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IMF Warns Trump on Trade

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The major averages opened lower on mixed data but recovered late to enter the final hour with modest gains. Industrial production bounced back convincingly after last month’s substantial decline posting a .6% gain in June from a revised May decline of just .1%, the original figure was -.5%. Strength was seen in mining and manufacturing, utilities production slipped for a 2nd month.

With Trump and his administration continuing to demonstrate that US foreign policy leaves a lot to be desired. The IMF or International Monetary Foundation warns that the Trump inspired trade war is likely to cost the global economy some 430 billion, just for starters, shaving about .5% off total economic growth in the process. As with most wars victors are few and far between, and usually achieve that status by writing the history books after the fact. Trade wars are no exception and tariffs are certainly nothing new. The most probable outcome is higher costs and reduced trade in the near term. Slower economic growth and reduced employment comes later, ala the IMF warning. If Trump really believes that he can “win this” he’s naïve at best, or a fool hardy poor student of history, or worse. The data will start to hit the tape in earnest next month, and I expect material jumps in the various price measuring metrics for starters due to the imposition of tariffs at the national level. Locally consumers will find themselves faced with higher prices, something that is rarely, if ever, well received. Additionally various exports will see higher prices as well reducing demand in the process. An unknown here is how much negative backlash from our trading partners is going to occur compliments of Trumps antagonistic and ham-fisted attempts at diplomacy.

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