By Max Reyes
The U.S. hasn’t seen any major effects on its economy from the coronavirus epidemic, and will refrain from using it as leverage in the second phase of China trade talks, White House economic adviser Larry Kudlow said.
“This is principally a public-health problem and the pandemic of course is in China, not the U.S.,” Kudlow said Thursday in an interview on Fox Business Network. “Insofar as the economy, we see no material impact.”
Asked if the virus will give the U.S. more leverage in the second phase of trade discussions with the Asian nation, Kudlow said the outbreak is “completely separate from trade, jobs and all the rest.”
“This is an issue of helping them if we can, offering our assistance, engaging with them, this is a humanitarian effort on our part -- nothing to do with economic rivalries,” he said.
China’s promises in its phase-one trade deal to increase purchases from the U.S. -- which experts already were calling unrealistic -- will be even tougher to fulfill now that a new virus is hammering demand and interfering with supply chains. The acrimonious talks stretching back almost three years roiled financial markets, cast a cloud of uncertainty over investment decisions and hurt growth in both nations.
U.S. gross domestic product expanded at a 2.1% annualized rate in the final quarter of 2019, beating expectations, with a narrowing in the trade deficit -- largely due to a sharp drop in imports amid the U.S.-China trade war -- boosting the main number.
“Phase one, even though it may have caused some uncertainty, will pay off in major growth dividends later this year,” Kudlow said.
Both the U.S.-China pact and the trade agreement with Mexico and Canada are “pro-growth deals and will add over will add over a percentage point to GDP growth,” but that might not materialize until the second half of the year, he said. “Tough trade negotiations now turn into implementation. We will see a big pickup in growth, may not see it in the winter quarter, but hopeful we’ll see it in the spring.”
The suspension of production for Boeing Co.’s 737 Max is set to weigh on the economy, and may take half a percentage point off GDP, Kudlow said.
Kudlow also told reporters at the White House that the Trump administration is leaving decisions about whether to cancel flights to or from China to the airlines for now.