President Trump denounced the head of the Federal Reserve as an “enemy” in a dizzying array of angry tweets Friday that sent markets reeling.
By day’s end, the trade war with China, which was already buffeting the U.S. and global economies, had significantly escalated, and many analysts had abandoned hopes of a near-term deal. Trump appeared to have worsened the economic turbulence that his administration says it is trying to reduce.
Earlier in the day, Trump lit into Jerome H. Powell — whom he chose as chairman of the U.S. central bank in 2017 — after Powell stopped short of committing to make more interest rate cuts, which Trump has demanded as a way to stimulate a slowing economy.
“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” Trump said in a remarkable message on Twitter, comparing Powell to Chinese President Xi Jinping.
Trump and his economic team have been increasingly concerned about the economy, which is weakening and could foil Trump’s reelection bid if it were to fall into recession. Trump has repeatedly sought to blame the Fed. He has also said he is considering tax cuts and other ways to bolster growth, but his own actions, including the increasingly costly trade war with China, have been a principal cause of economic turbulence, according to economic analysts from both parties.
Markets plunged immediately after Trump began his Twitter storm with the attack on Powell. All the major U.S. stock indexes ended sharply lower, with the Dow Jones industrial average falling 623 points, down 2.4% for the day. Government bond yields also sank, along with oil and other commodities.
“The other shoe keeps dropping on America’s economic war with China, and as China and Trump ramp up the rhetoric and put on new tariffs, stock investors have had enough and want out,” said Christopher Rupkey, chief economist at MUFG Union Bank in New York.
Powell, in a highly anticipated speech Friday morning at the Fed’s annual conference in Jackson Hole, Wyo., pledged to do whatever the Fed could to sustain U.S. economic growth. But the Fed, which made a small cut in a key interest rate last month, is divided on how aggressively it should respond in the face of economic crosscurrents that include strong domestic consumer spending and significant trade policy uncertainty.
Trump has demanded the Fed cut a full percentage point in its benchmark interest rate and take other steps to lower the value of the dollar to spur exports.
Not hearing the message he wanted, Trump tweeted Friday: “As usual, the Fed did NOTHING! It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work ‘brilliantly’ with both, and the U.S. will do great.”
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