China Trade War News: August 23rd, 2019
The China trade war heated up today when the Chinese government announced it will place tariffs on roughly $75 billion worth of U.S. imports starting on September 1st.
Only a portion of the overall tariff package will be implemented in September, according to the Chinese Ministry of Commerce, with the rest coming into effect on December 15th.
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The move was retaliation for U.S. tariffs on $300 billion worth of Chinese goods. President Donald Trump announced on August 1st that tariffs would go in effect on September 1st of this year.
However, pressure from the American business community caused Trump to postpone tariffs until December of this year.
The President told reporters that a candid meeting with Apple (AAPL) CEO Tim Cook helped convince him that tariffs would upset the holiday shopping season enough that he should delay them.
Tariffs Could Impact Fed Policy
The world’s central bankers are meeting this week to discuss policy in Jackson Hole, Wyoming.
The tariff announcement could impact the direction of Fed policy in the coming months.
Federal Reserve Chairman Jay Powell appears to be leaning towards a cut, but many voting members of the Fed aren’t convinced that the economy needs one.
Trump, Wall Street, and practically the whole world are hoping that the Fed cuts interest rates before the end of 2019, but many rational observers don’t agree.
Most notably, several voting members of the Fed’s board of governors believe a rate cut is unnecessary, citing strong consumer spending and low unemployment.
If the Fed thinks tariffs will affect the economy, it could increase the chances of a rate cut this year.
However, critics say the economy is fine and cutting rates is a violation of the Fed’s dual mandate. Many believe lowering rates now will leave the U.S. with less ammo to combat a recession.
What the Fed will decide is anyone’s guess, but the market thinks it’s getting a cut. Fed fund futures still show traders are betting on another cut before the year is through.
Stay tuned to the Stock Dork for all of the latest China trade news.