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Kudlow Says Trump May Be Bluffing on China Tariffs. Is He Right?

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Political watchers opined Thursday on comments made by Lawrence Kudlow, President Donald Trump’s new economic advisor, that doused the markets’ tariff fears Wednesday when Kudlow stated that the tariffs against China may likely be a negotiating tactic and may never actually be enforced.

Trump’s proposed tariffs against China could be a negotiating tactic, Kudlow said on Stuart Varney’s Fox Business show. He told NBC News that tariff talk was “part of the process,” and that it was “possible” that tariffs against China wouldn’t go into effect. “I would take the president seriously on this tariff issue.”

Greg Valliere, chief global strategist for Horizon Investments, noted in his Thursday morning Capitol Notes briefing that Kudlow “came to the rescue” as the stock market plunged Wednesday “amid exaggerated fears of a ‘trade war.’”

Kudlow stated Wednesday that “this is not a trade war,” Valliere said, “and besides the tariffs proposed by the U.S. and China are just opening shots in a process that now will give way to negotiations that could last for weeks, maybe longer.”

The markets “instantly turned positive after a horrendous open,” Valliere noted.

Kudlow’s argument, Valliere continued, “is that a deal is possible, one that will be a plus for the U.S., and that China has to confront the issue of its theft of intellectual property.”

Valliere sees “a deal by summer” and says “talks on NAFTA have progressed; an agreement in principle is possible in the next week or two.”

The key point from Kudlow: “Back-channel talks are progressing with China and on NAFTA,” Valliere said.

Andy Friedman of The Washington Update, meanwhile, told ThinkAdvisor on Thursday morning that he sees Trump’s imposition of tariffs as “more than a mere negotiating ploy.”

Trump, Friedman said, “wants to reduce imports and in his view right-size the country’s balance of payments. Sure, if countries agree to make trade changes that balance U.S. imports and exports, Trump won’t follow through. But if negotiations yield only something meaningfully less than that, I think Trump will carry through on his promise to impose tariffs in those cases.”

As to the impact of tariffs on the markets, “generally speaking, tariffs are counterproductive for the economy and the markets, as we’ve seen by the market volatility of the past few days, as the markets drop with the threats of a trade war and rise when assured one won’t occur,” Friedman continued.

Tariffs, he added, “can lead to a trade war, as our negotiating partners retaliate with tariffs of their own, hurting U.S. exporting businesses.”

Even without a trade war, tariffs are harmful for consumers, Friedman said. “As an example, if the U.S. imposes a 10% tariff on TV sets manufactured in Asia, then U.S. consumers should pay 10% more for the TV sets they buy.”

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