The trade war between the world's top two economies heightened on Friday after Trump hiked tariffs on $US200 billion ($A285 billion) worth of Chinese goods, saying China reneged on earlier commitments made during months of negotiations.
"Yes, I don't disagree with that, ' said Kudlow, while insisting that 'both sides will pay" - and Beijing more than Washington as Trump's prediction comes true and companies relocate from China to other nations with free or freer US trade arrangements. But will American consumers?
In another sign of how nervous investors were feeling, an index known as Wall Street's "fear gauge", which measures how much volatility the market expects in the future, spiked 28.1%.
The Dow Jones Industrial Average plummeted more than 470 points to start Monday trading, as traders reacted to an increasingly aggressive U.S.More news: Three confirmed killed in mid-air seaplane crash in southeastern Alaska
USA -imposed tariffs will put pressure on China to make a deal because they will make Chinese products more expensive for Americans, and Chinese manufacturers will therefore sell less.
"I assume this goes fairly high within China's government before retaliatory actions are settled upon", he said.
Beijing is running out of USA imports for penalties due to the lopsided trade balance between the world's two largest economies. White House economic adviser Larry Kudlow said on Sunday that China needs to agree to "very strong" enforcement provisions for an eventual deal and the sticking point in negotiations was Beijing's reluctance to put into law changes that had been agreed upon. Brent crude, the worldwide standard, gained 24 cents to $70.86 per barrel. His comments came after the United States more than doubled tariffs on $200bn (£15.4bn) of Chinese goods on Friday. And slower US economic growth could even hurt domestically focused companies. On Monday he said, "We're dealing with them". But China has taken so advantage of the USA for so many years, that they are way ahead (Our Presidents did not do the job). But China has taken so advantage of the US for so many years, that they are way ahead (Our Presidents did not do the job).
They added that the effects of the tariffs had spilled over noticeably to the prices charged by US producers competing with goods affected by the levies.More news: Kim Kardashian and Kanye West ‘name son after Glasgow train station’
He warned Xi Jinping on Monday that if he doesn't make a trade deal, companies will flee China to avoid seeing tariffs increase their prices in the U.S.
Beijing will impose tariffs ranging from 5 per cent to 25 per cent on a number of American goods, according to a statement by the Tariff Policy Commission of the State Council - China's cabinet.
The president said on Monday that the administration would offer financial assistance to assist farmers whose products could be impacted as trade tensions worsen. "It is no big deal".
Analysts have said investors should prepare for a more volatile stock market while the trade dispute deepens. "Losing a valuable market, losing stable pricing, losing an opportunity to support our families and our communities", said Davie Stephens, president of the American Soybean Association.More news: Amazon Pays Employees to Start Businesses
US equities hit record highs just two weeks ago on hopes of a trade deal and a positive first-quarter earnings season.