The following is a transcript of the interview with Larry Kudlow that aired Sunday, July 29, 2018, on "Face the Nation."
MARGARET BRENNAN: To a friend of yours, Larry Kudlow, the director of the president's National Economic Council. Larry, welcome back. So good to see you.
LARRY KUDLOW: Thank you.
MARGARET BRENNAN: We did have a good economic growth number, that Q2 number, four point one percent. It's hard to argue it was anything but a good win for the president. But when you take it apart was this sort of just a temporary burst of buying ahead of the implementation of the president's tariffs.
LARRY KUDLOW: No I don't think so at all. I mean, the- the basics of this number were consumer spending and business investment. Those are the basics of any numbers, C plus I to put it in economic terms. -It's doing terrific. It's rising by better than 4 percent as was the overall. And I know some people have tried to downgrade this by saying about the- tariffs- buy ahead of tariffs. By the way we don't know that. There's a lot of theories about that. I'm glad to see exports rising whatever the reason. The biggest thing that nobody's talked about in terms of these smaller issues is- inventories. Inventories fell by I think twenty five billion dollars. That's very unusual. It took at least a percentage point off of GDP. But let's- these things jump around a lot. The heart of this report as I said: consumer spending, business investment are on a tear. Business investment is on a tear, which is really what our tax cuts--
MARGARET BRENNAN: Right.
LARRY KUDLOW: were designed to do —
MARGARET BRENNAN: And your deregulation.
LARRY KUDLOW: --the- and the deregulation. Thank you. And the energy. And by the way the president's attitude- the war against businesses is over, the war against success is over—
MARGARET BRENNAN: But then he's had--
LARRY KUDLOW: --the war against energy is over.
MARGARET BRENNAN: --a trade war Larry.
MARGARET BRENNAN: He's got trade disputes even with some of our allies and that's the thing that makes people worry that everything you've just laid out is going to go up in smoke.
LARRY KUDLOW: Up in smoke.
MARGARET BRENNAN: Can you promise that NAFTA will be done ahead of the November races, that you will get that agreement in principle to actually be a- hard agreement with the Europeans.
LARRY KUDLOW: Actually, on Mexico, just to pinpoint that, we're making very good progress and something good may be announced in the not too distant future.
MARGARET BRENNAN: By September?
LARRY KUDLOW: The biggest one was the European Union. I was waiting for you to- to get to the EU where I had a role and POTUS was unbelievable.
MARGARET BRENNAN: You helped him cool off those--
LARRY KUDLOW: And President Juncker was unbelievable.
MARGARET BRENNAN: --tensions this week?
LARRY KUDLOW: more than that. I mean, yes I think that's true. But also the EU- President Juncker, I mean comes right out of the gate saying, "We will buy a ton of your soybeans which will help ameliorate the China problem
MARGARET BRENNAN: But the EU can't buy that. European nations or private companies would have to.
LARRY KUDLOW: Yes indeed.
MARGARET BRENNAN: Right.
LARRY KUDLOW: And I think they will. And I think there's a lot of momentum there.
MARGARET BRENNAN: So there wasn't an actual transaction? This is a promise to do something in the future?
LARRY KUDLOW: We will have an actual transaction, guaranteed. Starting out right away with soybeans, beef and liquid natural gas, LNG, which is a huge topic.
MARGARET BRENNAN: But the European Commission says that agricultural- agricultural products are absolutely not up for negotiation. You're saying they are.
LARRY KUDLOW: They will be part of the negotiations, but I don't want to get in the way of their domestic issues. OK. We are going to be very accommodative. They will be very accommodative. Again if eggs are not part of it what are soybeans doing and what's beef doing? In the final document that was signed by both. We talked about opening markets for farmers and for workers. So, no I don't buy that-
MARGARET BRENNAN: What's the timetable on this?
LARRY KUDLOW: Immediately. Immediately, we're starting immediately.
MARGARET BRENNAN: Are you going to be negotiating this? Or is a trade representative?
LARRY KUDLOW: I'll be involved. Bob Lighthizer is the key guy, absolutely. We will be starting immediately. We'll be setting up a layered process to examine all the different areas. Remember-
MARGARET BRENNAN: Can you get this by September because we still have the Commerce Department saying they're reviewing whether to put these auto tariffs on or not-
LARRY KUDLOW: That's fair enough. And they are reviewing it.
MARGARET BRENNAN: That's a knife hanging over your neck.
LARRY KUDLOW: Well, I don't know if it's a knife. We'll see how that study comes out. The president asked for it and the Commerce Department will give it-
MARGARET BRENNAN: You don't think we'll see that 20 percent tariff on autos?
LARRY KUDLOW: I don't want to get ahead of anything in this game, Margaret. As you well know. All I'm going to say is the EU story is moving ahead very rapidly, very rapidly. And I think that by the way puts China in a very difficult position. China is I think being isolated. I don't know if they realize it or not. I assume they do. Not only is the EU and the US coming back together as I said before I'm looking forward to a deal on Mexico and I think a deal with Canada is-is out there-
MARGARET BRENNAN: But, as you say, this is really about China. But if China is not coming to the table then what are these tariffs accomplishing?
LARRY KUDLOW: Tariffs have moved a lot of people to the table including the European Union.
MARGARET BRENNAN: Beijing?
LARRY KUDLOW: Including Mexico. Well we'll see about that. You know, as I said before, a key point here is that all of a sudden the Chinese are being isolated. China by the way asked the EU to do a trade deal. The EU said no. The EU said to us we would much rather have the deal with you the United States. And that's why President Trump and President Juncker's meeting was so important and the process is beginning immediately. So this is very good news in my judgment.
MARGARET BRENNAN: So, you are a Reagan-era conservative.
LARRY KUDLOW: I am.
MARGARET BRENNAN: Doesn't it send shivers up your spine when you start talking about giving aid bailout to farmers? When you start talking about deficits now growing more towards 1 trillion in 2019 when you start talking about trade wars here. Isn't there a less destructive way to get to the growth you want to see.
LARRY KUDLOW: Well look, first of all, lowering tax rates and rolling back regulations and opening up energy is a great way for growth and that's what we're seeing. And the President's program, you know we've only been doing this I guess five Trump quarters. We're almost at 3 percent. Three point one in the first half and four point one in the second quarter. It's working. It's all working people were saying we couldn't do it. So that's one point
MARGARET BRENNAN: So you're telling farmers the pain is worth it?
LARRY KUDLOW: No I'm not telling anybody. I'm not for pain, I'm for prosperity as always. But here President Trump has said he wants to end tariffs he wants to end non-tariff barriers. He wants to end subsidies and he is a free trader. But sometimes you have to target tough tariffs to do so, OK? And that's what he's doing and I think it's beginning to show some success. Only been six months since he's been on this track.
MARGARET BRENNAN: Yep.
LARRY KUDLOW: So no. And regarding the deficit, let me say this. The increase in growth is going to be a big factor--
MARGARET BRENNAN: We do have to wrap it up.
LARRY KUDLOW: --in lowering the deficit. Even the CBO numbers and they've never agreed with us on taxes and dynamics--
MARGARET BRENNAN: Yeah, but.
LARRY KUDLOW: We have all--
MARGARET BRENNAN: Mick Mulvaney put out a number this week that I was referring to on the one trillion.
LARRY KUDLOW: Yes but look behind that number in the short run do we lose the revenues to invest in our economy. Absolutely.
MARGARET BRENNAN: Larry.
LARRY KUDLOW: Even the CBO numbers- even the CBO numbers show now that the entire one and a half trillion dollar tax cut is virtually paid for by higher revenues and better nominal GDP.
MARGARET BRENNAN: Larry we have-
LARRY KUDLOW: These are all good things, Margaret.
MARGARET BRENNAN: We have to leave it there because I am out of time. We'll be back in one minute with a lot more FACE THE NATION. So don't go away.