The phase 1 deal in the trade war with China is closed, now Trump is turning to Europe in the trade war! This is clear from an interview published by the US President today.
Trump with another attack on the Fed
But one after anonther. In the said interview, Trump is doing another sweep around his favorite topics. And already from folklore he attacks the American central bank again: Donald Trump has recently held back conspicuously with his criticism of the Fed – no wonder, after all, the US central bank ensured with its massive interventions in the American repo market and with the purchase of short-dated US government bonds for a party on Wall Street.
And Wall Street – especially Dow Jones – is very important to the US President: he sees the share prices as evidence of his own success as head of government – and thinks that the higher the share prices, the better his chances of being re-elected.
Now the US President has resumed criticism of the Fed in an interview with CNBC that will air today. Without the Fed’s rate hikes, the Dow Jones would be 5,000 to 10,000 points higher, Trump said. And the US GDP would be in the 4% range:
“That was a big blip that should not have taken place. It should not have happened (..). Now, with all of that, we had done the big raise on interest, I think we would have been close to 4%. And I – I could see 5,000 to 10,000 points more on the Dow. But that was a killer when they raised the rate. It was just a big mistake. ”
As is well known, the Fed cut interest rates three times in 2019 – after the previous tentative hikes – and admitted that the highly indebted US economy (record debt to US companies) cannot bear higher interest rates.
Yesterday Trump gave a kind of campaign speech at the World Economic Forum – the United States was in the middle of a boom, it was the best US economy ever, according to the President’s yesterday’s lax statements. Well, a look at the facts (the growth of US GDP) doesn’t really confirm this assessment:
Source: Fred
A prankster who recognizes a certain decoupling between the real economy and the prices on Wall Street, which has new all-time highs every day. It was predominantly Trump himself who pushed this decoupling significantly: he created a problem – threats of tariffs in the trade war – in order to put this problem aside for the time being. And the Algos, which are now dominant on the stock markets, bravely bought every hopeful message.
Trade war phase 2: Now it’s Europe’s turn!
Now Europe seems to be dealing with the customs threats. The EU, Trump said in today’s interview, has no other option but to do a deal with the US, otherwise there is “Very high tariffs on their cars and other things.”
Trump had met yesterday in Davos with the new EU Commission President von der Leyen, as Trump now says, it was a “Great talk.”
Well, whatever else. But this great conversation should not prevent the coming conflict. Trump announced today quite frankly what is coming up:
“I wanted to wait until I finished with China, I didn’t want to go with China and Europe at the same time.”
And Trump continues:
“And quite frankly, Jean-Claude was a friend of mine but he was impossible to deal with. I wanted to do Mexico and Canada first. Now they’re all done and we’re going to do Europe. ”
For the stock markets, phase 2 in the trade war is of course great news: now there can be new hope rallies according to the motto: customs duties may not come after all, everything will be all right again! The Algos are probably already programmed for European reports!
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