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Kudlow Into the Breach

Trump needs his new economic chief’s focus on policies for growth.

Larry Kudlow is interviewed on the floor of the New York Stock Exchange, March 14Photo: Richard Drew/Associated Press

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The Editorial Page

March 14, 2018 7:01 p.m. ET

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Equity markets stumbled Wednesday after President Trump tweeted his enthusiasm for more trade brinksmanship even as first quarter economic growth estimates are falling. Congratulations and good luck, Larry Kudlow, who said he has accepted Mr. Trump’s offer to run the White House National Economic Council.

The long-time CNBC commentator is an excellent choice to replace Gary Cohn, having helped Mr. Trump craft his campaign tax plan. Mr. Kudlow, a stalwart from the GOP’s growth wing going back to the Reagan Administration, also played a crucial role persuading Congress to support the reform that passed in December. He spent hours with Senators making the case for the supply-side benefits of tax reform, which passed without a single Democratic vote.

Mr. Kudlow’s job in the White House will be to protect this growth potential against policy erosion. This includes new bursts of spending, special pleading by industries, and above all a wave of trade protectionism. Mr. Kudlow has been critical of Mr. Trump’s steel and aluminum tariffs, but the President has spoken with him several times in recent days and presumably is comfortable with an internal debate.

“We don’t agree on everything, but in this case I think that’s good,” Mr. Trump said on Tuesday. “I want to have different opinions. We agree on most. He now has come around to believing in tariffs as a negotiating point.”

The risks of this strategy were clear Wednesday when share markets fell amid new trade tensions. Mr. Trump started the selloff with a morning tweet that said, “We cannot keep a blind eye to the rampant unfair trade practices against our Country!” Boeing shares promptly fell on fear of lost foreign sales, down 2.5% on the day.

The Commerce Department then signaled that it will allow few product exceptions to the tariffs for U.S. metal-using firms. This means higher prices for everything from the aluminum foil around Hershey’s Kisses to the steel in Ford Motor’s profitable SUVs. German Chancellor Angela Merkel said the European Union shouldn’t fear retaliating if necessary. And news reports said Mr. Trump asked advisers to double the tariffs he is soon expected to impose on Chinese goods to $60 billion.

All of this interferes with the economy’s growth momentum of the last nine months. Mr. Kudlow has devoted his career to promoting policies that produce prosperity, including tax cuts, deregulation, privatization and open trade. At some level Mr. Trump must recognize and want this, and it doesn’t hurt that Mr. Kudlow is the kind of seasoned TV advocate Mr. Trump respects.

Mr. Kudlow is less of a brawler than Mr. Cohn, so one question will be how such a nice guy will fare in the Trump Hall of Knives. Aside from the protectionists, he’ll have to compete for influence with Treasury Secretary Steven Mnuchin, who wants weaker capital standards for banks and doesn’t seem to mind a weaker dollar.

But Mr. Kudlow will have allies in White House economist Kevin Hassett and budget director Mick Mulvaney, as well as the first-rate staff that Mr. Cohn assembled, if he can keep them. Mr. Kudlow also has allies on Capitol Hill. His best asset is that Mr. Trump needs faster growth and rising wages to succeed, and that has been Mr. Kudlow’s life’s work.