Paul Tudor Jones: Trade War Has Accelerated Fed Rate Cut Need


Jun. 12 2019, Updated 3:08 p.m. ET

Trade war expedites the need for rate cuts

Billionaire investor Paul Tudor Jones spoke to Bloomberg today ahead of JUST Capital’s event in New York. He thinks the US-China tariff war has expedited the need for Fed rate cuts. He said, “I didn’t think we’d have a first cut in 2019.” He believes that the Fed could make its first rate cut after a long hiking cycle.

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Renewed trade war concerns

A tweet by Donald Trump on May 5 reignited US-China (FXI) trade war concerns, worsening the geopolitical landscape. Between May 5 and June 11, the S&P 500 (SPY) and NASDAQ Composite (QQQ) fell 1.7% and 4.0%, respectively. Trump has again threatened to raise tariffs if Chinese president Xi Jinping doesn’t meet him at the G20 summit, scheduled for later this month in Japan.

To counterbalance the slowdown driven by tariffs, Trump has time and again asked the Fed to cut interest rates. He believes the Fed erred in raising interest rates last year, putting the US at a disadvantage to China.

Tariffs a “very material” event

After weak non-farm payroll and consumer price inflation reports, calls for Fed rate cuts have grown louder. Markets are now expecting at least two rate cuts this year.

In his conversation with Bloomberg, Jones stated that “I think whether we impose that next $300 billion is going to be very material for whether that’s the tipping point for pushing us into a recession.”


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