Trump Blasts Powell’s Rate Hikes, Trespassing on Fed’s Independence

Trump threatens tariffs on all $500 billion of Chinese imports CNBC

U.S. President Donald Trump said he's "ready to go" with US$500 billion in new tariffs on Chinese goods imported to the U.S., saying the country has been taken advantage of for too long.

U.S. President Donald Trump may not be happy about the strength of the U.S. dollar, but the greenback's recent rally may partly be a product of his own making. Chinese Commerce Ministry spokesman Gao Feng last week called those accusations "groundless" and said that the US trade penalties contravene rules at the World Trade Organization.

Put another way: The best way for the Fed to assert its independence is to do exactly the opposite of what Trump suggested.

The U.S. has already slapped tariffs on $34 billion of Chinese exports, targeting China's advanced manufacturing capacity, with levies on machinery, electronics, engines and engine parts.

Benchmark 10-year US notes last fell 12/32 in price to yield 2.8894 percent, from 2.847 percent late on Thursday. "He's been saying since the '80s that trade deals are bad and we should have more tariffs, and that's what we're getting".

For years presidents have avoided commenting on the Fed, which markets broadly trust to act in service of its dual objective - maintaining maximum inflation and stable prices - rather than a political aim.

The central bank is unlikely to yield to such pressure. And expectations of inflation can cause inflation to accelerate as businesses raise wages and prices to keep pace.

Monetary policy isn't the only reason the dollar has strengthened this year.

With President Donald Trump intensifying his rift with US trading partners, economists are growing more doubtful that any deal that might benefit American workers and companies is in sight. The bank has raised rates twice this year and two more times before the end of the year.

During the 2016 presidential campaign, Trump was highly critical of the Fed and accused its policymakers of keeping rates at ultra-low levels to favor Democrats. "China, their currency is dropping like a rock". Trump warned in July that he was ready to impose import tariffs on another $ 300 bn.

In an interview with CNBC, Trump said he was "not thrilled" that the Fed was raising rates and thus causing upward pressure on the dollar. "The remarks certainly aren't an immediate threat to Fed independence, but they break with the tradition of respectful distance". "As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions".

Still, the official acknowledged the possibility that such an escalation could happen later because it was hard to predict what Mr. Trump might do.

It is unusual for a sitting president to criticize the Federal Reserve, which is an independent body, free to set monetary policy without influence.

"The president has a certain style. I want them to do well", he said. "That's the way it is". "The structure is already created to put a big committee together and try to get a lot of analysis behind these decisions", he said.

Their message from Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow is "the Fed is doing it right, let it happen".

Mr. Powell said last week he wasn't anxious about political pressure from the White House. "The United States should not be penalized because we are doing so well".

The White House in June already threatened to extend United States taxes on Chinese imports progressively to up to $450 billion.

"And the reason it was brilliant is he was looking back at President Bush and President Reagan - both of whom had publicly grumbled about the Fed raising rates", Low noted. "Republicans attacking [Fed Chairwoman Janet] Yellen...should be careful what they wish for", he wrote in a CNBC commentary in 2015.

Nixon's phone transcripts include a December 1971 exchange with then Fed Chairman Arthur Burns in which Nixon praises him for lowering the discount rate, according to an article in the Journal of Economic Perspectives. "The Fed has a point about politics", he wrote.

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