Thursday, 13 Dec 2018
Business

Trump's two favorite economic indicators – the stock market and the trade deficit – are lacking


The trade quarrel between President Trump and China is causing jolts on Wall Street. (Luisa Gonzalez / Reuters).

President Trump has made it clear that he wants the stock market to rise and the trade deficit to decrease, and his policy to do so. But this year, he got the opposite result: the trade deficit is rising as the market crumbles.

The US trade deficit is at its highest level in a decade, the Commerce Department reported on Thursday, and the trade deficit with China is at a record high. Trump's trade war seems to worsen the trade deficit, as the United States continues to import a lot of foreign products but has trouble selling products such as soybeans abroad.

Trump's commercial quarrel with China is also provoking shocks on Wall Street. The stock market had a particularly ugly week, with the Dow Jones industrial average losing nearly 1,600 points on Thursday before reducing losses. In Wall Street's general view, Trump's trade policies had driven the market down. The rebound Thursday afternoon was prompted by hints that the Federal Reserve may not increase its interest rates significantly in 2019.

"The stock market could no longer disapprove of the president and his economic team," wrote Chris Rupkey, chief economist at MUFG Union Bank. "This administration must mitigate its war with the world, from European builders to importers in China, otherwise this stock market will collapse completely and make the 2019 recession forecast a reality."

The President has repeatedly stated that the rise in the stock markets was proof that his economic policies were working well, but since the gains were largely shattered by 2018, he went on to blame others for the spiraling markets. .

The last time he tweeted to rent the market gains, it was late October when he sought to remind people that "the stock market is rising sharply since the elections" and "the revenues are excellent. Since then, he has blamed the Democrats and the Federal Reserve for the decline of the market. Investors agree that pressure from the Fed to raise interest rates and make borrowing more expensive is one of the reasons stocks have slipped, but this week's trading was mainly driven by the fight between Trump and China.

The news was announced on Wednesday that the United States and Canada on Saturday arrested one of China's top business leaders, a leader of Huawei's electronics and technology company, creating a new point of friction with China. The Chinese government has labeled the arrest of "despicable hooliganism", although US senators from both sides say the company is spying on Americans and has violated the sanctions imposed on Iran.

Trump this year put high prices on a number of foreign products to encourage consumers to "buy American products" and companies to produce more products in the United States. But the strategy does not seem to work.

Soybean exports fell by $ 800 million in October and are down more than 40% from last year, as China counteracts Trump's tariffs by imposing heavy taxes on US agricultural products. Although many economists expected the trade deficit to widen this fall, the numbers are even larger than expected because of Trump's trade war and the fact that the European and Chinese economies are weakening and weakening. should largely reduce purchases of US goods.

It's "how to reduce the Trump administration's trade deficit," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a morning note to clients. "Increasing domestic demand through tax easing and fierce struggles with trading partners does."


(Washington Post)

Trump and Chinese President Xi Jinping have negotiated a truce over the weekend to retain additional tariffs for 90 days, but a wide gap remains between what Trump wants and what the Chinese are willing to give. Trump says Xi agreed that China would buy many more US goods to reduce the trade deficit between the two countries and reduce tariffs on US goods, including automobiles. But the Chinese have not yet confirmed these details, especially on cars.

"We have to wait 90 more days. This kind of uncertainty is not necessarily good for the markets, "Jamie Dimon, CEO of JPMorgan Chase, told CNBC.

The United States recorded a trade deficit of $ 335 billion with China last year.

One of the essential elements of Trump's rationale for starting the trade fight was to reduce the trade deficit, which, in his view, indicates that the United States is "losing" to the benefit of other countries. However, most economists do not consider the trade deficit as a problem, as Americans receive cheaper goods and countries such as China use the money they earn with trade to invest in US firms and buy of the American public debt.

"The fact that the president calls himself a" tariff man "is juvenile and not very presidential," said Dennis Gartman, editor of a daily newsletter on the markets. He says he voted for Trump but disagrees with him on trade policy. "The president seems to want to believe that the United States can be an island. This is the thought of the 17th or 18th century. "

Related:

Inventories are in free fall, but a US recession does not seem imminent

Trump has gained little from China to the present day

Trump's claims on trade deal with China reveal cracks

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