President Donald Trump prides himself on bold negotiating tactics, but his threat to put tariffs on Mexico could backfire.
President Donald Trump's threat to put tariffs on all Mexican goods unless it cracks down on immigrants entering the U.S. lowers the bar on tariffs to now be used for all sorts of issues that are unrelated to trade.
Trump on Tuesday said it is likely he will carry through with tariffs on the second biggest U.S. trading partner, in a move that analysts say could ultimately hurt him and create an atmosphere of distrust about U.S. policy. The initial reaction on Wall Street was a stock market sell-off and a flight to safety in bonds. And economists both cut their economic forecasts and changed their view in favor of Fed cut rates this year.and try to stop the tariffs.
"This is the second downward revision to our forecast this year as a result of the trade war. And with every subsequent action on trade, the pain becomes more severe and threatens to be more persistent. The Fed will not likely sit idle and watch the economy weaken. We are revising our call: we now expect the Fed to cut rates. We look for a 25bp cut in September, another in December," they noted.
"Congress would be voting to stop the emergency declaration at the border which is used to justify the tariffs. We would expect both the House and Senate to pass these measures. However, the President would likely veto and therefore Congress would need veto proof majorities in both the House and the Senate," said Clifton.
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