Donald Trump turns his economic enemy rhetoric on Europe, seizing on the call for a stimulus by the head of the European Central Bank.
Mario Draghi’s speech on Tuesday was focused solely on Europe overcoming economic challenges, more than a decade after the financial crash of 2008 and amid the prospect of the UK’s departure from the European Union. However, it also identified protectionist threats such as Trump’s trade wars with the European Union as well as China and other countries.
It is unclear how Trump learned of Draghi’s statement but he was preoccupied on Twitter with it throughout Tuesday, treating it as an European economic assault on the US:
Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.
— Donald J. Trump (@realDonaldTrump) June 18, 2019
He saw the evidence of the plot in the reaction that “European Markets rose on comments (unfair to U.S.) made today by Mario D!”.
Four hours later, apparently triggered by a report on Bloomberg, he tweeted — accurately — “ECB officials see Rate Cut as primary tool for any new stimulus”, but then complained, “Very unfair to the United States!”
Trump told reporters, “[Draghi] did something today that was very dramatic. And, frankly, it helped that part of the world.”
Central banks had been using monetary policy to ensure that recovering economies did not fuel inflation. But direction is being reversed because of the prospect of slowdown from protectionism and fears of recession.
Last month Trump raised the duties on $250 billion of Chinese products from 10% to 25%, and threatened to impose the duty on the other $300 billion of imports. He ordered a 5% tariff on Mexico, to rise to 25%, until he declared an artificial “victory” in forcing Mexican moves on migrants travelling towards the US.
See TrumpWatch, Day 873: Trump’s Mexico Show — “Victory” or Bluster?
Trump also said Japan and Europe have six months to reach a trade agreement with the United States or face auto tariffs.
Some of Trump’s earliest measures were aimed at the European Union and other US allies. He imposed a 25% tariff on steel and 10% on aluminum in March 2018.
With anxiety over trade leading to a decline in business confidence and spending, Germany’s industrial production fell 1.9% in April, compared to an expected 0.5% decline.
Draghi pre-empted Trump’s objections at the ECB’s annual forum on central banking in Portugal, “We don’t target the exchange rate.” Economists and central bankers applauded.
But Larry Kudlow, director of the White House’s National Economic Council, backed up Trump with the misleading claim that the European rate cut was currency manipulation.
He’s concerned that there is some certain beggar-thy-neighbor policies in the currency market. It sure would be better to have currency stability it seems to me rather than manipulating either for trade reasons or other macro reasons.
Firing Fed Reserve Head?
Trump again hinted that he might fire the head of the Federal Reserve, Jerome Powell, if the central bank did not bow to his demands for a US interest rate cut.
The Federal Reserve is expected to leave rates unchanged on Wednesday after a two-day policy meeting, stoking Trump’s anger, “We’ll see what happens; they’re going to be making an announcement pretty soon, so we’ll see what happens.”
Asked if he would dismiss Powell, Trump responded, “I want to be given a level playing field, and so far I haven’t been.”
