By Denny Gulino
THE WHITE HOUSE (MaceNews) – President Donald Trump kept his tweets coming Tuesday afternoon, again slamming the Federal Reserve while staying away from the topic of China as he has since returning from the weekend in France.
One of the other Trumps – “live” Trump – had repeatedly declared China’s Xi Jinping a “brilliant leader” while on camera at the Biarritz G-7. “Twitter Trump” last week had designated Xi an “enemy” as in who was the bigger enemy, Xi or Fed chief Jerome Powell.
Speculation grows that the third Trump – “Teleprompter Trump” – may be making an appearance soon. Again, it’s only speculation, but as the Sunday tariff deadline gets closer a decision point appears to have arrived.
Either open the way for new talks by suspending, delaying or modifying the additional tariffs on $100 billion worth of Chinese goods – these including many bought at retail by U.S. consumers – or see the possibility of a deal with China fade away for the foreseeable future.
It would seem that decision point also includes some recalibration in the U.S. posture toward one of the world’s largest telecom manufacturers, Huawei. China has made clear that high level talks depend on softening both tariffs and the ban on certain advanced Huawei products.
There is also an Oct. 1 deadline for even more tariff escalation, and then Dec. 15 after which just about everything China sells to the U.S. will cost significantly more. Even within the Trump administration opinions are reported to diverge on whether hitting every China export hardens resistance.
For now “Twitter Trump” is in the lead, and Twitter Trump blasts enemies, doesn’t back off and finds ways regularly to provoke new controversies and distractions. As the tweets land, stocks gently cruised about half a percent lower, the VIX elevated back above 20, and the return of the 2-year to 10-year curve inversion seemed to become more entrenched.
“The Federal Reserve loves watching our manufacturers struggle with their exports to the benefit of other parts of the world,” Twitter Trump railed in the early afternoon, at a time his public schedule had him having lunch with the vice president. “Has anyone looked at what almost all other countries are doing to take advantage of the good old USA? Our Fed has been calling it wrong for too long!” Trump wrote.
He also retweeted something originated by aide Kellyanne Conway, labeling “messy” a story in a newspaper friendly to the White House raising questions about the sons of former Sen. John Kerry and presidential candidate Joe Biden and what was once a business deal in the Ukraine.
The subject of China was raised from another direction Tuesday, in an Op-Ed by Princeton professor and former N.Y. Fed President Bill Dudley. In a Bloomberg Opinion piece, Dudley wrote, “Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks – including the risk of losing the next election.”
In every discussion of trade, Fed Chair Powell has carefully stated the disclaimer that his warnings about the effect of trade uncertainty in no way is a judgment of trade policy itself, a subject he has said it outside the Fed’s lane. Every Fed official has at one time or another steered away from any hint the Fed is ever making decisions for political reasons.
The question of whether the Fed should ever question the policy of any administration, on trade or deficit spending or anything else, regardless how seemingly misguided, was first raised in a Mace News analysis June 6, titled “The Sadness of Being Merely the Federal Reserve.“
Three more trading days remain this week in which the countdown toward Sunday’s added tariffs may increasingly influence share prices and the credit markets. Should administration policy on tariffs not be modified then on Sunday will begin a gradual process of price hikes at stores and on line of diapers, baby clothes, jackets, shirts, underwear, pajamas, sweaters, dresses, gloves, shoes and watches. The trade war will have reached the U.S. consumer.
At the close Tuesday, the DJIA was off 120.93 or 0.47%, the S&P was down 0.32% and the Nasdaq ended off 0.34%. The Treasury 10-year was at 1.477%, below the 2-year which was at 1.522%. The VIX was still at 20.24. .West Texas Intermediate was up 2.34% at $54.94.