The Recession Watch Is Back On: CEO Daily

The Recession Watch Is Back On: CEO Daily

Is Jay Powell fueling Trump’s trade war? It’s probably not intentional, but by making clear he will cut interest rates to offset the economic costs of a trade war, the Fed chief may have emboldened the nation’s Trade Warrior in Chief. Trump announced Friday he was imposing a 10% tariff on $300 billion of Chinese goods. That led China on Monday to cut purchases of soybeans and push down the value of the yuan, which led Treasury Secretary Steven Mnuchin later Monday to declare China a currency manipulator. That sort of tit-for-tat retaliation is the very definition of a trade war. No surprise it caused markets to recoil. Morgan Stanley analysts said if the retaliation cycle continues, the economy will be in recession within nine months. But enter Powell, who made it clear last week he wants the expansion to continue, and he is willing to cut rates further to offset trade-related sluggishness. That could make it possible for the president to pursue his China-bashing agenda without having to pay the economic—and political—price. That said, Trump and Xi are playing chicken with an aging economic expansion, and the results are unpredictable. Macroeconomic policy is as much about psychology as it is about hard math, and the current situation provides plenty of cause for angst. “We did not enter this particular trade war with a plan on how to get out,” says Philip Levy, who was an economic advisor to George W. Bush. And so, the recession watch is back […]

Be the first to comment

Leave a Reply

Your email address will not be published.


*


This site uses Akismet to reduce spam. Learn how your comment data is processed.