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DE | Monthly| Sinai-Husby Economic and Market Perspectives: Trump “Trade Shock” and Chinese Reactions “Overshadow” – 8/16/19
Trump “Trade Shock” and Chinese Reactions“Overshadow” Good News on the Economy, Labor Market and Q2 Profits
Trade conflicts, mainly between the U.S. and
China, intensified Friday, August 2, on a sudden “Tariff Shock” announcement by
President Trump—a 10% tariff on $300 billion more of Chinese exports (U.S.
imports) to begin September 1. But then on August 13, a portion of the
Chinese exports subject to the new tariff, about half, was postponed to
Just after the August 2 announcement, China responded by setting a fix in the Forex market that sent the Yuan-Dollar tumbling to near 7.05, conjuring up a possible competitive currency devaluation. The U.S. Treasury Secretary Mnuchin then labeled China a “currency manipulator,” worsening the geopolitical risk backdrop. Just this past Monday, however, a significant portion of the Chinese goods to be taxed (about $150 billion to $160 billion) was pushed out by President Trump to December 15.
These rapidly-changing events and circumstances and attendant global economic and geopolitical risks have significantly increased downside risks and uncertainties surrounding financial markets and the U.S. economy. The Trump “Tariff Shock” has overwhelmed continuing good news on the economy—1) Q2 Real GDP and solid consumer fundamentals, including continuing strong Retail Sales in July (0.7%); 2) the labor market’s not too cold, not too hot jobs gains in July and a substantial