Trump Bashes China, to Meet Abe at G-7 Meeting
The main driver of markets the entire past week was the long-anticipated remarks at Jackson Hole by Federal Reserve Board chairman Jerome Powell. As has happened before, Powell disappointed many investors who expected a more dovish stance. In the event, he repeated a commitment to maintain the US economy and the Fed’s concerns about the impact of trade tariffs and tension. He gave no reason to point markets towards any September FOMC decision other than the widely anticipated 25bps cut in the Federal Funds rate. (See page 6.)
Of course, President Donald Trump in his inimitable way lashed out at Powell and China. We have only space for one tweet here: “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” You find more tweets on page 11, if you dare, about China.
Meanwhile, Trump will join the Western leaders plus Japan at the meeting of the G7 nations in France. Anticipating the usual troubles with the mercurial American President, the host, President Emmanuel Macron, announced there would be no formal communique following the meetings. Not sure that’s a big loss for investors. Anyway, the President may finally have some competition in shouting and headline grabbing as the new British Prime Minister, Boris Johnson, joins the group for the first time. Johnson is no slouch when it comes to shooting from the lip, though it sounds better with an English accent.
Escalating U.S.-China tensions might be creating an opportunity for Japan, as it seeks to conclude a bilateral trade deal with the U.S. Prime Minister Shinzo Abe is trying to secure a promise that Japan will not be included in any tariff President Trump might levy on imported cars or car parts.
Bilateral negotiators appear to be close to an agreement. Importantly for President Trump, talks appear to be focused on opening Japanese markets to imports of American agricultural products; especially beef and dairy. After the blows farmers have taken from tariffs levied on agro products by China, a farm country victory for Trump would be an important step in the preparations for the 2020 election.
Both Trump and Abe will be at the G7 meetings; and there’s speculation they may talk about some of the tougher outstanding trade issues. If the two can give instructions to their trade teams, a treaty might be agreed upon when the two meet again the United Nations in September.
The beat goes on. Friday, China announced another round of retaliatory tariffs totaling $75 billion on American goods coming into China, with implementation divided, like the American action, between September and December. Prior to the announcement President Trump’s economic adviser Larry Kudlow announced that the U.S. and China had productive talks via phone this past week, and that the US still anticipates face to face talks in DC next month. I guess the talks weren’t productive enough.
Meanwhile, the U.S. still covets Greenland.
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