Nancy Pelosi, the speaker of the House of Representatives, said that President Trump is doing the right thing but in the wrong way. On Tuesday, in an interview with Jim Cramer, she pointed out that China’s trade practices are alarming and not in the US economy’s interest. However, the tariff war could have a devastating impact on US consumers and companies. Tesla (TSLA) has to increase its car prices in China due to the weaker yuan. Notably, the yuan is weaker due to the trade war. China is an important market for Tesla.
Apple (AAPL) has been exposed to US tariffs. If tariffs reach 25%, Apple suppliers could relocate their production facility from China. Relocating the production would be expensive, according to a Bloomberg report. In the aviation sector, China is also critical for Boeing (BA). By 2030, China could be the largest aviation market in the world.
Is the trade war impacting consumers?
Stronger consumers support the US economy. Last year, the average annual expenditures rose 1.9%, while the income before taxes rose 6.9%. In 2017, the expenditure rose 4.8%, while the income fell 1.5%. The contraction in the expenditure with such large growth in the income could point to less aggressive consumers. Also, pension and insurance expenses rose 7.8% last year compared to a contraction of 0.9% the previous year. US consumers might be discounting future uncertainty. Also, the aging population could be another reason for the rise in savings.
Multilateral not bilateral!
Pelosi prefers a multilateral platform compared to the current bilateral trade talks. She said that the European Union and other nations should be stakeholders in the talks. She probably means that they could force China to accept a fair trade treaty. According to Pelosi, a multilateral platform would provide a peaceful resolution to trade disputes.
The US is engaged in a trade war with most nations. Notably, the US could impose tariffs on its European imports, according to CNBC. President Trump has also ratified the NAFTA trade treaty to USMCA. The bill is waiting for Congress approval. On Monday, the US and Japan reached a trade agreement.
Pelosi on the Fed
Pelosi said that the Fed is an independent body. Neither Republicans or Democrats should interfere with how the Fed functions. Last month, President Trump criticized Fed Chair Jerome Powell for higher interest rates. According to President Trump, positive interest rates are slowing US economic growth. In contrast, Powell thinks that the slowdown is due to uncertainty in the trade policy. After the Fed’s decision on interest rates today, we can expect a few more tweets from President Trump.