White House advisers on Sunday said the country isn’t heading for a recession and played down the effects of President Trump’s trade war after a wobbly week on Wall Street, arguing that pessimism is the only thing that could hold America back.
Mr. Trump’s chief economic adviser, Larry Kudlow, said Mr. Trump has no intention of abandoning his “supply side” approach to tax cuts and deregulation after U.S. stocks plunged at midweek on fears of a recession and weak economic performances from Germany and China.
More Americans are working, they’re earning more and even saving a bit as they spend freely.
“I sure don’t see a recession. We had some blockbuster retail sales, consumer numbers towards the back end of last week. Really blockbuster numbers. And, in fact, despite a lot of worries with the volatile stock market, most economists on Wall Street towards the end of the week had been marking up their forecasts for the third and fourth quarter,” Mr. Kudlow told NBC’s “Meet the Press.”
“We’re doing pretty darn well in my judgment,” he added. “Let’s not be afraid of optimism.”
Mr. Trump has alienated some voters with his strident rhetoric and unconventional policy moves, leaving his approval rating stuck in neutral. It also leaves an upbeat economy as his main selling point for reelection next year.
The president told New Hampshire supporters last week that voters’ savings and other investments are tied to his own fortunes.
“You have no choice but to vote for me,” the president told a crowd of 12,000 in Manchester. “Whether you love me or hate me, you’ve got to vote for me. Your 401(k)s would be down the tubes” if not.
He revved up the crowd a day after the Dow Jones Industrial Average plummeted 800 points, or 3.05%, the fourth-largest drop on record. The tech-heavy Nasdaq and the S&P 500 indexes also fell, though the markets regained their footing later in the week.
However, the yield on the benchmark 10-year Treasury note at midweek dropped to 1.623%, below the two-year bond rate, which is typically an indication that investors are preparing for an economic slowdown. It was the first time such an “inversion” has occurred since 2007 and the fifth time since 1978; each example was followed by a recession within two years.
Like his advisers, Mr. Trump insisted Sunday that everything is coming up roses.
“We have the strongest economy by far in the world. The tariffs have cost nothing, in my opinion, or certainly very little,” Mr. Trump told reporters as he returned to Washington from his New Jersey vacation.
“China is eating the tariffs, at least so far,” he said. “I’m prepared for everything, I don’t think we’re having [a] recession.”
Despite its upbeat tone, the administration has begun to acknowledge some of the economic turmoil.
Mr. Trump and his advisers blamed the Federal Reserve for not cutting interest rates fast enough, and they delayed some tariffs on Chinese goods, fearing ripple effects in the Christmas shopping season.
Mr. Kudlow said they will minimize any effects of the trade war on the American consumer, though “so far, it’s been virtually zero,” he said.
White House trade adviser Peter Navarro was even more adamant Sunday, saying the economists who think U.S. customers are taking it on the chin haven’t read the data.
“There’s no evidence whatsoever that American consumers are bearing any of this,” Mr. Navarro told CNN’s “State of the Union.”
Democrats disagree, though they’re stuck in some ways: They want to criticize Mr. Trump ahead of the election even as they acknowledge the U.S. must take a stand against China.
By and large, Mr. Trump’s opponents have settled on criticizing him for alienating potential allies and for ignoring the conventional wisdom that tariff costs are passed down to American consumers.
“The American consumer understands that these tariffs are a tax on them, one of the greatest tax increases on the middle class in the history of this country,” former Rep. Beto O’Rourke of Texas, a Democratic presidential contender, told NBC. “Yes, we need to hold China accountable. But when have we ever gone into a war, a military war or a trade war, without allies or friends and partners? Let’s make sure that we bring our friends in the European Union, Canada, and Mexico, and others, and bring a united front against China, to make sure that they respect the rules of the road, that they respect our economy, our farmers and our workers.”
Mr. O’Rourke and Montana Gov. Steve Bullock, another Democratic presidential contender, said the trade war is doing lasting damage to American farmers because China is a key market.
Mr. Bullock said Mr. Trump’s decision to extend billions of dollars in bailout payments to farmers won’t make them whole.
“The payments won’t matter if ultimately we do lose market share,” Mr. Bullock said.
Another Democratic presidential hopeful, Pete Buttigieg, said Mr. Trump has no strategy for keeping rural America afloat.
“American farmers are getting killed,” said the 37-year-old mayor of South Bend, Indiana, who is looking to become the youngest U.S. president in history.
Mr. Buttigieg said many of the farmers he meets are Republicans who supported Mr. Trump, but they are asking a key question: “How much longer are we supposed to take one for the team?”