Trump Threatens to Slap Tariffs on Everything Imported From China

Andrew Cummings
July 20, 2018

His remarks to CNBC weren't the first time that Trump has departed from a long-standing practice of US presidents steering clear of commenting on Fed policy and the value of the dollar.

He adds: "As usual, not a level playing field".

Mr Trump said increased rates had resulted in a stronger dollar which put the United States at a disadvantage compared with places where central banks are holding interest rates steady.

Trump has told reporters before that the USA could target all of China's imports.

Mr. Powell argues that the economy is strong enough to handle higher rates after the rates were kept artificially low to help the recovery from the Great Recession of 2007. Its rate hikes are meant to prevent the economy from overheating and igniting high inflation.

"I don't like all of this work that we're putting into the economy and then I see rates going up", Trump said.

Despite this, Trump said that the Fed should keep rates low so the US economy could make up lost ground to China. That episode ultimately triggered runaway inflation that took a decade to tame and required raising the Fed's policy rate above 15 per cent - more than eight times the rate's current average.

Policymakers around the world go out of their way to maintain the independence of their central banks, because the temptation to use monetary policy as a political tool by elected officials is too great. "The remarks certainly aren't an immediate threat to Fed independence, but they break with the tradition of respectful distance".

"Following falls in USA shares and ahead of the weekend, sales for position-adjustment reasons are seen overwhelming the market", SBI Securities said in a commentary.

"I'm not thrilled, because we go up and every time you go up they want to raise rates again", Trump told CNBC.

"The Fed's independence from short-term political pressures is critical to enabling it to take the longer-run perspective that is essential for achieving its legislated dual mandate for jobs and price stability", said Donald Kohn, a former Fed vice chairman who is now a senior fellow at the Brookings Institution in Washington. "I'm doing this to do the right thing for our country", Trump said in a CNBC interview aired Friday.

Nixon's attempts to influence provide a flawless example of why defenders of Fed independence are so fervent in their belief that politicians should not attempt to tamper with monetary policy, but there is also empirical evidence for independence as well.

Unemployment stands at 4 percent, close to record lows, while the economy has continued to expand under Trump, and the GOP is pitching their economic record ahead of the midterm elections.

"Uncertainty over the White House's dollar policy will certainly sow renewed seeds of doubt into global investors", Viraj Patel, foreign exchange strategist at ING, wrote in a report.

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