Kudlow corrects some of Trump’s lies

A worker walks near truck trailers and cargo containers, Friday, May 10, 2019, at the Port of Tacoma in Tacoma, Wash. (AP Photo/Ted S. Warren)

The White House’s top economic adviser has acknowledged that U.S. consumers and businesses pay the tariffs that the Trump administration has imposed on billions of dollars of Chinese goods, even as President Trump himself insisted in a tweet, incorrectly, that China pays.

Chris Wallace, host of “Fox News Sunday,” asked him, “It’s U.S. businesses and U.S. consumers who pay, correct?”

“Yes, I don’t disagree with that,” said Larry Kudlow, the head of the president’s National Economic Council.

Kudlow added, “Both sides will pay,” but he stipulated that China “will suffer (economic) losses” from reduced exports to the U.S., not from paying the tariffs.

Kudlow’s admission contradicts many of Trump’s comments and tweets to the effect that Chinese companies pay the tariffs in what amounts, in the president’s view, to a massive transfer of wealth to the United States from China. Yet almost no economist has agreed with Trump’s view and fact-checkers routinely brand Trump’s assertion false and point out that American importers of goods from China pay the tariffs.

Trump has also asserted that trade wars are “easy to win,” but Kudlow accepted that they come with costs for the U.S. economy, though he downplayed the impact.

On Friday, the Trump administration raised duties on $200 billion of Chinese imports to 25% from 10%, after charging that China had backtracked on commitments it made earlier in the talks. The administration has already hit $50 billion of additional Chinese goods with 25% duties.

Later Sunday, Trump reiterated his view in a tweet: “We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries.”

Yet Carl Weinberg, chief international economist at High Frequency Economics, a forecasting firm, pointed out that many goods made in China aren’t manufactured elsewhere. That’s why many U.S. importers have little choice but to pay the tariff.

“So if you need that new iPad, it is you who will be paying the import duty, not some worker in China,” Weinberg wrote in a research note.

Trump has also threatened to impose import taxes on the remaining $300 billion in Chinese imports, a step that Kudlow estimated would take several months to implement.

Imposing those tariffs would impact a wide range of consumer goods — clothes, shoes, toys, and electronics such as iPhones — that have been mostly exempted so far and could prompt steep cost increases that many Americans would likely notice.

Kudlow, however, said the economic impact of placing tariffs on all Chinese imports would be to cut economic growth 0.2 percentage points, “a very modest number.”

Independent economists, though, think the impact would be larger. Gregory Daco, an economist at Oxford Economics, estimates it would reduce U.S. growth by a half percentage point and cost 300,000 jobs.

Kudlow also said the U.S. is awaiting retaliation from China over the increased tariffs, after talks in Washington ended on Friday without a deal.

“The expected countermeasures have not yet materialized. We may know more today or even this evening or tomorrow,” he told “Fox News Sunday.”

Both sides have indicated that future talks are likely. Kudlow said on Sunday that Chinese officials have invited U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to visit Beijing, though nothing has been scheduled.

Kudlow also said that Trump and China’s President, Xi Jingping, may meet in late June at the G-20 international conference in Japan.

On Saturday, Trump tweeted that he thought that “China felt they were being beaten so badly in the recent negotiation that they may as well wait around for the next election, 2020, to see if they could get lucky & have a Democrat win.”

Beijing retaliated for previous tariff hikes by raising duties on $110 billion of American imports. And officials have targeted American companies operating in China by slowing customs clearance and stepping up regulatory scrutiny.

Sen. Rand Paul, R-Ky., told ABC’s “This Week” that he advised the president to finalize a trade deal with China soon, “because the longer we’re involved in a tariff battle or a trade war, the better chance there is that we could actually enter into a recession because of it.”

The two countries are sparring over U.S. allegations that China steals technology and pressures American companies into handing over trade secrets, part of an aggressive campaign to turn Chinese companies into world leaders in robotics, electric cars and other advanced industries.

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More trouble for Trump’s scandal-scarred appointees

Herman Cain. (AP Photo/Molly Riley, File)

President Donald Trump’s efforts to reshape the Federal Reserve stumbled on Monday, with one of his potential nominees for the Fed’s board withdrawing from consideration and another being enveloped by fresh doubts.

Herman Cain, a former CEO of Godfather’s Pizza, asked to be taken out of the running for an influential post at the U.S. central bank, Trump tweeted. Cain had dropped out of the 2012 presidential race after facing allegations of sexual harassment and infidelity — issues that resurfaced after Trump said earlier this month that he planned to nominate Cain for the Fed.

Trump tweeted that “My friend Herman Cain, a truly wonderful man, has asked me not to nominate him for a seat on the Federal Reserve Board. I will respect his wishes.”

Separately, CNN on Monday unearthed opinion columns that Trump’s other pick for a Fed board vacancy, conservative commentator Stephen Moore, wrote in the early 2000s. Among the opinions Moore asserted in those columns was that women should be barred from refereeing, announcing or even selling beer at men’s college basketball games. Those writings appeared on the conservative National Review website.

Moore told CNN that the articles were “a spoof.”

“I have a sense of humor,” he added.

Cain’s nomination had already appeared doomed after four Republican senators said earlier this month that they wouldn’t vote to confirm him if he were nominated. Republicans hold just a three-seat majority in the Senate, so the opposition of those senators, on top of unified Democratic opposition, made Cain’s prospects appear impossible. Senate Majority Leader Mitch McConnell declined to say two weeks ago whether the chamber would confirm Cain.

Several other controversies have also dogged Moore. A lien of more than $75,000 was filed against him in January 2018 for unpaid taxes. Reports have also indicated that he has fallen behind on alimony and child support payments to his ex-wife.

The CNN report Monday also noted that Moore once wrote, “Is there no area in life where men can take vacation from women?”

On top of that, both Cain and Moore have faced widespread criticism that they are unqualified for a critically important role on the world’s most influential central bank and that Trump chose them mainly for their allegiance to him and his priorities.

On Monday, Senate Democratic Leader Chuck Schumer warned the Republicans against using Cain’s withdrawal as a “pathway” to approval of Moore, calling him “equally unqualified and perhaps more political.”

“Mr. Moore, like Mr. Cain, poses a danger to the economic stability of our country,” Schumer, D-N.Y., said in a statement. “Mr. Cain clearly saw the writing on the wall and withdrew his name from consideration; hopefully Senate Republicans will again voice their deep concerns and force Mr. Moore to do the same.”

Carl Tannenbaum, chief economist at Northern Trust and a former Fed official, said Moore “has been overly partisan” in his comments about the Fed. Moore has lavished praise on Trump’s tax cut policies and has accused Chairman Jerome Powell of undercutting the economy with interest rate hikes.

Those criticisms “don’t sit well, certainly with people inside the Fed, and with the financial markets,” Tannenbaum said. “The Fed’s culture is consensus-driven and apolitical.”

Indeed, Trump’s picks of Cain and Moore have sparked worries about the Fed’s ability to remain politically independent. Last fall, Cain co-founded a pro-Trump super political action committee, America Fighting Back PAC. It features a photo of the president on its website and says, “We must protect Donald Trump and his agenda from impeachment.”

“There were so many things about (Cain) that were red flags,” including his lack of understanding of monetary policy, said Diane Swonk, chief economist at Grant Thornton and longtime Fed watcher. Cain has served on the board of the Federal Reserve Bank of Kansas City but didn’t participate in any interest rate decisions in that position.

The potential nominations surfaced after Trump spent months attacking Powell, his own pick to lead the Fed, and other Fed officials for raising rates four times last year. Trump has contended that those rate hikes hurt the stock market and were unnecessary because there was no inflation threat.

At a meeting in March, Fed policymakers indicated that they expected to keep rates unchanged this year, a sharp change from December, when they suggested that they would lift short-term rates twice more this year.

The Fed board, along with presidents of the Fed’s regional banks, plays a critical role in the U.S. economy, holding meetings to debate and vote on whether to raise their benchmark interest rate. That rate, in turn, affects everything from mortgage rates to the interest rate on auto loans and the interest paid on savings accounts. The Fed typically increases its benchmark rate when it worries inflation is about to accelerate, or cuts it to accelerate growth.

Like Moore and Trump himself, Cain has criticized the central bank’s policies. In a 2012 Wall Street Journal column, Cain argued that the Fed’s low rate policies had distorted the value of the dollar. He advocated a return to the gold standard as a way to control inflation, a position that most economists disagree with. Many economic historians argue that the gold standard, which fixes the dollar’s value to a specific amount of gold, worsened the Great Depression.

Before leaving the presidential race, Cain had proposed a “9-9-9” tax plan that called for replacing the current tax system with a flat 9 percent business and individual income tax, and a 9 percent sales tax.

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AP Writers Martin Crutsinger and Marcy Gordon contributed to this report.

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Copyright © 2019 The Associated Press. All Rights Reserved

Trump not even close on latest economic claims

Kevin Hassett, chairman of the Council of Economic Advisers, speaks during the daily press briefing at the White House, Monday, Sept. 10, 2018, in Washington. (AP Photo/Evan Vucci)

President Donald Trump pitched a wildly off-base claim about economic growth Monday as the White House used selective statistics to build a case that the economy is doing much better than when Barack Obama was in office.

The attention on Obama comes as the ex-president steps back into the political arena on behalf of Democrats in the November elections. The White House dispatched economic adviser Kevin Hassett to rebut Obama’s point that his policies helped end the Great Recession and put the economy on a growth path that Trump is now mostly benefiting from.

Companies are much more optimistic and have increased spending on buildings and equipment, Hassett said. Americans are starting new businesses and the increase in startups is accelerating more quickly than it did under Obama, he added, and blue-collar jobs — in mining, construction and manufacturing — are growing more rapidly.

Yet some of the White House’s case is wrong, exaggerated or lacks context:

TRUMP, in a tweet: “The GDP rate (4.2 percent) is higher than the Unemployment Rate (3.9 percent) for the first time in over 100 years!”

HASSETT: “The correct number is 10 years.”

THE FACTS: Actually, the correct number is 12 years. In the first three months of 2006, the economy expanded at a 5.4 percent annual rate. At the same time, the unemployment rate was 4.7 percent.

The economy’s growth rate, which reached 4.2 percent in the April-June quarter, has been higher than the unemployment rate dozens of times since World War II. Hassett acknowledged Trump’s tweet was wrong.

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HASSETT: “There was an inflection at the election of Donald Trump, and … a whole bunch of data items started heading north.”

THE FACTS: If you look at a chart of monthly job gains or the economy’s growth rate, that inflection point is hard to spot. Hassett notably did not include in his presentation any mention of overall job creation or the broadest measurement of the economy’s output, GDP.

That’s probably because the growth rate Trump repeatedly cites, the 4.2 percent expansion at an annual rate that occurred in the April-June quarter, isn’t out of line with Obama’s record. The economy grew more quickly than that four times during Obama’s eight years in office.

Economists generally acknowledge that growth has accelerated this year compared with 2016 and 2017, and most of them partly credit last year’s tax cuts for fueling more consumer and business spending. The economy is on pace to grow at a 3 percent or faster pace in 2018, which would be the first time since 2005 it would reach that mark.

Yet it barely missed that cutoff in 2015, when it expanded 2.9 percent under Obama.

When it comes to jobs, the U.S. added more jobs in each of the last three years of Obama’s presidency, 2014-2016, than it did last year, Trump’s first in office. Job growth has picked up a bit this year but is still on track to come in below the 2014-2015 pace.

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HASSETT: “Small-business optimism is near the highest level in 35 years.”

THE FACTS: This is true. Small-business owners, as a whole, became far more optimistic about the economy after Trump’s election.

Many small-business people felt Obama was dismissive toward their efforts, particularly after his “You didn’t build that” comment in July 2012. Obama’s larger point was that governments helped create success by building roads, bridges, and the foundations for the internet. But his opponent at that time, former Massachusetts Gov. Mitt Romney, seized on the comment as evidence that Obama didn’t appreciate small business.

Still, optimism doesn’t automatically translate into more spending or jobs. Small-business hiring has slowed in the past year as the unemployment rate has fallen to nearly an 18-year low. Larger firms are better able to attract workers in a tight labor market because they typically can offer higher pay and more benefits.

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HASSETT: “And I think that if anyone were to assert that the capital spending boom that we’re seeing right now was a continuation of the trend that President Trump inherited, then, well, they wouldn’t get a high grade in graduate school for that assertion.”

THE FACTS: It’s true that companies are investing much more in buildings, computers and other capital goods than they were in the last two years of the Obama administration. And some of that additional investment may have been spurred by the Trump administration’s corporate tax cut.

But another reason for the revitalization of business spending has been a turnaround in oil prices. Oil prices plunged in 2014 and 2015 from over $100 a barrel to roughly $30 a barrel in early 2016. They have since doubled to $67 a barrel. Those swings alternatively dampened investment in drilling rigs and other heavy machinery and helped send that spending higher.

Oil- and gas-related investment accounted for about 40 percent of the growth in business investment in the April-June quarter this year.

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Online:

White House charts: https://bit.ly/2CI6twl

Contact Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber

Find AP Fact Checks at http://apne.ws/2kbx8bd

Follow @APFactCheck on Twitter: https://twitter.com/APFactCheck

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