Introduction to the Trade War
The Trump administration is doubling down on its trade war against much of the world despite increasingly harrowing economic numbers emerging at home, with stock markets and Treasury yields tumbling Friday on news of the most significant slowdown in job growth since the pandemic.
Current Economic Situation
Government data showed the U.S. economy added 73,000 jobs in July — far fewer than expected — and issued revised numbers for the prior two months that showed only 19,000 jobs were created in May, and 14,000 in June, amid widespread uncertainty over President Trump’s tariff policies and deep cuts to government employment. The unemployment numbers came a day after Trump signed an executive order increasing tariffs on 66 countries, further roiling a decades-old system of global trade.
Reaction to the Unemployment Report
The chair of the White House council of economic advisors reacted to the unemployment report by saying the numbers are “not what we want to see.” But Trump responded by directing his team to fire the commissioner of the Bureau of Labor Statistics, a nonpartisan position responsible for overseeing the statistical analysis of jobs data, suggesting the numbers were politically “manipulated.” She was fired hours later.
Trump’s Accusations
“I was just informed that our Country’s ‘Jobs Numbers’ are being produced by a Biden Appointee, Dr. Erika McEntarfer, the Commissioner of Labor Statistics, who faked the Jobs Numbers before the Election to try and boost Kamala’s chances of Victory,” Trump wrote on his social media platform, Truth Social. McEntarfer was confirmed by a Senate vote of 86 to 8 in January 2024. He did not offer evidence to support his accusations of manipulated data, either for this year or before the 2024 election.
The Impact of the Trade War
Paradoxically, Trump and his team also seemed to acknowledge the authenticity of the numbers by blaming the chairman of the Federal Reserve, Jerome Powell, for the disappointing results. For months, Powell has resisted pressure from Trump to lower interest rates amid concerns over stubbornly high inflation — and the prospect that prices will increase further if the president’s trade war persists. The Federal Reserve chairmanship is another position meant to operate with independence.
Market Reaction
At the closing bell, the Dow Jones industrial average had fallen more than 500 points, while the NASDAQ was down over 2.25%. The U.S. dollar fell against other currencies. But the most telling moves may have occurred in the bond market, which saw the most drastic slumps in 10-year and two-year Treasury yields in a year.
The Future of the Economy
The increased unemployment rate, to 4.2%, came off government data reported earlier in the week that showed a dramatic decrease in imports and consumer demand to the United States, figures that have temporarily inflated economic growth numbers. Overall, economists are warning that U.S. gross domestic product could grow less than 2% this year, its worst performance since the height of the pandemic.
Trump’s History with Unemployment Data
Trump has had issues with unemployment data for many years, often using one of his favorite terms, “fake,” to describe them. During his 2016 campaign, he argued that unemployment was worse than the government figures showed; once in the White House, he suggested the official data understated the strength of the economy.
Tariff Negotiations
The timing of the latest jobs report comes at a politically inopportune moment for Trump, who had set Friday as a deadline for countries around the world to negotiate trade deals with the United States on his terms, or face steep tariff rates. Only a handful of framework agreements were struck — with the European Union, South Korea, Japan, the United Kingdom and Vietnam, among others — while dozens of other nations were hit with rate hikes.
Impact on Trading Partners
Major trading partners faced brutal increases, including Brazil, which now faces a 50% rate on most goods, and India, hit with 25% import duties. Switzerland was slammed with a 39% rate, but most countries on the list released by the White House were given 15% tariff rates. The new import taxes are to take effect Aug. 7.
Conclusion
The trade war initiated by the Trump administration has led to significant economic repercussions, including a slowdown in job growth and an increase in unemployment rates. The administration’s decision to fire the commissioner of the Bureau of Labor Statistics has raised concerns about the manipulation of economic data. As the trade war continues, it remains to be seen how the economy will fare in the coming months.
FAQs
Q: What is the current state of the US economy?
A: The US economy has added 73,000 jobs in July, which is far fewer than expected, and the unemployment rate has increased to 4.2%.
Q: What is the impact of the trade war on the economy?
A: The trade war has led to a slowdown in job growth, an increase in unemployment rates, and a decrease in imports and consumer demand.
Q: What is the reaction of the White House to the unemployment report?
A: The White House has responded by firing the commissioner of the Bureau of Labor Statistics and blaming the chairman of the Federal Reserve for the disappointing results.
Q: What is the future of the economy?
A: Economists are warning that the US gross domestic product could grow less than 2% this year, its worst performance since the height of the pandemic.
Q: What is the impact of the tariff negotiations on trading partners?
A: Major trading partners have faced significant increases in tariff rates, including Brazil, India, and Switzerland.
