As U.S. major averages were aiming to close out a third straight weekly gain, comments on ramping up trade war efforts from President Trump caused traders to hit the “pause” button in order to further understand the implications and whether or not there will be any direct impact on the markets. President Donald Trump recently sat down with CNBC for a wide-ranging interview this past week.
In the interview, President Trump said that he was prepared to place tariffs on all Chinese goods that are imported by the United States. This amounts to a little over $500 billion in goods. Being that China only imported nearly $130 billion of US goods in 2017, the tit-for-tat battle gives the United States a lot more leverage.
The president made it clear that he was going to do what was necessary in order to create a more balanced trade relationship with China and other countries. With China, the issue is not only the trade imbalance, but also to stop the alleged theft of U.S. technology and intellectual property.
“I’m not doing this for politics, I’m doing this to do the right thing for our country,” Trump said. “We have been ripped off by China for a long time…I don’t want them to be scared. I want them to do well. I really like President Xi a lot, but it was very unfair,” stated President Trump in the CNBC interview.
President Trump also took the opportunity to discuss his displeasure with the current Federal Reserve interest rate hike schedule. In the end, the president said he would ultimately let the Fed continue to operate as they see fit, but he is “not thrilled.”
“Because we go up and every time you go up they want to raise rates again. I don’t really – I am not happy about it. But at the same time, I’m letting them do what they feel is best. But I don’t like all of this work that goes into doing what we’re doing.”
The president even took to Twitter to further discuss is reasoning for not agreeing with the current pace of the interest rate hikes:
While investors and analysts largely do not see Federal Reserve Chairman Jerome Powell shifting course based on the comments, they did warn that the president’s attacks could escalate if the Fed continues forward with the two more rate hikes this year as planned.
For now, it appears this appears to just be talk, but it highlights how far the president is willing to go in order to fix the US’s role in the international trade scene. The Fed will continue to be in a tough situation, as further rate hikes in 2018 and 2019 could put even further political pressure on Powell. Yet, if Powell was to suddenly slow the pace of interest rate hikes, many may see this as giving in to political pressure. Investors must continue to be vigilant of any further material changes that could hit their portfolio.