Trump: Fed rate cut would clinch victory in trade war with China

President Trump said Tuesday that the Federal Reserve should cut interest rates to help the U.S. win his trade war with China.

In a Tuesday tweet, Trump said that the Fed could clinch a victory for the U.S. in the nearly yearlong dispute with China by slashing borrowing costs to stimulate the economy.

“China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing,” Trump tweeted Tuesday, though Beijing has not announced monetary policy changes.

China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a “match,” it would be game over, we win! In any event, China wants a deal!

— Donald J. Trump (@realDonaldTrump) May 14, 2019

{mosads}Trump has called on the Fed to cut interest rates throughout the year to boost the economy while inflation remains below the central bank’s 2 percent target. The president has frequently criticized the Fed and its chairman, Jerome Powell, for raising interest rates seven times during his presidency. 

Powell said in a press conference earlier this month the Fed is unlikely to adjust interest rates without a major shift in the health of the economy.

“We think our monetary policy stance is in a good place and we are going to be patient,” Powell said on May 1. “We don’t feel like the data is pushing us in either direction.”

The Fed is politically independent from the White House, and legally mandated to preserve stable prices and maximum employment. But Trump has called on the Fed to boost the economy past potential headwinds from his trade war, insisting that foreign central banks do the same for their governments.

“We’re negotiating very powerfully and strongly with other nations. We’re going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated,” Trump said in August, adding he was “not thrilled” with Powell.

Trump’s tweet comes one day after stocks plummeted in response to escalating tariffs levied by the U.S. and China.

The Chinese government announced Monday it would raise tariffs on $60 billion in U.S. goods in response to Trump hiking taxes Friday on $200 billion in Chinese products.

Trump has imposed a 25 percent tariff on $250 billion in goods from China. The White House also released Monday a list of roughly $300 billion in Chinese goods that Trump may hit with tariffs. The move would subject all exports from China to a 25 percent tax.

Trump has sought to downplay the economic harm of his trade policy, even while preparing to boost financial aid for farmers hindered by Chinese tariffs. But economists have warned that major escalation of the trade war could cause a recession in the U.S.

“Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now,” Trump tweeted Tuesday.

“Hopefully China will do us the honor of continuing to buy our great farm product, the best, but if not your Country will be making up the difference based on a very high China buy.”