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Week In Review


On Tuesday the Trump administration identified the Chinese exports to the U.S. that will be subject to tariffs in response to Chinese intellectual property abuses. The next day China released a list of retaliatory tariffs on imports from the U.S. that included soybeans and commercial aircraft, but markets were calm as Kudlow, Trump’s chief economic adviser, emphasized that none of the new tariffs have been implemented and that the two sides are still trying to talk out their differences. On Thursday Trump ordered his administration to develop proposals for tariffs on an additional $100 billion of imports from China in response to China’s retaliatory tariffs. China’s government immediately stated that they would retaliate if these additional tariffs are implemented. Markets on Friday showed a flight to safety in response to this next round of potential escalation.

Our Take

If taken at face value, the rhetoric on both sides of the U.S.-China trade dispute is escalating quickly into a tit-for-tat trade war, and this would be bad for economic growth and living standards globally. If, as Kudlow implied on Wednesday, the rhetoric is mostly a negotiating tactic, then this is still a very dangerous game that both sides are playing. While China may soon run out of imports from the U.S. to target, there are still many actions that the Chinese government can take against U.S.-owned assets in China and the operations of U.S. companies inside of China. Also, China’s large holdings of Treasuries are another way that the Chinese government could cause disruptions in the U.S. economy. Hopefully both sides will find a way to de-escalate this conflict.


Nonfarm payrolls increased by a much less than expected 103,000 in March, but wages rose 2.7% year-over-year. The unemployment rate remained at 4.1% and participation slipped 0.1%. Most of the shortfall in hiring was in more weather-sensitive areas of the job market.

Our Take

While the headline March numbers are mildly disappointing, the longer-term trend of a tightening labor market that is beginning to push wages upward is intact. The Fed is likely to stay on its course of gradual rate hikes and balance sheet reduction based on this report.