U.S. stocks and Treasury yields sank on Friday, as President Donald Trump said that American companies are “hereby ordered to immediately start looking for an alternative to China.”
Trump’s comments were an unexpected intensification of the rhetoric in the U.S. trade war with China. They sent markets reeling just moments after comments from Federal Reserve Chair Jerome Powell had soothed investors’ nerves and helped stocks recover from early declines.
Trump issued a series of bellicose threats to China on Twitter, hours after China announced new tariffs on U.S. products and sent markets slipping in early trading.
“Our Country has lost, stupidly, Trillions of Dollars with China over many years,” Trump said. “They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing .your companies HOME and making your products in the USA.”
It’s unclear what, if anything, Trump can actually do to enforce his Twitter order to U.S. companies. Treasury yields extended their declines after the tweets. The 10-year Treasury yield fell six basis points to 1.54%, the lowest since 2016, while the two-year yield declined seven basis points to 1.52%.
Just moments earlier, Powell, speaking during an annual gathering of central bankers in Jackson Hole, Wyo., had soothed markets.
“Our challenge now is to do what monetary policy can do to sustain the expansion so that the benefits of the strong jobs market extend to more of those still left behind, and so that inflation is centered firmly around 2 percent,” Powell said, according to prepared remarks.
“We will act as appropriate to sustain the expansion,” Powell added.
Powell said central bankers have been “carefully watching developments” in the “three weeks since our July FOMC meeting,” including the U.S. threat of new tariffs on Chinese goods. He also said the Fed has noticed signs of a global slowdown in China and Germany, and is aware of the risks that may come with Brexit and civil unrest in Hong Kong.
Trump was also fiercely critical of Powell in a separate stream of Twitter posts, in which he hinted at a new economic policy that would “be announced shortly.” Trump, who has blamed the Fed for imperiling the economy ahead of his reelection campaign, compared Powell to the Chinese President Xi Jinping: “Who is our bigger enemy, Jay Powell or Chairman Xi?”
Write to Alexandra Scaggs at [email protected]