Donald Trump addressed reporters on Tuesday, expressing optimism about improving trade relations with China amidst ongoing negotiations. He promised to take a “very nice” tone during the debates. His goal is to negotiate down these tariffs, but he stated unequivocally that they will not go to “zero,” even if they reach an agreement. Trump’s comments were initially understood with optimism in the broader context of a potential de-escalation of the trade war with Beijing.
In fact, in his recent public comments, Trump directly telegraphed what he wanted Jerome Powell, Chair of the Federal Reserve, to do. Sanders called on Powell to take bold action to lower interest rates. Despite his criticism of Powell, whom he labeled “a major loser,” Trump confirmed that he has “no intention of firing” the Fed chair. Powell’s decisions on raising interest rates are coming under heightened fire. This has caused political headaches for Trump in recent months.
Trump’s critical remarks about Powell have intensified since last week, reflecting his frustration with the Federal Reserve’s policies as they relate to economic growth and market performance. His comments coincided with the US stock market’s fluctuations, where significant gains were observed following Trump’s statements. On Tuesday, the S&P 500 rose by 2.5%. At the same time, the Nasdaq soared by an even greater 2.7% — an important sign that earlier selloffs triggered by Trump’s statements are beginning to recover.
Trump’s cheerfully naive approach to trade relations was, at first, a major source of market turbulence. His escalated criticism of Powell in recent months eventually spooked investors. The selloff continued to pound equity, bond and the US dollar market. Today, markets are beginning to recover as investors come to terms with the meaning of what Trump said.
The President’s focus on negotiations with China highlights his administration’s ongoing strategy to address trade imbalances and tariffs. As to the meetings with Beijing, he said he was hopeful for a productive outcome. The administration was clear that any deal would not result in the elimination of all tariffs.