Mnuchin Says Don’t Take Trump’s ‘Enemy’ Barb at Powell Literally
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Treasury Secretary Steven Mnuchin said President Donald Trump’s characterization of the U.S. Federal Reserve chief as an “enemy” on par with China’s leader was not meant to be taken literally.
“I don’t think it was a literal comment that he’s an enemy,” said Mnuchin, speaking on “Fox News Sunday” from the Group of Seven meeting in Biarritz, France. He had been asked about the president’s tweet musing on whether Fed Chairman Jerome Powell or Chinese President Xi Jinping was the bigger enemy.
While Mnuchin brushed off Trump’s comment, the tweet was just the latest — and perhaps the most personal — complaint by the president about the Fed and its chairman.
The treasury chief spoke after a tumultuous Friday for the markets, with the Dow Jones Industrial Average falling 623 points after the president signaled he would escalate the trade war with China after the country’s latest round of tariffs. Trump made good on his threat, first issued on Twitter, after markets closed.
Trump has pressured the Fed for months to cut rates and criticized its policies. Earlier this month, the president called the Fed “clueless.” On Friday, Trump told reporters that if Powell wanted to quit, “I wouldn’t stop him.”
In the same interview, Mnuchin also said the U.S. isn’t facing a recession and that the inverted yield curve — often a leading indicator of a downturn — reflects the market’s expectations for further Fed rate cuts.
“We don’t see a recession on the horizon,” Mnuchin said. “I don’t think the yield curve reflects a recession, I think the yield curve reflects the fact that it anticipates the Fed is going to lower short-term rates and the long end has already reflected that.”
The Fed did lower interest rates in July for the first time since the financial crisis, but slowing global growth and an escalating trade war with China threaten to pitch the U.S. economy into a recession.
Cause for Concern
Central bank officials are loath to engage the president directly despite his frequent attacks. That said, they explained repeatedly at last week’s gathering in Jackson Hole, Wyoming, that trade disputes are poisoning the global economy and making it difficult for the central bank to keep the economy humming.
The Federal Reserve Bank of New York’s index shows the probability of a U.S. recession over the next 12 months is close to its highest level since the global financial crisis more than a decade ago. Although a robust labor market continues to support solid consumer spending, other data have shown more cause for concern. Business investment is cooling, and manufacturing reports out last week showed fresh signs of cracks in the sector.
Mnuchin and White House economic director Larry Kudlow defended the president’s recent moves on trade and the economy as the leaders of the world’s top industrialized nations meet in France.
Days after Trump announced higher tariffs on Chinese exports to the U.S., drawing a furious response from Beijing, Mnuchin said he was “somewhat hopeful” Beijing will come around to a sweeping trade agreement with the U.S., and Kudlow insisted that talks are ongoing.
“The conversation between the China side and the U.S. side continues, negotiations continue,” Kudlow said on CNN’s “State of the Union.” “The U.S. side is continuing to plan for a visit from the China side sometime in the month of September.”
In a second interview, on CBS’s “Face the Nation,” Kudlow said a teleconference with deputies from the U.S. and China is scheduled this week and that he doesn’t expect China to retaliate against Trump’s escalation of tariffs on Friday.
“His was an action to respond to their action” earlier in the day to place additional duties on $75 billion in U.S. exports, Kudlow said. “So I doubt whether they’re going to take another step.”
Kudlow also played down Trump’s tweet on Friday that U.S. companies are “hereby ordered to immediately start looking for an alternative” to China. Kudlow said the president doesn’t intend to try to block investment in China right now and that “maybe the way it was phrased was a little tougher than usual.”
“He’s asking American companies to take a look, take a fresh look at frankly moving out of China,” Kudlow said.
Trump suggested in a tweet on Friday that he was looking at the “Emergency Economic Powers Act of 1977” in ordering U.S. companies to quit China. “Case closed!” Trump concluded.
The International Emergency Economic Powers Act gives U.S. presidents wide latitude to regulate commerce at times of national emergencies. It’s unclear how Trump could use the law in the current situation to force U.S. companies to comply.
“He would have the authority to do that under IEEPA if he declared an emergency,” Mnuchin said on Sunday. “He has not done that. I think what he was saying is he’s ordering companies to start looking” because there’s an extended trade war.
The G-7 summit, which brings together heads of state from the U.S., the U.K., France, Germany, Italy, Canada and Japan as well as representatives from the European Union, began with a warning from European Council President Donald Tusk that “trade wars will lead to recessions.”
Central bankers meeting at Jackson Hole, Wyoming, this weekend offered a similar lesson: that there’s only so much they can do to shore up the global economy at a time of political uncertainty — notable an escalating trade conflict between the world’s largest economies.
U.S. business groups are also ramping up the pressure. The president of the Consumer Technology Association on Friday termed escalating tariffs “the worst economic mistake since the Smoot-Hawley Tariff Act of 1930 — a decision that catapulted our country into the Great Depression.”
— With assistance by Mark Niquette
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