Trump is sabotaging his own reelection

US President Donald Trump is currently drawing attention with conflicting reports about the trade war. Instead, he should focus more on the weakening economy in his own country.

At the beginning of this week, President Trump was astonished by the comment that the trade war between China and the United States could just simmer until after the 2020 elections. Usually the incumbent president does everything he can to ensure that the economy in an election year is as good as that. runs as well as possible. This statement has led to speculation that the president is counting on his voters finding it more important that he not be fooled than that the economy is growing well. However, those speculations were quickly thrown into the trash.

Childish
At the NATO summit, however, it turned out that Trump really does allow himself to be messed with. A leaked video of a reception at Buckingham Palace shows (and hears) how Canadian Prime Minister Justin Trudeau jokes with his British, French and Dutch counterparts about a very long Trump press conference. After being confronted with that video, he called his Canadian colleague a man with 2 faces. Then he went straight home by plane. Trump's hardline theory has also been undermined in another respect.

On Wednesday, December 4, he said coolly that the talks with China are going well and that a first agreement is in sight. The stock markets received a huge boost from this ruling. However, the hairline cracks in the economy of the United States are now becoming increasingly visible. On Wednesday, it was also announced that the number of jobs in the American corporate world increased by 67.000 in November. That is considerably less than the 121.000 in October, while economists had expected a growth of 150.000.

Trade conflict hurts
However, it is particularly the state of affairs within the services sector that is a cause for concern, as growth again weakened in this segment. A good services market is more important than ever as the manufacturing sector contracted for the fourth month in a row. Among other things, the uncertainty surrounding the conflict with China is hurting the industrial sectors. If growth in the US services sector falters, a recession in 2020 is very close.

The Federal Reserve, of course, does everything it can to prevent that. Traders are already pricing in a 70% chance that interest rates will be cut further in 2020. This is evident not only from the Fed futures on the CME exchange, but also from the dollar. The US currency has fallen about 1% against the euro this week. If that trend continues, Trump's long-held wish (a weaker dollar) will come true. The downside, however, is that the chances of a re-election are a lot smaller if the US economy really starts to sputter.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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