President Trump wants to shape public opinion in his favor while negotiating a trade deal with China.
President Trump’s expectations
Obviously, President Trump wants the maximum benefit for the US in his trade talks with China. As a result, the US-China trade war continues. The ongoing trade war impacts both economies. However, President Trump wants to use positive economic data to indicate trade war success. In his latest tweet, President Trump said that the US economy is doing well. He also highlighted that the unemployment rates are near historic lows. The US added 164,000 jobs in July.
According to President Trump, the US economy is “poised for big growth after trade deals are completed.” In another tweet, he said that the talks with China are going well. In a tweet, Trump said, “We are doing very well with China, and talking!” He thinks that after the trade deals, the tariff money will help farmers impacted by the Chinese tariffs.
Could the trade war lead to a recession?
Previously, President Trump said that if China doesn’t complete a deal with the US, the Chinese economy might enter a recession. He said that the US economy is doing great amid the trade war. However, there are signs of weakness. The weakness was visible in the Fed’s recent rate cut after more than a decade. Fed Chair Jerome Powell said, “But manufacturing output has declined for two consecutive quarters, and business fixed investment fell in the second quarter.” Concerns related to “global growth, trade policy uncertainty, and muted inflation” led to the rate cut decision in July.
The recent yield curve inversion added to the fears about the US economy entering a recession. However, the inversion could be a false alarm. The inversion generated more concerns about an already uncertain growth outlook.
Markets are volatile amid the trade war, recession fears, and geopolitical tensions. The S&P 500 Index and the SPDR S&P 500 ETF (SPY) have each fallen approximately 4.5% in the last 15 sessions. The industrials, financials, consumer discretionary, and energy sector stocks have been impacted the most. The Industrial Select Sector SPDR ETF (XLI), the Financial Select Sector SPDR ETF (XLF), and the Consumer Discretionary Select Sector SPDR ETF (XLY) each fell more than 4% in the past month. In comparison, the Energy Select Sector SPDR ETF (XLE) fell 9.1%. SPY fell 2.8% in a month.