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U.S.-China Talks Are Making ‘Headway,’ Trump Adviser Says

Kudlow Brushes Off Slowdown Calls, Says 3 Percent Growth Can Prevail

(Bloomberg) -- The Trump administration is making “headway” in trade negotiations with China, the top White House economic adviser said Sunday, brushing off reports suggesting diminishing prospects for a deal and push-back from Beijing.

“We’re making great progress,” Larry Kudlow said on “Fox News Sunday,” adding that he was “optimistic” President Donald Trump and President Xi Jinping of China would meet to ink a trade pact at some point -- possibly in March or April.

Kudlow’s comments followed reports that Chinese officials have scrapped a trip to Trump’s Mar-a-Lago resort in Florida where there could be a signing ceremony. And earlier this week, Trump said that while he was “confident” about the prospects for an agreement, “if this isn’t a great deal, I won’t make a deal.”

U.S.-China Talks Are Making ‘Headway,’ Trump Adviser Says

Kudlow said daily negotiations between U.S. and Chinese officials have been progressing following face-to-face talks in Washington roughly two weeks ago, after which Trump extended a March 1 deadline for increasing U.S. tariffs on $200 billion in Chinese goods.

Negotiators are “working out some of the difficult final points,” Kudlow said. “It’s got to be good, it’s got to be fair and reciprocal, and it has got to be enforceable -- that’s an important point.”

Chinese officials have pushed back against some Trump administration demands for a mechanism -- such as a regular schedule of meetings -- to enforce the terms of their agreement.

Kudlow touted what he termed a breakthrough in China accepting proposals meant to promote “stable currencies” and avoid competitive devaluation of currencies.

China and the U.S. have reached consensus on many “crucial” issues and have discussed the need to observe the “autonomy” of each other’s monetary policy, People’s Bank of China Governor Yi Gang said at a press conference during the annual National People’s Congress in Beijing.

At the same time, Beijing’s top trade and monetary policy officials this weekend delivered a subtle pushback against certain demands from Washington, delivering Beijing’s own interpretation of progress made in talks over the enforcement of any deal and the role of currencies.

Budget Eve

Looking ahead to Trump’s 2020 budget proposal, due on Monday, Kudlow called the expected request for a 5 percent across-the-board reduction in domestic spending tough but necessary. “I think it’s exactly the right prescription,” he said.

The former broadcaster brushed off worries about the rising U.S. budget deficit. Trump’s budget is likely to signal that the federal budget can be balanced in 15 years.

“I don’t think good growth policies have to obsess, necessarily, about the budget deficit,” Kudlow said. “We are going to point a steady glide path to lower federal spending” and borrowing as a share of GDP.

Kudlow also predicted another budget fight with Congress over spending on a wall along the U.S.-Mexico border, casting it as inevitable: “I suppose there will be.”

Wall Money

The Trump administration reportedly will ask Congress for an extra $8.6 billion to help pay for the wall, even after the president declared a national emergency to reallocate funds from other areas for wall construction. The last budget showdown over the issue shut down much of the federal government for a record 35 days.

“He’s going to stay with his wall and he’s going to stay with the border security theme; I think it’s essential,” said Kudlow.

Kudlow predicted that U.S. economic growth can continue at 3 percent in 2019 and beyond, even as many private economists look for a slowdown this year as the impact of the 2017 Republican tax cuts wears off.

To contact the reporters on this story: Ros Krasny in Washington at rkrasny1@bloomberg.net;Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story: James Ludden at jludden@bloomberg.net, Ros Krasny, Mark Niquette

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