Trump may be about to face his biggest test yet on the economy

President Trump faces a number of important trade and budget decisions in the coming months, just as the US economy is facing the biggest courtesy of his tenure, forcing him to decide whether to call back as the recession suit last year for next year. 19659002] Trump has threatened to escalate trade conflicts with China, Mexico, the EU and Japan, spooking business leaders and leading someone to withdraw investment. Similarly, budget and debt negotiations with congressional leaders from both parties have spit, which increases the possibility of a new government tank in October.

Uncertainty ̵[ads1]1; and a cooling global economy – led JPMorgan Chase on Monday to predict that there was a 45 percent chance that the US economy would enter a recession next year, up from 20 percent in early 2018.

Also on Monday, a key meter in New York's manufacturing industry reached the largest monthly drop ever recorded. It was the last sign that, after a relatively strong economy last year, political and economic forces seem to have combined this year in a way that has diminished the economic outlook. This can be problematic for Trump, who has tried to exploit the economy's performance as a key to his re-election.

"The main question is: Can you get a smooth landing for the economy?" Said Vincent Reinhart, chief economist for Mellon and a former Federal Reserve economist. "We are going through a slowdown and no one likes it. It doesn't feel good."

The softness and uncertainty of the economy around Trump's next actions is causing a delicate situation for the Fed, which meets Tuesday and Wednesday. Trump trusts the central bank to reduce interest rates to boost economic growth. But Fed officials are trying to reconcile worrying reports on the economy with other areas of relative strength, especially low unemployment and high spending.

At the same time, Trump has in its power to reduce the risk of finance – on the budget and trade.

Lawmakers are working to make a budget deal that can avoid a fall in the fall, increase federal debt limit and prevent deep spending. But so far, even the Republicans have struggled to come to an agreement with the White House, which would be a prelude to a wider debate with the Democrats. Similar efforts at the beginning of the year ended in the longest government's closure on record after Trump demanded funding for its border wall.

Another closure of the government, flirting with federal debt limit violations and deep spending cuts would all hit the economy.

Likewise, for trade, white house officials, Republican leaders and business leaders have said that if the spots are resolved soon, it can lift the economy into 2020. But so far, most of the negotiations have either resolved or stopped uncertainty as to whether Trump Meet with Chinese President Xi Jinping in the group of 20 next week's meetings.

"The biggest confidence risk of growth today will be trade in the south," said Jamie Dimon, JPMorgan's director last week. .

The president has taken complete ownership of the economy's performance, calling it the "Trump economy." During the first year of the presidency, his best financial lawyer engaged in rigorous debate on how to shape politics, and Trump hesitated to take action that would damage growth.

But over the past year his team has been largely exposed to Trump's instincts, especially on trade, and Trump has been willing to entertain tariffs and state closures in the hope of achieving other political goals, even though they risk to the economy.

On Saturday, Trump discounted the concerns and said that the economy's performance was historic and just in progress. He warns of a decline if he loses next year. He often refers to the finance settings, but rarely indicates which records he refers to.

"The Trump economy sets up records and has a long way up," he wrote on Twitter. "But if any, but I take over in 2020 (I know the competition very well), there will be a Market Crash that has not been seen before! HOLD AMERICA GREAT."

Next month, the economy will pick the longest expansion in US history, growing for more than a decade since the big recession officially closed in 2009. Trump increased the tax burden, higher levels of government spending and more deregulation, but Democrats have demanded that some of these changes be a "sugar high" as will wear off and eventually damage the economy.

There are many signs that the economy of the economy last year may prove short-lived.

The manufacturing indices have fallen to the lowest levels of Trump's presidency, reflecting weaker demand and fearing that Trump's resilient approach to trade is leading companies at home and abroad to withdraw from spending.

In the midst of signs that some manufacturers are withdrawing, Trump has gone on the attack. He has lashed out on several iconic companies, including Harley-Davidson and General Motors, on cutting house announcements, and he said last week that he was pressuring Lockheed Martin not to slow down production at a helicopter facility in Pennsylvania.

Trump has tried to point out that some companies he sees are cutting jobs, but the impact of these threats is unclear. Businesses cut capital investment in the first three months of the year, even though they continued to benefit from weakening tax cuts at the end of 2017.

The Morgan Stanley Business Conditions Index recorded the largest month-on-record record in June and is now at its lowest level since December 2008, when the US economy was in the midst of a recession.

"We see this underlying deterioration. It has been a slow softening," said Lindsey Piegza, chief economist at Stifel Fixed Income. Piegza has become particularly concerned with lowering private domestic sales, an indication that US demand is likely to decline. 19659022] However, analysts and white house officials have stressed that there are still many bright spots in the economy and have warned against over-activation to a few blips in the data.

"Trump has deeply held trade beliefs. A few short-term data points will not change, said a senior official who spoke on condition of anonymity because they were not authorized to speak publicly.

About 70 percent of the US economy is driven by consumer spending and consumer confidence remains strong, with retail spending in April and May. Inflation is still low, and wages have grown the fastest for Americans in working class.

The US economy added only 75,000 jobs in May, many fewer than expected, but unemployment rates are 3.6 percent. White house officials believe wages and spending will help lift the economy despite other factors, even though businesses continue to withdraw their investment.

"Finally, you need to consider whether the data makes sense," Kevin Hassett, head of the White House's financial adviser counsel, said in an interview. "What makes sense to me is that we are being rescued from the decline of the consumer right now because revenue growth has been so high."

Trump and business leaders both look to the Fed for a possible boost. The stock market has risen in recent weeks, mainly based on investors' belief that the Fed will go in to counteract any widespread damage from the charges.

Wall Street predicts an 85 percent chance of a July price cut and will look at Fed leader Jerome H. Powell's press conference Tuesday Tuesday for signs he's ready to trade soon.

"The Fed is trying to trade sooner than later. If they wait too long, it will be much harder to get out of trouble," said Andrew Levin, a former Fed economist, now learning at Dartmouth.

However, the main concern remains how Trump plans to resolve the escalating trade battle with China, Trump has imposed $ 250 billion in import prices in Chinese imports and threatened to punish another $ 300 billion in imports if China does not agree with major concessions. last year and continued for months before unraveling in May. Trump has said that if Xi does not meet him next week during the G20 summit in Japan, the United States would be prepared to move on with new rates.

"The economy is not near a recession this year, but next year is much more problematic, says Greg Valliere, chief US policy strategist at AGF Investments writing a daily political newsletter. "If we go into 2020 without a China agreement, it will be a significant downside for him in terms of business uncertainty, agricultural security, weaker economic growth and perhaps even a little bit of infection."

More than 320 companies and industry groups testify at the US Trade Representative's office this week, and next about their fears that the introduction of tariffs on all Chinese imports will lead to significant price increases, job losses, and profits shrinking. But in the White House, some advisors point out that hundreds of thousands of companies were not plagued enough to testify or even submit comments on charges.

The US economy grew 2.9 percent in 2018, the highest level since 2015, according to the trade department. White House officials have predicted that growth will be even stronger this year, but few others agree. The economy grew by 3.1 percent in the first three months, but a number of analysts predict it will grow less than 2 percent between April 1 and end of September.

Trump has not shown any sides to support, especially in his trade dispute with China or in his budget death with Democrats and Republicans on Capitol Hill. But he has also shown a penchant for swinging sharply when he is confronted with bad opinion polls or a stockpile, figures that he looks closely at.

"The White House doesn't have to panic, but there are reasons to be nervous," said Douglas Holtz-Eakin, an economist who advised Sen. John McCain (R-Ariz.) During his presidential election in 2008. "We always went down from 3 percent growth. The question is, what? If we lower to 2.5 percent, it's a big win. If we lower to 1, 5 percent, there is a much tougher re-sell. "

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