Editorial | Cheaper Chinese goods will aid Trump’s push to lower interest rates

On a scale of zero to 10, US President Donald Trump said he had “a 12” with his Chinese counterpart Xi Jinping. There have been several key compromises and promises from the meeting in Busan, and one issue in particular may have implications that appeal to the US leader: an argument to pressure US Federal Reserve chairman Jerome Powell to continue with his interest rate cut.

As widely expected, the US Fed lowered its target rate to a range of 3.75 per cent to 4 per cent this year. But a further rate reduction at its last meeting of the year in December by the central bank’s Federal Open Market Committee – which sets the benchmark rates – is now less clear as Powell said there was no “foregone conclusion” one way or another. Trump has been attacking the Fed chair for lowering rates too slowly; he likely would not be happy with Powell’s latest statement.

Trump said he would lower fentanyl-linked tariffs on China to 10 per cent from 20 per cent, effective from November 10. That would bring the overall tariff rate on Chinese imports to 47 per cent from 57 per cent.

Meanwhile, the continuing US government shutdown and what has been called the “job apocalypse” brought on by rapid advancements in artificial intelligence in multiple industries have raised the alarm for Powell. That, too, may induce the Fed committee to ease off in December.