President Donald Trump is pushing his bitter trade war with China into an aggressive and unpredictable new phase, bewildering Wall Street and risking an even bigger slowdown heading into a 2020 election in which the economy was supposed to be the president’s strongest selling point.
The Trump administration on Monday evening drove the stand-off with the world’s second-largest economy to a new level, officially labeling China a currency manipulator for the first time in a quarter century, enraging Beijing and inviting further retaliation in a bare-knuckled fight that has already slammed U.S. farmers and helped drive American manufacturing close — or into — recession.
Following a precipitous stock-market decline that started the week, investors on Tuesday took a break after China intervened to keep its currency, the yuan, from plunging further. But traders and money managers said market turmoil could resume at any moment given the unpredictable nature of the American president and the enormous stakes involved in such a titanic showdown.
“I think the expectation is that this is going to escalate and get worse rather than coming to a place of agreement or just going away,” said Putri Pascualy, managing director at investment firm PAAMCO Prisma. “The risk in the market is political and political risk for investors is very difficult to handicap.”
For the moment, advisers inside the White House who are urging a calm, methodical approach to China — one that favors engagement over escalation — appear to be losing out. The Treasury Department, under Steven Mnuchin‘s leadership as secretary, declined multiple earlier opportunities to label China a currency manipulator despite Trump’s campaign pledge to do so on day one.
Get the Exclusive
11.29.2024