In the case of Trump vs. the Federal Reserve, the president of the United States is likely to secure a winning verdict this week
that U.S. industrial production was technically in recession, meaning two straight quarters of contraction.
The Fed has made clear that trade tensions loom large in its worries about risks to the economy. Company investments in long-term projects like factories and technology picked up during the first half of 2018 in the wake of corporate tax cuts, but those investments have faded much faster than expected.Sign Up
“If you’re a manufacturing company in our economy, of any size, chances are pretty good that your supply chain goes across national borders,” Powell said in his testimony. “That supply chain is really part of how you do business, and you just assume that it’s working and you can focus on your clients. When your supply chain is called into question — we hear this a lot from businesses — when it’s called into question, you pull back.
“Trump’s trade policies are starting to show up in corporate balance sheets,” said Joseph Brusuelas, chief economist at consulting firm RSM. “In the third quarter you’d expect to see profit-margin compression across a wider array of earnings reports and the consumer will feel it, which could cause a pullback in consumption. That’s where the problem is for the White House.”
The Fed will likely step into this slowdown scenario on Wednesday with a rate cut of at least a quarter point and perhaps as much as a half a point. Trump already predicted on Monday that whatever it does....countries that know how to play the game against the U.S. That’s actually why the E.U. was formed....and for China, until now, the U.S. has been “easy pickens.” The Fed has made all of the wrong moves.
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