The Fed cut interest rates this week for the first time in nearly 11 years, effectively lowering the odds of a recession in the United States. Just 24 hours later, Trump raised those odds by vowing to unleash tariffs on $300 billion of US imports from China, which will for the first time directly impact American shoppers.
US stocks plummeted on the tweet, a selloff that deepened on Friday. Cash rushed into ultra-save government bonds, sending Treasury yields to multiyear lows. "Tariff man is back and more dangerous than ever to our economy," Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in a note to clients on Friday.
But some observers fear Trump's increased pressure on China will backfire, provoking retaliation that deepens the economic pressure. The Barclays global manufacturing confidence index dipped further into negative territory in July. Barclays said it's"yet another warning of an ongoing global industrial recession."Many blame the trade war for the global manufacturing downturn, but that may only be partially true.
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