US President Donald Trump Softens Tone on China and Federal Reserve

Much of the world’s international trade travels by container ships. Public domain image.

Trump’s Change in Tone

US President Donald Trump has softened his tone after recent tough talk about China and the US Federal Reserve.

He said he has “no intention of firing” Jerome Powell, who leads the Federal Reserve. Trump has criticized Powell many times and called his “a loser” but now says he just wants him to lower interest rates more quickly.

Normally the Federal Reserve is considered to be independent from the White House administration, although President Trump believes that the US is in a state of emergency, which gives him special powers.

Trade Talks with China

Trump also said he is hopeful about making progress with China on trade. He mentioned that tariffs on Chinese goods might be lowered “substantially,” although not removed completely.

Trumps tariff plans have come under a lot of criticism because the same item made in one country might have a much higher tariff than the same item made in another country.

The Trump tariffs are meant to bring factories and jobs back to the US. Cutting interest rates is another part of Trump’s plan to boost the economy by making borrowing cheaper for businesses and homebuyers.

Impact of Tariffs

Trump’s tariffs on Chinese goods are as high as 145%, which has led China to strike back with its own tariffs. Economists warn this trade war could hurt the global economy.

On Tuesday, Trump said he would be “very nice” in trade talks with China to reach a deal. US Treasury Secretary Scott Bessent also said he believes the trade war cannot last and must calm down.

The trade war and Trump’s criticism of Powell have caused financial markets to shake. Stock prices, bond values, and the US dollar all dropped after Trump called Powell “a major loser” last week. Markets have started to recover since then.

Market Response

Trump’s adviser Kevin Hassett said the president had looked into firing Powell, even though Trump himself appointed him in 2017. Powell was later reappointed by Joe Biden in 2021. It is unclear if Trump is legally allowed to fire the Fed chair, and no president has ever done so before.

In Asia, stock markets responded positively to Trump’s softer tone. Japan’s Nikkei rose 1.9%, Hong Kong’s Hang Seng gained 2.2%, while China’s Shanghai index stayed nearly flat.

In the US, stocks also rose on Tuesday, with the S&P 500 up 2.5% and the Nasdaq climbing 2.7%. Futures markets, which hint at how markets might perform later, were also up.

Economic Concerns

Some investors worry that too much pressure on the Fed to cut interest rates could raise inflation, especially with tariffs already pushing prices higher.

The International Monetary Fund (IMF) said US economic growth would slow more than other advanced countries because of the uncertainty caused by the trade war.

The IMF warned that the high tariffs and the unclear future of trade talks could lead to a big drop in global economic growth.

Tariff Escalation

The Trump administration said new tariffs, when added to existing ones, could raise taxes on some Chinese goods to 245%.

In return, China has placed 125% tariffs on American products and says it will “fight to the end.”

China has not officially responded to Trump’s latest comments, but a Chinese state newspaper said the US may now realize that tariffs are hurting its own economy.

Source: BBC.

Conclusion

In conclusion, the trade war between the US and China has been a major concern for the global economy. Trump’s softer tone on China and the Federal Reserve has brought some relief to the markets, but the uncertainty surrounding the trade talks and tariffs remains a major issue. The impact of the tariffs on the global economy and the US economy in particular will be closely watched in the coming months.