Trump is risking his reelection with the trade war: Strategas analyst

President Donald Trump’s trade war is slamming the stock market and risks damaging the global economy, as well as his own reelection chances, according to Strategas head of policy research Daniel Clifton.

“Trump is trading away his reelection,” said Clifton.

Stocks posted their worst day of the year on Monday after China retaliated to Trump’s 10% tariffs on another $300 billion in Chinese goods. The battle continued into Monday evening with the Trump administration officially labeling China a currency manipulator, just months after it had said China’s handling of its currency was not in violation of the law.

The action was in response to the retaliatory moves in the yuan, which fell below the key 7 to the dollar level Monday as China seemingly failed to prop it up, as it has been doing.

“Forward looking inflation indicators are suggesting a very meaningful slowdown in economic growth,” Clifton said, adding Trump has been counting on voters seeing the promise of a better economy for all Americans.

“Without a better economy, it’s hard to see how he wins reelection. I’m not sure a muddle-through works. He needs better,” said Clifton.

Trump has repeatedly identified his own success with the stock market’s progress. The S&P 500 is still up 13.5% year to date, after losing 3% Monday and 3% last week. Stock investors have counted on the “Trump put” to rescue the market from past swoons, meaning Trump would take action before it fell too far.

“While the world waits for a Trump put, you’re really going to wait for the next data point from the Federal Reserve. It’s going to be the Powell put that comes into affect,” said Clifton. Fed Chairman Jerome Powell was criticized by Trump last week for not cutting rates deep enough. Markets took Powell’s press briefing as hawkish, following the Fed’s first rate cut in more than a decade. But since Trump upped the ante in the trade war Thursday, markets are expecting about two more cuts this year.

“He’s digging in,” Clifton said of Trump. “He’s digging in against the advice of all of his advisors.”

Source: Strategas Research