deal yet. China would like to make a deal, I’m not ready.”