Wall Street Fears Trump May Be Too Dumb to End Trade War Before 2020
If you only got your information about our trade war with China from Donald Trump, you might think that the whole thing was going great—just like, if you only got your information about the president from the president himself, you might also think he was “great-looking”, emotionally stable, and fantastic with money, when, of course none of these things are true. Naturally, that hasn’t stopped Trump from claiming otherwise, and on Tuesday, he repeated his favorite yarn, the one about how the U.S. is taking in billions of dollars from China, when, in reality, it’s American consumers paying the price while U.S. companies pull back on investments out of fear that Trump will drag out his trade war with China indefinitely. And according to Wall Street, the growing consensus is that’s exactly what Tariff Man has planned.
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In a note to clients sent Monday, Goldman Sachs warned that a trade deal—the one the president lied about having struck last December—may not get done until after the 2020 election. That means that the additional tariffs Trump has threatened to impose on popular consumer goods like iPhones, beginning September 1, could be in place for an awfully long time. “While we had previously assumed that President Trump would see making a deal as more advantageous to his 2020 re-election prospects,” the bank’s chief economist wrote in the report, “we are now less confident that this is his view.” Ed Yardeni, president of investment advisory Yardeni Research, echoed that fear in an interview with CNN Business, saying that “Trump perceives the U.S. economy is strong enough to withstand even 25% tariffs across-the-board on everything we import from China.”
Trump also seemingly believes that his trade war is a good way to force the Federal Reserve to give him the rates cuts he’s been demanding for a year, since Jerome Powell’s rationale for last week’s quarter-point cut was to safeguard against “downside risks” like a shitty businessman in the White House whose policies are hurting an otherwise strong economy. And while Goldman predicts that Trump’s hostage-taking will pay off in the form of two more rates cuts before the end of the year, experts say it might not be enough to stop a recession of the president’s own making.
Recession odds probably go over even,” Mark Zandi, chief economist at Moody’s Analytics said last week, “and I think it would be pretty hard to avoid a downturn, regardless of what the Fed does.”
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