Battle stations
- China
announced retaliatory tariffs and Trump said he'd
fire back.
- Powell
tried to calm markets. That didn't last long (see above).
- Have you
had enough of nasty political debates? So has Google.
A sharp escalation in the trade war ended the week. China
threatened new tariffs on $75 billion of American goods. President Trump said
he'd have a response later. Markets plunged, undoing any good Jerome Powell did
with his dovish, long-awaited Jackson Hole comments. And he then got a Twitter
lashing from the President, anyway.
- Soybeans, automobiles and oil will bear the brunt of added China tariffs. Some measures would
take effect Sept. 1, and some from Dec. 15, Beijing's Finance Ministry
said. The levies take aim at the heart of Trump's political
support—factories and farms—amid signs of a slowing U.S. economy.
-
"I will be responding to China's Tariffs this afternoon. This is a GREAT opportunity
for the United States," Trump clapped back in a flurry of tweets. A meeting took place on
trade around noon in the Oval Office, according to people familiar. He's
scheduled to leave later today for the G-7 summit in France. Watch this
space.
-
Trump's comments sent U.S. stocks tumbling, with the S&P 500 dropping 2.6% and the Dow losing more than 600
points. Treasuries rallied,
with 10-year yields falling nine basis points and the yield curve
threatening inversion once again. The dollar lost ground against almost
all G-10 peers, with the yen up almost 1%. Oil slid to a two-week low and
gold jumped.
Back to Powell's comments, which were trumped by Trump:
- The U.S. economy is in a
favorable place, but faces "significant risks," he said a speech to Kansas City Fed's annual
symposium in Jackson Hole, Wyoming, minutes after China's announcement on
tariffs. "Trade policy uncertainty seems to be playing a role in the
global slowdown and in weak manufacturing and capital spending"
domestically.
- The Fed chair may have hoped to reassure markets, but any impact was wiped out within minutes
as Trump took to Twitter in response to China. Powell was "fairly
dovish today and markets were reacting to that positively, but when
the trade tweet came out, that obviously changed market
dynamics," said John Augustine, chief investment officer at
Huntington Private Bank.
- His comments also weren't enough to give him a respite from presidential ire. "As usual, the
Fed did NOTHING!" tweeted Trump. "My only question is, who is our bigger
enemy, Jay Powell or Chairman Xi?" Ouch.
- Traders ramped up expectations for rate cuts. While Powell's line of thinking may not be so
transparent, he clearly feels the Trump administration's policies
have boxed him in, writes Bloomberg Opinion's Brian Chappatta. The
path forward amid the U.S.-China trade warmongering may have to be fiscal
easing.