On Day Three of Larry Kudlow’s first week at the White House, the president’s new economic adviser did exactly what he was hired to do: go on TV to calm the stock market over something his boss said.
Kudlow, a former CNBC contributor and Wall Street economist who now oversees the National Economic Council, is a self-avowed advocate of free trade—but he found himself on Wednesday defending President Donald Trump’s proposed tariffs on Chinese goods.
Kudlow’s performance on Wednesday set the stage for him to play the role in the coming months of the White House’s top economic salesman, forcing him to “jump right into the frying pan,” one longtime ally said.
The administration’s recent moves on trade have spooked the stock market and scared American companies that produce goods China now intends to tax at a higher rate. Only hours after the U.S. released a list of Chinese products it intends to target, China moved to impose tariffs on roughly $50 billion in U.S. exports of soybeans, cars and other products, raising the prospect of a trade war.
With markets slipping early in the day, Kudlow went on Fox Business Network’s Varney & Co., to say the trade plans were just “the first proposals”—a not-so-coded message to his former Wall Street colleagues.
“In the United States at least, we’re putting it out for comment, it’s going to take a couple months. I doubt if there will be any concrete action for several months,” he said, before pivoting to his support for the president. “Trump’s putting his cards on the table. He’s standing up for this country, but he’s also standing up for better world trade.”
Kudlow said in an interview with POLITICO on Wednesday that he views his role in part as reframing Trump’s actions on tariffs as part of a strategic move to create trade with China that eventually leads to faster growth and higher wages in the U.S. “I like to say that there is a pot of gold at the end of this rainbow,” Kudlow said, adding that so far Trump has liked his efforts to rebrand the trade moves in ways that are more palatable to free-traders and Wall Street.
Kudlow, a former Reagan budget official who hasn’t lived in Washington in years, took the White House job knowing he might wind up in exactly this spot, trying to clean up messes made by Trump and his aggressively protectionist advisers including trade adviser Peter Navarro and Commerce Secretary Wilbur Ross, people close to the NEC director said.
It left him questioning whether it would be worth it, especially since the biggest economic agenda item of the president’s first term, the giant tax cut package, had already come and gone.
Kudlow ultimately decided that he could serve as a market interpreter for the president, who has come to view the stock market as one form of political polling – making the case that Trump doesn’t really want trade wars but does want to drive better deals with China and other trading partners.
“Larry and President Trump agree on 85 percent of the issues,” said Stephen Moore, a distinguished visiting fellow at the Heritage Foundation who worked with Kudlow to develop the Trump campaign’s first tax plan. “And Larry views China as a rogue nation just as much as Trump does. I don’t think that is a big problem for him.”
Kudlow’s various appearances on TV and before gaggles of White House reporters early Wednesday appeared to succeed in soothing the markets. The Dow recovered after his television interviews promising that the U.S. really wasn’t entering into a trade war with China, finishing the day up more than 200 points.
“Absolutely not. Absolutely not,” Kudlow said Wednesday on Fox when asked if there was a trade war going on between the U.S. and China. “And let me just say right at the top, number one, blame China, not President Trump. Because they’ve been going on for many years. Trump is really the first president to fight back.”
Kudlow has now taken over the role his predecessor Gary Cohn – another former Wall Street executive – played internally as a moderating force on Trump’s protectionist instincts and as a Wall Street whisperer that things won’t really get out of hand. And he took the job knowing that the more nationalist and protectionist views of White House aide Peter Navarro were ascendant in 2018.
That role ultimately exasperated Cohn to the point where his remaining in the White House became intolerable.
One difference between them, however, is that Kudlow has a much friendlier relationship with Navarro. Even if the two do not agree on every trade issue, they’ve know one another for many years since they’ve both appeared frequently on CNBC.
Kudlow said in the interview Wednesday that he’s gotten on well with Navarro so far. “We’ve had a couple of good meetings, good discussions. And he likes the pot of gold idea.”
This more cordial vibe between the two top advisers is expected to bring down the temperature of the contentious trade policy debate inside the White House – even if the two men do not always agree on the substance of the policy.
“Peter and Larry are a great one-two punch, the ying and yang on Trump’s economic agenda – with Larry on the tax and regulatory side and Peter on the trade side. All signs point to them working closely together to successfully prosecute the president’s economic agenda,” said Andy Surabian, a former special assistant to the president and deputy White House strategist.
Kudlow’s first few days in the White House have been a steady stream of meetings with NEC staffers and other White House aides, said one White House official.
Even before Kudlow officially started the job, he did informal meet-and-greets with staffers throughout the building. On his first official day Monday, he met with the president and the two discussed tax, trade, and the banking bill currently winding its way through the Hill, said the official. On Tuesday, he ran his first NEC staff meeting and has impressed those staffers with his deep dives into their various policy areas – be it infrastructure or tech.
The question for people who know Kudlow is how long he will be able to tolerate trade moves that he does not always support – especially since he won’t have a signature policy item to push through Capitol Hill like Cohn did.
But for now Kudlow appears to be trying to cast the president’s trade moves as broader economic ones that will boost growth, add jobs, and raise wages – key messages for the Republicans heading into the 2018 mid-terms.
“I would take the president seriously on this tariff issue,” Kudlow told reporters outside of the White House on Wednesday morning. “There are carrots and sticks and the like, but he is ultimately for free trade. He said that to me, he said it publicly. So he wants to solve this with the least amount of pain and again here is the key point: Both sides benefit by positive solutions that lower barriers and help the markets. You follow me? That’s so important.”