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Art Laffer: Trump told me personally tariffs are his only leverage on China

Dion Rabouin
Financial Markets Reporter

President Trump’s trade war may be more an act of desperation than aggression. Art Laffer, an advisor to President Donald Trump during his 2016 presidential campaign, said on Friday that the president told him personally that tariffs were about all the leverage he has in his battle with China.

“He’s said to me personally that he has very little leverage except by threatening tariffs and I have to trust him that he’s telling me the truth,” Laffer told Yahoo Finance.

Trump reportedly is planning to push ahead with tariffs on $200 billion of additional Chinese imports to the United States as early as next week. The U.S. has already imposed tariffs on $50 billion of Chinese goods and China has responded in kind with tariffs on $50 billion worth of goods it imports from the U.S.

Companies and members of the public have until Sept. 6 to submit comments on the proposed duties, which cover everything from selfie sticks to semiconductors and would impact significantly more consumer items than the previous tariffs had.

According to the report, the president plans to impose the tariffs once that deadline passes. U.S. stocks fell after reports of Trump’s intentions.

In a wide-ranging interview with Yahoo Finance, Laffer, the architect of the supply-side economics paradigm embraced by former President Ronald Reagan, said that despite having started the trade war by imposing tariffs on the world’s second largest economy, he believes Trump wants free trade.

Economist Arthur Laffer speaks about the economy during a panel discussion at the Heritage Foundation on December 18, 2014 in Washington, DC. AFP PHOTO / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)

“I believe deep down that he’s a free trader,” Laffer said. “Any owner of an international business has to be a free trader if they know how to do business and he does.”

Laffer is known for the eponymous Laffer Curve, which suggests that reducing taxes can actually increase government revenue by spurring productivity among workers who are discouraged from labor by high tax rates.

He’s also known as a strong advocate for free trade, who has railed against tariffs and other non-tariff barriers to free trade. Laffer said a trade war would be “the exact opposite” of what he’d like to see.

“That is the one thing we need to make sure we avoid, and free trade is the only real answer,” Laffer said. “The question is how do we get from here to there and that’s not my specialty.”

See also:

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Dion Rabouin is a global markets reporter for Yahoo Finance. Follow him on Twitter: @DionRabouin.

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