Donald Trump escalated economic global tensions on Friday, lashing out a range of targets that included the European Union, the Federal Reserve and China, indicating that he is prepared to raise tariffs on Chinese imports from $34bn to cover the entire $505bn of Chinese imports.
“I’m willing to go to 500,” he said during a taped interview with the business channel CNBC, an escalation he was prepared to make because it “was the right thing to do for our country” and because the rise in stocks – the S&P 500 is up 31% since his election – allowed him to pursue a more aggressive trade policy.
“Farmers have been on a downward trend for 15 years. The price of soybeans has fallen 50% since 5 years before the Election. A big reason is bad (terrible) Trade Deals with other countries. They put on massive Tariffs and Barriers. Canada charges 275% on Dairy. Farmers will WIN!”
Trump’s comments caused the Dow Jones Industrial Average to register a slight dip before the opening stock market bell in New York, though it then shook off the president’s threat and rose again on strong US corporate earnings growth.
The US president did not limit himself to commenting on tariffs and trade, and he accused China and the EU of currency manipulation.
“China, the European Union and others have been manipulating their currencies and interest rates lower, while the US is raising rates while the dollar gets stronger and stronger with each passing day – taking away our big competitive edge.”
He added: “As usual, not a level playing field …”
While the Trump administration has stopped short of honoring a campaign pledge to formally designate China as a currency manipulator, the president’s stream of consciousness approach to economic issues, andwhat many experts perceive as the dangers of unintended consequences, is causing alarm in foreign capitals and central banks.
The president’s latest finance-focused comments come ahead of the visit of the European commission president, Jean-Claude Juncker, to Washington next week for talks aimed at heading off a US-European trade war. Juncker is set to meet Trump on Wednesday.
Angela Merkel, the German chancellor who used her annual summer press conference to warn of a proposed 25% US tariff on European cars and components on national security grounds, said Juncker “will be making suggestions there about how we can enter into a discussion process to avoid this”.
Trump has threatened to slap a 25% tariff on imported cars and components, with a commerce department review under way to establish whether this is justified on national security grounds.
Merkel noted that German carmakers produce 400,000 cars a year in the US which are exported. BMW’s largest factory was, she pointed out, not in Germany but in Spartanburg, South Carolina.
But, she said, “I’m not filling myself with expectations or predictions” for Juncker’s trip.
In a further breach of established protocol, Trump redoubled his recent criticism of the Federal Reserve’s decision to steadily raise interest rates this year.
In an apparent reference to Fed rate increases, Trump tweeted: “Tightening now hurts all that we have done. Debt coming due & we are raising rates — Really?”
Trump’s comments are a break with the tradition that presidents avoid commenting on the path of domestic monetary policy. Interest rates are seen as the domain of the central bank, while the currency is regarded as the responsibility of US treasury officials.
In June, he also broke established protocol as regards to sensitive economic data with a tweet signaling May’s strong jobs report ahead of the labor department’s own announcement, a move some describe as a blatant misuse of presidential power as such numbers usually have an impact on stock and bond prices.
The president’s latest interest rate and dollar-focused comments came a day after he first criticized the Fed’s series of rate increases.
The Fed has raised interest rates five times since Trump took office, with two of those coming this year under the Fed chair, Jerome Powell, Trump’s pick to replace Janet Yellen. Trump told CNBC he’s worried the Fed’s policies will cancel out his efforts to boost the economy.
“I am not happy about it,” Trump said. “I don’t like all of this work that we’re putting into the economy and then I see rates going up,” Trump said.