The markets, which when frightened in April, twisted Trump’s arm, now watch another movie. The casting to happen to the head of the Fed will become a race against the clock. The economy cools, prices are emphasized. It is the magic of tariffs.
In the end, Trump did not wrinkle. He did reversed with reciprocal tariffs in April and May, and yielded to China. But he did not give up. He rammed again last month and came out with his. He did not find too much opposition or reprisals. AND The markets, which when frightened in April, twisted his arm, now watch another movie and let him do. The consequences of its unilateral commercial crusade are in sight. A new executive order, which will enter into force on Thursday, imposes taxes to imports from 69 commercial partners in a range that goes from 10% to 41%. Brazil stands out: it will pay 50%, although with several exceptions. The relevant collection that climbed a monthly average of US $ 7,000 million in 2024 Au $ 27,000 million in June will increase. The 10%universal tariff, established on April 2, will now only govern for those countries that have commercial deficit with the US. Other forty that enjoy surpluses will work 15%. And a dozen will pay more, supposedly, for his unequal treatment or the major incidence of his figures. Or by personal whim, such as Brazil, a country with bilateral deficit balance for decades. It is a new economic geography that carries its unmistakable signature.
Trump did not wrinkle. The European Union, yes. Washington will apply an aliquot of 15% to the exports of its main commercial partner, except those of steel, aluminum and pharmaceutical products (achieved by more burvosy sector regimes). Brussels will not modify yours or take reprisals. And, according to the president, he undertakes to acquire US $ 750,000 million in energy from the US and to make investments there for US $ 600,000 million. In commerce, or in any other activity, the small print of the contracts is essential to dimension the true conditions imposed. And here there is not a single paper in sight. But the image of the president of the European Commission, Ursula von der Leyen, agreeing with Trump in a Scottish golf course, Turnberry, owned by the tycoon, is that of a resounding claudication. “Submission,” said French prime minister. It is the best thing that could be achieved, it was the official explanation.
The casting to choose Powell’s successor
An omnipresent Trump occupies the center of the scene. Monetary policy is not its responsibility, but another of its obsessions. He inspected the Fed headquarters a week before the Open Market Committee meeting and demanded explanations for expense invoices. Two weeks before, he spread the determination to fire Jerome Powell, its headline, whom he mistreats months ago for Gatille for a drastic reduction of interest rates. Powell did not wrinkle. The Fed kept the rates without changes in the range 4.25%-4.50%, although unanimity was frowning. The vote was resolved 9 to 2 (with the absence of Governor Adriana Kugler). Since 1993 there were no two dissidents, such as that of the governors Waller and Bowman, prone to start the path of a gradual reduction (with reasonable arguments). If from this column it was feared that in the conclave a riot that questioned Powell’s leadership would explode, such a thing did not occur. But Trump incited him later. “Jerome ‘too late’ Powell, an idiot stubborn, must substantially lower interest rates, now. If you keep refusing, the Board should take control and do what everyone knows what should be done!” He posted textual in Truth Social.
On Friday the absent governor Kugler presented her resignation, six months before the end of her mandate. The president is the power to designate his replacement, subject to the approval of the Senate. Thus, the possibility of locating an related person at the Board of Governors, with voice and vote for decision making is advanced. To give an example, the two dissidents were named by Trump in their first period. Powell himself, anointed by President Obama as governor, was then appointed to the Trump’s helm instead of Janet Yellen. However, three nominations for his lazy background – those of Judy Shelton, Stephen Moore and Herman Cain – were never confirmed by the Senate, and withdrew them. It is public that the candidate selection process to replace Powell has already begun. It is a dance of names that includes Kevin Hasset, former governor Kevin Warsh and even the secretary of the Treasury, Scott Besent (who is willing to assume a double function if Trump wants it there). The casting will become a race against the clock. Trump will try to sit the chosen at the next meeting of September 16 and 17 to take “the control of the Board.” Since the time of Richard Nixon in the convulsive 70s that the independence of the Fed does not suffer such siege.
Trump tariffs
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The one that wrinkled is the economy
Trump did not wrinkle. Powell, either. But the economy, yes. After all, the Trumponomics are a stagning shock (applied, yes, on a touching economy). And the fingerprints of the rise of tariffs and migratory restrictions are already present clearly in the last baking of indicators. Nothing more categorical than the work report. A net creation of jobs was expected in excess of 100,000 in July, and there were 73 thousand. But, estimates of the previous two months sank to lead after the processing of better documentary information. The 144 thousand pointed in May were reviewed at 19 thousand. And June 147 thousand, 14 thousand. The monthly average desensill 168 thousand in 2024 to 85 thousand so far this year. The last three months: just 39 thousand. The unemployment rate rose slightly to 4.2% because not only does labor demand fall. The offer of foreign labor is also contracted, and vertically. If the labor participation of the beginning of the year was maintained, it would be around 4.9%. Trump’s immediate reaction was to fire the messenger. The president is proud of his planting, but denies the results he reaps. Thus, the head of the Statistical Agency, Erika Mtntarfer, since the same day of the publication of the report, is another unemployed. Attention: This is the agency that also calculates consumer inflation.
The economy cools, although not as much as employment. GDP grew 3% in the second quarter. It came from falling 0.3% in the first. Extreme variability is explained entirely by tariff uncertainty. Assets of goods were anticipated. 51% grew in the first quarter to dodge taxes, and retracted 35% three months later. It is convenient to average the figures and still take them with tweezers. However, the damage is evident. Internal final sales-which grew to 3.2% in the Biennium 2023-2024-were decelerated to 1.3% in the first semester. Scare the consumer – and until May, at least, Trump terrified him – he never seemed very close. If you look at your service expense – the most rigid component of private consumption – went from 2.9% the last biennium to only 0.9% the first semester. Trump is excited about the growing collection of tariffs and wants to increase it more. But who pays the account? Foreigners, says the president. The consumer has another presumption. In the long run, that invoice is intended. At the cut, its real income available fell more than 1% in May and did not rebound in June. And the brake was already mentioned in the labor market. It will not be easy to convince him, then, that he must not load with the dead.
Tariff magic
The economy cools, prices are emphasized. It is the magic of tariffs. And it is what takes the drop in rates that the Fed scored as a task to do on its point map. The favorite measurement of the Central Bank – the deflator of personal consumption – climbed 0.3% in June, the highest reading since February. The inflation of the goods increased 0.4% and begins to reflect the passage at prices of the largest tariffs, slow but sure. Firmly anchored the expectations of inflation, the process should be an unique time price increase. Its current reverberation in inflation records should disappear next year. But you have to let the Fed take collections and operate to your loyal knowledge and understand. And do not subject it to constant bombing that would damage its credibility if it freely resolves the convenience of lowering interest rates.
At this crossroads, what will the Fed do? Cutting the fees is the planned road map. What is discussed is the time to begin a gradual reduction that protects the fulfillment of its dual mandate, today threatened by both the deceleration of the labor market and by the price rise that boost the rising tariffs. Powell made it very clear that there is no decision made for the September meeting. At the juncture, the Fed is particularly dependent. But, he pointed out before knowing the fulminant adverse trifecta of the work report. Therefore, and not for Trump’s insistence, Chicago’s futures adjusted their vision. And they took the chances of a rates drop in September one by three to 90%. At the end of the month, in Jackson Hole’s annual symposium, Powell will let us know if so or if he has repairs and must correct us.
Source: Ambito
