Larry Kudlow on China Trade, USMCA: "President Trump Showed Us How To Bargain" | Video | RealClearPolitics

Larry Kudlow on China Trade, USMCA: "President Trump Showed Us How To Bargain"


White House economic adviser Larry Kudlow's interview with anchor Maria Bartiromo on FNC's "Sunday Morning Futures" touches on the U.S.-China trade negotiations and the USMCA trade deal.

MARIA BARTIROMO: Joining me right now on the impact of all of this, White House economic advisor Larry Kudlow. Larry, it's wonderful to see you this morning. Thanks so much for joining us. So, you're going into a big week. I understand that Tuesday will be the vote on spending. Wednesday will be an impeachment vote and Thursday will be the vote on USMCA. How important was that agreement on USMCA and are you expecting it to come to the floor on Thursday for that vote?

LARRY KUDLOW: Well, I guess that's the schedule. I think if it comes to the floor as expected it will pass. I think it's going to pass handily. You know, Maria, you can go all the way back a week or so with the gigantic jobs number, 266,000, 3.5 percent unemployment. Production workers making faster wage increases than their managers and then you come -- yeah, we're going to get a budget deal.

We’re also going to get the space defense deal as part of that budget operation. And then you have USMCA and you have China phase one. You know, China phase one and USMCA cover more or less over $2 trillion worth of trading activity, U.S., North America, China, okay? Over $2 trillion. And I just want to note here not only is this positive for economic growth, but it does show that President Trump's example of being a tough, hard-nosed bargainer on trade and economic matters works.

You know, he's been accused of being an isolationist and every other name around. The fact is, he has accomplished stuff here in the trading area that no one, and I mean no one, in our memory has been able to achieve. So, you know what? I kind of like tough myself and I think tough is working and incidentally, tough is going to increase our economic growth rate next year and the years ahead.

MARIA BARTIROMO: Yeah. It certainly feels that way. You’ve got a landmark deal with Mexico and Canada for sure. What would you say is the appropriate representation in terms of what that contributes to economic growth in 2020, Larry? What are you expecting in terms of growth? I know we're at the lowest unemployment in 50 years. I know the consumer is solid as a rock. What about economic growth 2020?

LARRY KUDLOW: Well, I think that again these trade deals are going to be very helpful. They're going to reduce uncertainty and probably pick up some important business investment spending. In ballpark numbers, Maria, I would say we'll do a half a percent better GDP in 2020 than would've otherwise been the case and I like the action of recent months, the U-track, of course. You've had a tremendous bull stock market. Broad index up 25 percent. That's telling you business conditions are getting better. Trade is part of that, of course, an easier Fed policy is part of that, of course. And if you look inside that, the cyclicals, the pro-growthy areas, things like industrials, and technology and financials, all that stuff's been leading the parade, tells me that the economy is heating up once again.

MARIA BARTIROMO: Larry, let me ask you about this China deal. I know it's just a phase one. The expectation is that China's going to buy a whole bunch of additional agricultural products. What I really want to know about is the intellectual property part of this. You say that you've got some promises from the Chinese to actually protect intellectual promises -- property, rather, but isn’t it true that they've just instituted their own new cyber security rules that are in place that say that no foreign company may encrypt data so it can't be read by the Chinese central government and the communist party of China? In other words, businesses are required to turn over the encryption keys. Are these new rules that China just put in place basically negating any opportunity for the U.S. to protect its IP?

LARRY KUDLOW: Well, look. We will see. There's a large IP chapter in this deal and there's also a large forced technology transfer chapter in this deal. I don't think we know enough about these new Chinese rules and we'll have to look at that and by the way if they do violate then of course we will take action. That's part of the enforcement mechanism in the deal. But look, to take a look at what's actually there, you know, in the intellectual property theft chapter, counterfeiting, stealing tradable goods, that is going to be front and center. There's a whole process now where if you go out and you start stealing goods or as I say, counterfeiting goods, that's going to come under an enforcement process, multi-stages, individual companies. This is for first time. Our individual companies in America, they will go to American staff at the embassy -- and then the two will come together, will do deputy level and principle level and don't forget, although we have adjusted trade tariffs down, the December 15th tariffs, and part of the September tariffs, we will still have $250 billion and 25 percent, which I look at as a bargaining and an insurance policy.

So, all these things will come under careful scrutiny. The question is, look, if the Chinese, in granting a license to an American company, okay? If they think that they will mandate technology transfer or if we open up a joint venture and we don't get fair representation in that joint venture -- then those will be violations of this deal and those will come under the enforcement process. So, we will see whether China lives up to its commitments or not.

MARIA BARTIROMO: Yeah. Yeah, what I like about the deal is that you've got this snap-back mechanism in place.


MARIA BARTIROMO: And if they do break their promises, which we've seen them do so many times, the tariffs snap back in place and I also like the idea of these wages that you mentioned; the bottom earners are really seeing their wages go up a lot more than the national. One word answer. What do you think the bottom earners are seeing an increase in wages, Larry? I know the national average is 3 percent, 3.1 percent. What's the bottom see in wage increases?

LARRY KUDLOW: It's about 3.5 to 4 percent depending on how you count it. I'm not saying that their wages are higher, then. I'm just saying their increase in wages --

MARIA BARTIROMO: Right. I think the increase was much higher --

LARRY KUDLOW: -- is actually faster --

MARIA BARTIROMO: -- than 3 percent on the bottom. That's what I was referring to.

LARRY KUDLOW: Yeah. Well, it's actually running -- total compensation down; there is about 3-and-a-half to 4 percent. That's a better rate than their managers are getting. It's the first time we've seen this, Maria, since the 1980s. I think, in particular, the tax cut package -- especially the business part -- the deregulation package -- have had tremendous positive influence. But look, let's go back to the trade issue here, because I think -- this is pro-growth. I want to emphasize this. Whether it’s USMCA, for example -- the International Trade Commission had wide variance of options for what the growth numbers would be.

But it could be 350,000 jobs per year. It could be three-quarters of a percent of GDP per year. And on China, we export about $180 billion worth to China.


LARRY KUDLOW: Right? Those are the latest numbers. This deal will push that 200 billion. That is an increase, an increase, of 200 billion. So, we are going to be doubling American exports, whether it's farming and agriculture and machinery, and technology. We've never seen anything like this before.

And so, the economic consequences are going to be so positive from the standpoint of virtually the entire American economy. We've never seen this before, and I repeat this point.

President Trump showed us how to bargain, you know?

MARIA BARTIROMO: Yeah. For sure -- well -- listen. The Art of the Deal --

LARRY KUDLOW: Tough is a good thing.

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