Ex-Trump Official Gary Cohn Warns That Trade War Could Lead to Recession

Gary Cohn, the former top economic adviser to President Trump, was all smiles Thursday morning when he discussed the 14 months he spent in the White House. “Last year was the best year of my life,” said the former COO of Goldman Sachs, at a Washington Post event. But Cohn, who left his job as director of the National Economic Council in April, also offered some restrained criticism of the administration’s trade policies.

Cohn said a trade war, with countries hitting each other with retaliatory tariffs, could lead to a recession. “If you end up with a tariff battle, you will end up with price inflation. You could end up with more consumer debt. Those are all historic ingredients for an economic slowdown,” he said. “So I would not like to see that happen.”

Asked by Post reporter Damian Paletta if such a trade war could undo the benefits of the tax reform bill Cohn helped craft and pass last year, Cohn responded, “Yes, it could.”

Cohn, castigated by the White House’s economic nationalists as a “globalist,” during his West Wing tenure, called for a “global environment” on trade. He also contradicted President Trump’s own stated view that trade deficits—situations where the United States imports more than it exports—are bad and must be corrected.

“I have always said a trade deficit doesn’t matter. In many respects, it’s helpful to our economy. If we could manufacture something in the United States cheaper or better than we could import it, we can do that,” Cohn said. “The fact that we’re importing a product at a lower price point or a higher quality point means the consumer, at the end of the day, can either buy more products, which will stimulate the economy, or save more money, which is good for the economy.”

Cohn, who helped organize last year’s G7 economic summit, also suggested the communique that President Trump signed, and then indignantly withdrew from, at last weekend’s G7 in Quebec was not substantively different than the previous year’s agreement.

“If you look at the trade section in there,” said Cohn, “that language is really not that much different than language that we were talking about a year ago. We’re talking about free, fair, open, reciprocal. We’re talking about lowering tariff and non-tariff barriers, trying to open up trading, making trade free and fair.”

Cohn drew a distinction between what he considers bad trade actions—trade wars, mostly—and retaliation against illegal activity, such as intellectual property theft by China. He said the section 301 actions against China spearheaded by U.S. Trade Representative Robert Lighthizer, for instance have “a lot of merit.”

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