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Donald Trump Wants Higher Bond Purchasing and Lower Rates to Beat China in Trade War

trade war

The trade war between the U.S. and China accelerated significantly after China retaliated with a proposed $60 billion of tariffs on U.S. products. The U.S. president wants to win the trade war; the president now seeks help from the Fed for boosting the U.S. economy.

Mr. Trump tweeted that China is likely to stimulate its economy to counter the fallout. He said if the Fed would take similar actions, it would be “game over“.

The president tweeted, “China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a ‘match,’ it would be game over, we win! In any event, China wants a deal!”

He further said that with a little quantitative easing, U.S. GDP growth could increase to 5%. He is actually suggesting the Fed to work on bond purchasing on an emergency basis.”

Donald Trump has repeatedly advised the Fed to decline the rates and resume bond purchases last month. However, the Fed claims that the economy is in good situation and inflation numbers are matching with the growth. Therefore, they had left interest rates unchanged.

The escalation of a trade war between the two largest economies has been considerably impacting investor’s sentiments and stock markets. The global stock markets started falling over the last week amid threats of a trade war.

The U.S. stock market indices experienced the biggest one-day drop of this year on Monday after Trump indicated the extension of a trade war and rate cuts.

The threat of trade war along with Trump’s suggestion of increasing bond purchasing pushed investors towards safe-haven long terms assets such as government bonds. Investors move towards safer assets declined the treasury yield significantly last week. Yields fall when bond prices rise.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.