White House economic advisor Larry Kudlow told CNBC on Tuesday that he believes the United States holds the upper hand in trade negotiations with China due to the comparative strength of the U.S. economy.
“The Chinese economy is crumbling. It’s just not the powerhouse it was 20 years ago,” Kudlow said on CNBC’s “Squawk on the Street.”
Kudlow said that “any long chart of Chinese investment” or economic metrics shows “a steady downdraft.”
“Their GDP, which is probably inflated by several points, is coming in lower and lower,” Kudlow added.
China reported that its economy grew 6.2% in the second quarter, its weakest growth rate for gross domestic product (GDP) in at least 27 years. Additionally, Chinese stocks are broadly dropping as the Shanghai composite index of stocks has fallen over 15% from its high in the past year. By comparison, the S&P 500 is just 5% below its high in the past year and has climbed nearly 15% in 2019.
His comments come as U.S. stocks rebounded Tuesday after the worst day of 2019, dropping when China retaliated to President Donald Trump announcing new tariffs would be placed on Chinese goods in September. The trade war with China escalated to a new level on Monday but Kudlow told CNBC that the U.S. “would like to negotiate” and “make a deal.”
Kudlow said China may hold out on a trade deal but repeated his confidence that the U.S. can withstand any slowdown to its economy better than the Chinese can.
“I think China is getting hurt significantly, much more than we are,” Kudlow said.
“The American economy is very strong. Theirs is not,” he added.