U.S. President Donald Trump

(CNN) – President Donald Trump enjoyed a brief stock market bounce after deciding to delay his threatened tariffs on Chinese-made cell phones and toys, but Wednesday’s very bad day for the US stock market underscored the grim economic reality facing the President as he runs for reelection.

Both China and Germany — the world’s second- and fourth-largest economies — delivered disappointing economic data overnight. Germany, which relies heavily on exports to China and the US, reported a slight contraction in the second quarter, opening up the possibility that it might tip into full-blown recession.

That news came after three central banks last week — in India, New Zealand and Thailand — all aggressively cut rates more than expected over trade fears and growing economic uncertainty.

The US has continued to see positive economic growth and a hot job market, thanks in part to Trump’s 2017 tax cuts, but that’s been largely driven by consumer demand that could be dashed by a slowdown abroad.

Analysts say Trump’s decision to delay some tariffs may have been too little too late — and that he risks losing his most powerful argument for reelection: the economy.

“The economy was clearly slowing ahead of the tariffs,” said Lindsey Piegza, chief economist at the investment bank Stifel. “We saw that weakness setting in prior to the tariffs, but the global trade war has only exacerbated that weakness.”

Wall Street breathed a sigh of relief after the Trump administration agreed to hold off slapping further economic penalties on an array of Chinese imports until mid-December, marking the first time the President has acknowledged that US consumers’ pocketbooks could get hurt by the escalating trade war.

But that reprieve appears to be have lasted only a day.

On Wednesday, stocks sank as the bond market sent a new warning sign that a recession could be nearing. The Dow Jones Industrial Average shed 800 points, erasing yesterday’s gains, while the yield on the US 30-year Treasury note fell to a record low.

Markets sank after the yield on the 10-year Treasury note fell below two-year yield for the first time since 2007. This kind of inversion is a viewed by many as a strong signal that a recession is likely in the future.

Trump and aides have been spooked by market turbulence for the past several days and the President had been encouraging officials to find ways to turn it around as the numbers have continued to slide.

Trump has been closely watching markets over the past week, including Wednesday, according to officials. He was pleased Tuesday that his decision to back off tariffs on China caused a boost in markets.

Trump’s frustration at the markets has been directed mainly at the Federal Reserve, as well as the chairman he appointed, Jerome Powell. But people familiar with the matter say he’s also vented that the team tasked with negotiating a trade deal with China has so far failed to strike an agreement.

He’s expressed concern that a worsening trade standoff could harm the economy and …read more

Source:: Daily times


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Bad economic news raises political risks for Trump

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