Larry Kudlow has been making the media rounds this week, appearing on Fox and Bloomberg (though, tellingly, not his former employer, CNBC) to help soften President Trump's aggressive trade rhetoric to make it more palatable to investors.
But in what can only be interpreted as a show of defiance considering the Dow's nearly 600 point drop on Friday, Kudlow took to Fox News Sunday to offer a stern warning to China: Stop stonewalling and instead make a good-faith effort to come to the table.
WALLACE: And that's what they're doing is stonewalling?
KUDLOW: Basically. I mean, lots of rhetoric out there, like, you know, old communist party type stuff. The whole world, please, the whole world knows China has been violating trade laws for many years and President Trump is the guy calling them on it and he's right to do so.
WALLACE: Is the president -- you say he's calling them on it. Is he bluffing or will he impose tariffs if China doesn't change its trade practice?
KUDLOW: Look, I -- he's not bluffing. I mean, there are a number of tools at his disposal.
Just one thing there -- people are saying Trump, Trump, Trump. This is a problem caused by China, not a problem caused by President Trump, and I would go so far as to say, Trump is there to fix the problem.
If you talk to the president as I have, he regards himself as a free trader, all right? As do I. But his argument, and it's a good one, you can't have free trade, which is pro-growth around the world unless China brings down its barriers, opens up its markets --
And while Kudlow neglected to announce his "trade coalition of the willing" like he had promised on Friday, he did try his hardest to burnish both the president's and his own free-trade bona fides while trying to frame the US's tariff tit-for-tat with China as an isolated issue within the framework of global trade - not a runup to the US implementing blanket tariffs, a policy Kudlow says he vehemently opposes.
KUDLOW: Well, hang on. So, I oppose the blanket tariffs, I always do.
Now, with respect to China, I've always been a hard-liner on China, and while I don't like tariffs, sometimes there is no substitution for putting tariffs into the discussion, into the process. That is part of the quiver of arrows that the president has.
Look, he's a great negotiator. He has a whole history of that. But in this process, tariffs have to be part of it. There's no two ways about it. Then, hopefully, there will be discussions and hopefully, in just the next two months, the Chinese will come seriously back to the table.
President Trump has told me, we were together a long time on Thursday and Friday. He likes President Xi. They get along. He respects President Xi as a negotiator, but they have not played by the rules, Chris. This has been going on.
Technology is everything to this country, everything -- our entrepreneurship, our innovation, our future growth, our productivity. We cut corporate tax rates precisely to unlock the animal spirits around technology.
We cannot let China willy-nilly steal our technology.
Of course, we've heard most of this trade rhetoric before, Kudlow took viewers by surprise after Wallace moved on to his next topic, the $1.3 trillion omnibus spending bill. Is it true, Wallace asked, that the White House is pushing a bill to undo some of the spending increases included in the omnibus bill?
Kudlow confirmed that he and OMB Chief Mick Mulvaney are working on an "enhanced rescission package" that would "trim some spending", now that Republicans on the Hill have finally come around to the idea that blowing a massive hole in the federal budget could be bad for America in the long term.
WALLACE: OK, I've got a minute left. There is talk this morning that the president may ask Congress to undo part of the $1.3 trillion spending bill to cut back some of the expenditures that were made. Is that true and how far along are you on that?
KUDLOW: It's playing in the White House. My friend, OMB Director Mick Mulvaney, he and I are on -- I'm an ex-OMB guy. I feel his pain.
We are looking at an enhanced rescission package. I'm not going to use numbers. This is all around town.
I think the Republican Party on the Hill has finally figured out. It's really not a bad idea to trim some spending because, after all, spending can lead to deficits and spending interferes with the economy. And President Trump is a deregulator and a tax cutter. So, we want and much more modest government role.
While this is certainly an encouraging sign for Treasury bulls, there's much that needs to be determined. Depending on the final number, whatever rescission package Kudlow is planning could amount to a drop in the bucket: Goldman warned in January that US Treasury issuance was set to double in 2019 - and that was before the omnibus bill was signed into law. Trump warned when he signed the $1.3 trillion bill that he was only affixing his signature because of national security concerns, and that he would never sign another bill like it.
Will markets take Kudlow's hint seriously? We'll need to wait until Treasury futures open later this afternoon to find out.
Of course, Kudlow wasn't the only senior administration official to talk trade on the Sunday shows this week. After he admitted on Friday that a trade war with China remained a possibility, Treasury Secretary Steven Mnuchin clarified that, while a trade war remains a possibility, he doesn't see one as likely.