The Dow Jones Industrial Average made a major recovery Monday after plunging more than 400 points when President Trump threatened to dramatically increase tariffs to 25 percent on $200 billion worth of Chinese goods.
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Former Reagan economist Art Laffer said Monday there is no cause for alarm and the tit-for-tat tariffs against each other's goods is just the way negotiations with China work.
“This is just the back and forth with negotiations and I think Trump very, very much wants a free trade deal but he wants it right and he wants it to be done with the Chinese giving us what should be given, [which] is intellectual property guarantees and fair trade, free trade...and I think once they come to that realization I think you'll get a deal and it will be done very well,” he said on FOX Business’ “Making Money with Charles Payne.”
Laffer believes a trade deal with China is inevitable and that the market will skyrocket as a result.
“We will get a great deal and Trump will get enormous credit and the market will be 5000 points higher”
While Laffer acknowledges that the Chinese are “good, tough negotiators,” he said they aren't as good as Trump.
“You always wait for your play on the last minute. Just when they're just about to sign, oh wait a second I just need one more thing...but frankly that is what [negotiators] do and Trump isn’t about to have it. He's going to stick up for his guns and wait until we get a good free trade deal.”
He notes the president is a master negotiator who is working tirelessly to get the best deal possible for the U.S., while China tries to act tougher at the last minute to spite Trump.
“I think [Trump] understands how bad a Chinese trade war would be, but I think the Chinese are playing it a little bit against Trump"
Laffer said Chinese President Xi Jinping is under a great deal of pressure to reach a trade deal because the fate of Beijing’s economy depends on it.
“He may be emperor for life by law but believe me when there is civil unrest coming, they are going to be focused on him,” he said. “Look what happened to the markets in China when Trump even threatened to impose tariffs. They are greatly at risk if they don’t come to the table, correctly, fairly and honestly and want good solutions to the problem.”