White House economic adviser Larry Kudlow said Tuesday that although the spread of coronavirus could affect China’s ability to buy U.S. goods under a “phase one” trade deal, its overall impact on the U.S. economy would be “minimal.”
“The export boom from that trade deal will take longer because of the Chinese virus. That is true,” said Kudlow on Fox Business show “Mornings with Maria.”
“On the other hand, the North American trade deal, USMCA, is going to unlock tremendous investment. … Manufacturers will benefit.”
He added, “The U.S. economic impact, Maria, is going to be minimal.”
Signs of the new coronavirus outbreak started to emerge before President Donald Trump and Chinese Vice Premier Liu He signed a much-anticipated trade agreement on Jan. 15. Beijing pledged to purchase an additional $200 billion of U.S. goods and services over the next two years, including $77.7 billion in manufactured goods, such as industrial equipment, pharmaceuticals, and automobiles. The deal will go into effect on Feb. 14.
The White House adviser acknowledged that there could be a decrease in exports and production in China, especially in the pharmaceutical sector. “It’s not across the board,” he said. “Chipmakers are not going to be affected that much. Pharmaceutical stuff will probably be affected much more. Some things kind of in the middle when you get to automobiles and auto parts, but there’s a lot we don’t know.”
Kudlow estimated that the overall impact of the coronavirus on the U.S. economy would be “minimal,” adding that it might actually lead to more investment in U.S. equipment.
“I understand that industry in China is shut-in, but it’s not the end of this world,” Kudlow said. “America is a very diverse economy. … America is working, and there is a blue-collar boom, and none of that is going to change.”
The Chinese yuan blew past the 7-per-dollar mark on Monday, the first day of trade in China since the Lunar New Year, as investors sold their yuan and dumped commodities over worries of the spreading coronavirus and its economic impact. The Shanghai composite index, which is China’s benchmark stock index, saw a nearly 8 percent plunge—its biggest one-day fall since the stock market crash in 2015.
The market dive came as the Chinese central bank injected 1.2 trillion yuan ($174 billion) into the financial system via reverse repo operations and imposed regulations to limit short selling.
The U.S. market, however, was up slightly on Monday, with the Dow Jones Industrial Average surging 0.4 percent while the S&P 500 added 0.5 percent.