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Trump is becoming increasingly hostile to China, a risky game
Trump is escalating his rhetoric toward China, which could have worrying consequences for the U.S. economy. There is a risk of a further increase in trade restrictions. What's next?
Trump is becoming increasingly hostile to China, a risky game
In recent weeks, President Donald Trump has enjoyed some success despite widespread concerns that the trade conflict could weigh on the American economy. Inflation is falling steadily, jobs remain plentiful and there are increasing signs that the economy could boom this quarter.
Worrying trade rhetoric
Given these positive economic developments, Trump's increasingly aggressive rhetoric toward China over the past week has been particularly concerning, especially before his Phone call with Chinese leader Xi Jinping. The economic situation under Trump appears to be going well at the moment, but the economic framework of his administration is based on numerous economic reservations and unproven theories. A renewed escalation of trade conflicts with the world's second-largest economy could collapse this framework.
Important turning point in the trade war
May 12th marked a decisive one Turning point in the global trade war. Delegates from China and the USA announced that they would significantly reduce each other's historically high tariffs. The markets reacted happily and Wall Street reduced its recession forecasts. Consumer confidence, which had been declining for a long time, also recovered significantly.
Current economic indicators
The current economic reports have proven surprisingly robust. According to the consumer price index, consumer prices in April fell by just 2.3% grew while inflation rose this month 2.1% was reduced, according to the separate personal consumption expenditure price index. The Federal Reserve considers this report when considering a change in interest rates. The Fed's goal is an inflation rate of 2%, meaning America is finally getting closer to that long-term goal after years of historically high price increases.
Rising tensions with China
Tensions between Trump and China have increased in recent weeks as Trump accuses China of reneging on commitments made in May. Both countries have put mechanisms in place to prevent trade tensions from escalating again, but the mood remains tense. Trump commented on Truth Social, said it was “extremely difficult” to reach an agreement with Xi Jinping and he accused China of “total violation of its agreement.” These constant tensions pose the risk that the economic situation will deteriorate dramatically.
Concern about the future of the economy
Economists, Wall Street analysts and business executives are sounding the alarm about the trade war, fearing a toxic combination of rising prices and slowing economic growth. A recent report showed that layoffs rose by nearly 200,000 in April to 1.786 million and initial jobless claims rose to 247,000 - much higher than estimated. Additionally, Challenger, Gray & Christmas reported 94,000 layoffs in May, an increase of 47% compared to the previous year. These warning signs suggest that good news could quickly turn negative, especially if trade tensions escalate.