US stocks dip as Trump talks of more tariffs on China

Blanche Robertson
July 22, 2018

President Donald Trump has indicated that he's willing to hit every product imported from China with tariffs and again criticized the Federal Reserve, as well as some of the nation's biggest trading partners.

Later, the White House said in a statement that Trump respects the Fed's independence and was not interfering with its policy decisions.

Mr Trump's dismissal of economic-policy tenets shifts attention during a week when he's facing growing pressure over his relationship with Russian President Vladimir Putin and his lukewarm support for the finding by USA intelligence agencies that Russia meddled in the 2016 election.

On Twitter, Trump also accused China and the European Union of manipulating their currencies to promote their exports at the expense of the USA, and criticised the Fed for raising interest rates. Trump complained that China's currency is "dropping like a rock". "I have to tell you, it puts us at a disadvantage". European auto shares fell on Friday in response to Trump's China comments.

Donald Trump said he was concerned about the potential impact on the U.S. economy and American corporate competitiveness from rising rates and a stronger dollar. In Friday, however, Trump again attacked the Fed, which is led by Jerome Powell, Trump's hand-picked choice.

The dollar has strengthened since late 2015 as the Federal Reserve began raising interest rates against a background of steady economic growth, slowly rising inflation and the lowest United States unemployment rate since the 1960s. But rate increases also make borrowing costlier for households and companies and can weaken the pace of growth.

The U.S. yield curve flattened, close to levels not seen in 11 years, as upbeat data on the jobs market and business activity reinforced the view of further interest rate increases from the Fed.

"In today's world, when currencies are so distorted, it would be foolish not to pay attention to whether the dollar is competitive", said Dan DiMicco, a former steel-industry executive who advised Mr Trump during the 2016 campaign. Since then, the Fed has generally made an effort to prove its independence.

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"If the market starts to feel the Fed is being manipulated politically, that's a really bad story".

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The president's comments shift attention during a week when he's facing growing pressure over his relationship with Russian President Vladimir Putin, after the two leaders met on Monday in Helsinki.

Trump defended his comments to CNBC by saying he is "just saying the same thing that I would have said as a private citizen". China accused American officials of making false accusations Thursday as it fired back against a claim President Xi Jinping is blocking talks with the US over the trade war between both nations.

Still, Wall Street took notice of the president's apparent desire for a weaker dollar.

When asked about the stock market possibly falling if the United States imposes duties on such a large amount of goods, Trump told CNBC: "If it does, it does".

Senior EU officials, including the European Commission's president, Jean-Claude Juncker, are set to fly to Washington, DC, next week with the aim of persuading Trump not to levy punitive tariffs on European automobiles.

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