Larry Kudlow: The Chinese Economy Is Crumbling Under Weight Of Tariffs

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Monday marked the stock market's worst day of 2019 following news that the president would levy more tariffs on Chinese consumer goods. Larry Kudlow, director of the National Economic Council and a chief advisor to President Donald Trump, joined CNBC's "Squawk on the Street" Tuesday to discuss the trade tensions that led to the sell-off.

LARRY KUDLOW: Well, look, that may be their political analysis -- maybe yes, maybe no. I will just say this, the economic burden of these tariffs is falling almost 100% on China. So their economy, which has been deteriorating, you can look at any long chart of Chinese investment, retail sales and so forth, and you see a steady downdraft. Their GDP, which is probably inflated by several points, is coming in lower and lower. In other words, my point is with respect to our disagreements and with respect to the president's tough negotiating with tariffs, I think China is getting hurt significantly much more than we are, as I said before.



So okay, if they want to wait, maybe so, but the Chinese economy is crumbling. It's just not the powerhouse it was 20 years ago everybody knows that, and as I said before, supply chains are moving out the demand for their goods is moving to other places a lot of people are coming back home. Very important, lost in the tax reform debate, lost in the tax reform debate, we're seeing now because of our new tax laws companies are repatriating their revenues and their profits and their whole factories and their productions to the United States -- some of that is coming from China.

CNBC HOST: Who?

LARRY KUDLOW: By the way, it's about a trillion dollars, which has not been adequately counted yet in the overall revenue flow for the budget gap separate subject but nonetheless, my point is this, with a 21% corporate tax rate and tremendous rollback of regulations and much easier tax policies with respect to repatriation, you're seeing American firms move back all those inversions, Jimmy --

CNBC HOST: Mylan is moving back because they're getting acquired. That's great, but that's not jobs, that's just tax rate stuff that's not anything else they're both being aquired. They both inverted and now they're both coming back.

LARRY KUDLOW: That is correct, but remember you've got home company administrative offices and so forth. You're also going to have factories moving back in from other places around the world, including China. So my generic point, China can wait, that's up to them, but I think they will continue to do great damage to their economy. The American economy is very strong, theirs is not.

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