Trump blames Federal Reserve for slow economic growth, but economists say trade war could cause recession

Trump blames Federal Reserve for slow economic growth, but economists say trade war could cause recession

United States President Donald Trump has blamed the Federal Reserve for the country’s “slow” economic growth.

During his 2016 election campaign, Mr Trump promised his administration would deliver 3% annual economic growth, but growth has instead continued at a rate of about 2%, consistent with the trends of the last decade.

The President has criticised the Federal Reserve for not lowering interest rates, which could boost economic activity by encouraging borrowing, spending and investment.

However, the economic data available does not support a drop in interest rates, and the Federal Reserve has a mandate to manage interest rates independently of the President’s political ambitions.

A more likely cause of the Trump Administration’s lower-than-expected economic growth is the ongoing trade war with China, which has seen rising input costs for US companies and reduced domestic activity.

Economists from Goldman Sachs have warned that the ongoing Sino-American trade war could cause a recession.

On 1 August the President announced a tariff of 10% on a final $300 billion worth of Chinese imports would take effect form 1 September. China consequently halted purchases of US agricultural products.

The US has accused China of manipulating its own currency, the yuan, for competitive gain in an attempt to offset the impact of the tariffs.

In a note to clients, Goldman Sachs said it has lowered its forecast of US economic growth for the final quarter of 2019 to 1.8%.

The investment banking group says it does not expect a trade deal to be reached between China and the US before the 2020 US President election

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