When Trump takes on China and the Fed, stocks lose
August has been a brutal month for investors, with the US stock market flailing virtually every time Donald Trump has laid into the Federal Reserve and China. In his most recent Twitter outburst, the president castigated Jerome Powell after the Fed chairman discussed the central bank’s policy limitations at a symposium in Jackson Hole, Wyoming today.
Apparently frustrated, Trump branded the Fed chair an “enemy” on Twitter. Then, the president’s tirade continued, as he “ordered” American companies to “immediately start looking for an alternative to China.” The S&P 500 swiftly dropped 2.6%.
“We don’t envy Mr. Powell and his colleagues right now,” Ian Shepherdson, chief US economist at Pantheon Macroeconomics, told the Wall Street Journal. “All their analysis and forecasts can be upended by a single tweet, so the policymaking process has been wrecked, even without the overlay of the president railing at the Fed.”
However, Friday wasn’t even the most destructive day for markets this month. Here’s a brief look at how the S&P 500 has responded each time Trump played hardball with China and the US’s own central bank.
Aug. 1: Trump shares plan for tariffs on China (S&P 500: -0.90%)
The S&P 500 shaves nearly 27 points as the Trump administration announces a 10% tariff on $300 billion of Chinese goods, effective Sept. 1. “We’re starting at 10 percent, and it can be lifted up to well beyond 25 percent. But we’re not looking to do that necessarily,” the president remarks before jetting off to a rally in Cincinnati, Ohio.
Aug. 5: China labeled a currency manipulator (-2.98%)
As the yuan sinks to its lowest exchange rate in 11 years, Trump accuses China of devaluing its currency. Shortly thereafter, the US Treasury designates China a “currency manipulator.”
China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!
— Donald J. Trump (@realDonaldTrump) August 5, 2019
Aug. 9-12: Trump wavers on trade talks with China (-0.66%)
“We’re not ready to make a deal, but we’ll see what happens,” the president says, when asked about trade talks scheduled for early September. Stock market losses continue, with the S&P declining 1.2% when the market opens the following Monday (Aug. 12).
Aug. 14: Recession talk ramps up (-2.93%)
Trump stokes fears of the inverted yield curve and lays the blame at the Federal Reserve’s feet. The S&P 500 falls almost 86 points.
..Spread is way too much as other countries say THANK YOU to clueless Jay Powell and the Federal Reserve. Germany, and many others, are playing the game! CRAZY INVERTED YIELD CURVE! We should easily be reaping big Rewards & Gains, but the Fed is holding us back. We will Win!
— Donald J. Trump (@realDonaldTrump) August 14, 2019
Aug. 23: The president “orders” US companies to find alternatives (-2.59%)
Uncertainty abounds as Trump lashes out at the Fed chair yet again. The White House’s short-term strategy remains confusing, with Chinese imports potentially put in jeopardy. Trump continues his diatribe even after the markets close:
…unfair Trading Relationship. China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!). Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%…
— Donald J. Trump (@realDonaldTrump) August 23, 2019
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