White House Believes Trade War Won’t Lead US Into Recession

White House officials pushed back yesterday against concerns that economic growth may be faltering, saying they saw little risk of recession despite a volatile week on global bond markets, and insisting their trade war with China was doing no damage to the United States.

‘There is no recession in sight, White House economic adviser Larry Kudlow said on Fox News Sunday. ‘Consumers are working. Their wages are rising. They are spending and they are saving…I think we are in pretty good shape.

US stock markets tanked last week on recession fears with all three major US indexes closing down about 3% on Wednesday only to pair their losses by Friday due to expectations the European Central Bank might cut rates.
For a brief time last week bond investors also demanded a higher interest rate on 2-year Treasury bonds than for 10-year Treasury bonds, often construed as a sign of lost faith in near-term economic growth.

However, trade adviser Peter Navarro yesterday likewise dismissed last week’s warning signs, saying ‘good economic dynamics were encouraging investors to move money to the United States. ‘We have the strongest economy in the world and money is coming here for our stock market. It’s also coming here to chase yield in our bond markets, Navarro told ABC’s This Week.

That sort ‘flight to safety is typically driven by concerns of global economic trouble — in this case the possibility that the Trump administration’s tariff battle with China may dampen business investment and growth worldwide.

The Chinese Tariffs

The tariffs on Chinese goods, Navarro said, ‘are not hurting anybody here. The US economy does continue to grow and add jobs each month. Retail sales in July jumped a stronger-than-expected 0.7%, the government reported last week, and Kudlow said that number showed that the main prop of the US economy is intact. But manufacturing growth has slowed and lagging business investment has also become a drag.

Globally, flagging global trade appears to have pushed the German economy toward recession, and dampened growth in China.

A slowdown would be bad news for President Donald Trump, who is building his 2020 bid for a second term around the economy’s performance. He told voters at a rally last week they had ‘no choice but to vote for him in order to preserve their jobs and investments.

Despite talking up the economy, the president and his advisers have repeatedly accused the US Federal Reserve of undermining the administration’s economic policies.

On Sunday, Kudlow again pointed the finger at the central bank, describing rate hikes through 2017 and 2018 as ‘very severe monetary restraint. The Fed hiked rates seven times over those two years as part of a plan to restore normal monetary policy following the emergency steps taken to battle the 2007-2009 global financial crisis and recession.
Even with those steps, the Fed’s target interest rate has remained well below historic norms, and policymakers have started cutting rates in response to growing global risks.

Democratic presidential candidates yesterday joined the many economic analysts who have said the administration’s sometimes erratic policies are to blame for increased uncertainty, disappointing business investment and market volatility.

‘I’m afraid that this president is driving the global economy and our economy into recession, Democratic candidate Beto O’Rourke said on NBC’s ‘Meet the Press.

#economic adviser#economy#politics#presidential leadership#Recession#stock market#trade war#Trump#White House