Kashkari (Aug. 28) warned of the urgent need to resolve trade disputes between the U.S. and Canada given their important trading relationship: “I’m cautiously optimistic that we end up in a better place, but it’s very uncertain.” In contrast, he characterized the U.S.-China trade negotiations as “shadow boxing right now” (Sep. 4). Speaking about the ongoing trade policy debate more generally, he said, “I’m hoping that everyone realizes that we have much more to lose than we have to gain in a trade war. It’s bad for the U.S. economy, it’s bad for the global economy. But we also need to achieve fair trade.” He warned of the downside risk from trade confrontation: “It’s a little bit like a game of chicken. Once in a while you actually run into each other, and so we have to be careful.”
The Trump Administration made additional comments on monetary policy. President Trump said of Chairman Powell: “I put a man in there [whom] I like and respect,” He expressed displeasure that Fed policy was not giving the Administration more policy space with respect to trade negotiations: “There’s something really nice-sounding about the fact that our dollar is so strong and so powerful. The bad news is that it makes life more difficult when you’re looking to sell product to the rest of the world. And they are cutting their currencies very substantially, far more than they should be allowed to do. And we’re not being accommodated. I don’t like that.” He specifically cited the ECB and PBOC: “Those countries are being accommodated by their monetary policy. Our country is not.” But he stopped short of endorsing political control over monetary policy: “We are not being accommodated. I don’t like that. That being said, I’m not sure the currency should be controlled by a politician.”
Treasury Secretary Mnuchin, too, praised Powell as a “phenomenal leader,” adding that “he understands the issue of growth and he’s carefully monitoring the growth numbers and the inflation numbers.” Mnuchin declined to comment on interest rate policy. He was “not at all concerned about” the yield curve, didn’t think it was a “predictor” of growth, and suggested that “for now” the Treasury was “perfectly content with” having a flat yield curve with issuance of longer-term debt.