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Trump threatens tariffs on all $505bn of Chinese imports

22 Juillet 2018

Responding to the president's latest comments, the White House economic adviser Larry Kudlow told the news website Axios that provoking Trump would be a mistake for China. "It could be 80 percent (since the election) if I didn't want to do this", said the president.

Trump repeated his criticism a day earlier of the U.S. Federal Reserve's policy on raising interest rates saying he is concerned the central bank will raise interest rates twice more this year, a White House official told CNBC. Trump complained that China's currency is "dropping like a rock".

The US, which is now doing well, should preserve its right to recover what was lost through such practices as illegal currency manipulation and trade deals that were not profitable for the US, the president tweeted.

Markets around the world lost ground on the comments.

"We are being taken advantage of, and I don't like it", Trump said.

Powell declined to comment when approached by a reporter in Buenos Aires, as he prepared for weekend meetings with finance ministers and central bankers from the Group of 20 economies. But rate increases also make borrowing costlier for households and companies and can weaken the pace of growth. "No president should interfere with the workings of the Fed", Fisher said.

"By running tight monetary policy and loose fiscal policy, Trump has put nearly ideal conditions in place for a rally in the dollar", said Karl Schamotta, a strategist at Cambridge Global Payments in Toronto.

"Lowering interest rates to zero lowered the value of the dollar".

"So by making the Fed's independence his primary goal, well, the Fed did what it did and it made Bill Clinton look better", he added.

It's what allowed the Fed to take emergency measures in the past, without fear of political meddling, such as in 2008 when it undertook an aggressive policy known as quantitative easing, whereby it bought massive amounts of debt to create new money out of nothing, to stimulate the economy.

What is a currency war?

However, many analysts doubt Trump's comments will have much impact on Federal Reserve policy or the markets.

"This puts Powell in the very awkward position", Valliere said, "of having to show the market that he's tough on inflation". Now, I'm just saying the same thing that I would have said as a private citizen.

The view that China and the euro area are manipulating their currencies contradicts the Treasury's own currency report, which found in April that no major USA trade partner is gaming its exchange rate.

Trump had a love-hate relationship with former Fed chief Janet Yellen.

When asked about the stock market possibly falling if the U.S. imposed duties on such a large amount of goods, Mr Trump told CNBC: "If it does, it does".

Interest rate hikes can suppress investment and the unemployment rate, two metrics Trump and Republicans touted frequently throughout his presidency. Nominated by Trump and confirmed by the Senate with broad bipartisan support, Powell has a four-year term as chairman that ends in 2022.

Leaders at the Fed seemed unfazed by Trump's remarks, however, emphasizing that US monetary policy operates independently from political concerns.

But, she said, "I'm not filling myself with expectations or predictions" for Juncker's trip.

Trump threatens tariffs on all $505bn of Chinese imports