On Friday, the U.S. Department of Commerce released some numbers on the American economy that suggest the national financial picture is starting to sour as a result of the ongoing trade war initiated by President Donald Trump.
U.S. economic growth fell to a 2.1% annual rate in the second quarter — down from a 3.1% pace in the first three months of 2019.
President Trump has targeted a growth rate of 3% or above, citing the Republican tax cuts passed in 2017. But some studies have found that the tax cuts passed have done little to boost growth, in part because most of the benefit went to wealthy people and corporations.
A 5.2% drop in exports — amid economic weakness in Europe and elsewhere as well as the U.S. trade war with China and other countries — contributed to the slowdown.
With Trump’s reelection prospects already shaky thanks to low approval ratings and the continued stench of ethical violations hanging over the entire administration, the president’s main argument for being given a second term hinges on a strong economy, and that too looks more uncertain each day.
In a recent meeting of his top economic advisers, trade adviser Peter Navarro suggested devaluing the dollar as a way to fight back against China, which has long been suspected of doing the same.
Trump’s response was not what Navarro had expected, according to Politico:
in his meeting with Navarro, Trump rejected a proposal to bring down the dollar. One person in the room said Navarro had barely begun his presentation before getting “slaughtered” by Trump. A second source briefed on the meeting confirmed this account. Navarro did not return requests for comment. The White House also did not respond to requests for comment.
Increasingly, the administration is running out of options to help assure the economy remains vibrant, and that has some concerned:
It’s the latest example of the Trump administration’s heated internal debate over how to manage the president’s controversial trade war with China and offset a potential economic slowdown ahead of the 2020 election. Trump himself has complained in interviews and on Twitter about the strength of the dollar, arguing that it makes U.S. exports more expensive and hurts his competitive position in the bruising tariff battle with Beijing.
And while Trump has urged the Federal Reserve to lower interest rates, so far the Fed has not responded to that prodding. Even though the central bank is expected to lower rates by a quarter point next week, that may not be enough to stimulate the slowing economy. Wall Street will be watching to see what the Fed does, but it remains to be seen if investors will be happy with such a small rate cut.
The simple fact for Trump may be the worst news of all: The economy is overdue for a downturn and the stock market is past due for a correction. If both of those take place close to the election, it could spell doom for the president.
Featured Image Via NBC News