Why Trump’s trade chaos may force Fed to cut rates

Trump’s tweet on Mexico spooked investors in part because it threw the future of the renegotiated NAFTA deal into doubt and raised the possibility of retaliatory tariffs from the U.S.’s third-largest trading partner. That, plus ongoing quarrels with other trading partners, could imperil the economic expansion, which is set to become the longest in American history this July.

That would leave the Fed as the president’s best buffer to sustain the healthy economy — the most potent selling point for his reelection with voters beyond his base…

Trump’s Mexico tariff tweet “adds yet another trade-related headwind to the growth outlook,” Feroli said. “Even if a deal is quickly reached with Mexico, which seems plausible, the damage to business confidence could be lasting, with consequences that might still require a Fed response.”

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