Yahoo Finance Trade war fears escalate as Trump renews attack on China, the EU and the Fed
US President Donald Trump has ramped up rhetoric against some of the country's biggest trade partners in a series of outbursts, accusing the EU and China of manipulating their currencies, and threatening to slap tariffs on all Chinese imports.
Lashing out on Twitter, Mr Trump said "China, the European Union and others have been manipulating their currencies and interest rates lower".
The comments caused European stocks to slide into the red on Friday, and halted the dollar's recent rally against the euro and sterling. The eurozone-wide Euro Stoxx closed down 0.33pc and the FTSE 100 fell as much as 0.7pc before later recovering.
The accusation follows months of escalating trade tensions between the US, and China and the EU, which have seen tit-for-tat tariffs introduced by all three sides.
Currently both China and the US have imposed tariffs of 20pc on around $34bn (£26bn) worth of each other's goods, although Mr Trump earlier this month released a list of potential penalties on a further $200bn worth of Chinese imports, which could include smartwatch devices assembled in China such as the Apple Watch and Fitbit trackers.
Meanwhile Mr Trump imposed tariffs on steel and aluminium imports from the EU, prompting Brussels to respond with its own levies, on items such as bourbon, jeans and motorcycles.
However, despite the mounting attacks, Mr Trump's administration has repeatedly refused to officially label China as a currency manipulator. During his campaign trial, Mr Trump had pledged to "direct the Secretary of the Treasury to label China a currency manipulator", but later did a U-Turn on this.
The comments will prove more inflammatory and surprising for the EU, which has been trying to ensure Mr Trump does not hike tariffs on European car imports, as threatened.
The president's criticism has largely been directed at Germany in the past, and his top trade adviser Peter Navarro earlier this year said the country was using a "grossly undervalued” euro to exploit the US.
Speaking today, German Chancellor Angela Merkel said she would work on the country's "under pressure" relationship with the US, amid increasing concern over where the trade dispute will end.
IMF chief economist Maury Obstfeld said: "The risk that current trade tensions escalate further with adverse effects on confidence, asset prices and investment is the greatest near-term risk to global growth."
China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge. As usual, not a level playing field...
— Donald J. Trump (@realDonaldTrump) July 20, 2018
Speaking in an interview on CNBC earlier in the day about his relationship China, Mr Trump implied the US was ready to escalate a trade war which the world's lender of last resort has already warned could "tear apart" the world order.
Mr Trump said he was "ready to go to 500", referring to the total amount of goods China exported to the US last year, of around $500bn.
"We are being taken advantage of and I don’t like it,” he told CNBC.
“I’m not doing this for politics, I’m doing this to do the right thing for our country. We have been ripped off by China for a long time.”
However, Mr Trump's attack was not solely directed overseas, and he also blasted the US Federal Reserve, saying "the US is raising rates while the dollar gets stronger and stronger with each passing day – taking away our big competitive edge".
"The United States should not be penalised because we are doing so well. Tightening now hurts all that we have done. The US should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates – Really?"
The critique on the central bank breaks with a long-held tradition for presidents to steer clear of influencing monetary policy to ensure its independence is upheld, and comes after the Fed in recent comments warned over the impact of a trade war.
In the interview with CNBC which aired on Friday, Mr Trump had said he was "not thrilled" with the moves to raise interest rates, saying every time the US economy strengthens "they want to raise rates again".
"I don't really — I am not happy about it. But at the same time I’m letting them do what they feel is best," he said. The White House later issued a statement to clarify that "he is not interfering with Fed policy decisions".
