Warning signals are plentiful in trade data such as Fed -Hints to lower interest rates

Federal Reserve chairman Jerome Powell indicated on Friday that the first rate reduction From 2025 could come next month, pressed if the Fed by a weakening labor market and rising inflation Bound by President Trump’s trade war with the world.

I will leave the labor market to others. In the trade data of the merchandise I see warning signals that can give a generally cautious FED chairman and other voting members of the Federal Reserve break.

In just three months, rates as a percentage of the total import quadrupled, by 10% for the first time in two decades, according to available government data that I have analyzed, and certainly decades longer.

Because the rates have been largely stable for decades, after decades of gradual decline, that speed of increase-the quadrupling is certainly unprecedented since the 1930 Smoot-Hawley Tariff Act cited as often as a contributing factor to the great depression.

In the same three months – April, May and June – the percentage of the total import that the United States came in, only the first and second time in just under 20 years, 234 months under 65%.

The American trade with the world fell for the third consecutive month in June, the latest data from the Census Bureau.

The FED will make its decision of September without data that shows the impact of rates on most leading trading partners in the world. The rate percentage for the three largest American importers, Mexico, Canada and China, respectively, has still not been resolved. The broad sketch of one Deal has announced with the European Union took place at the end of July. Trump has also announced rates for a wide range of import categories that will not be reflected in the data, including semiconductors and pharmaceutical products.

The American trade deficit was a record of $ 692.15 billion to June, a jump of 27.88% compared to the first six months of last year. Although that may not be of the utmost importance for the Federal Reserve, and certainly not most economists, Trump could react aggressively in the coming weeks, since his efforts to significantly reduce the trade deficit has actually failed.

Another disturbing number is that the value of the US exports earlier this year fell below 37% of the total trade. Although that percentage is now slightly above 37%, it was and is still very bad news for the export of the US and their producers and manufacturers. The last time that a year ended was 37% 2006. Although it is a statistical cousin of the trade deficit, it is actually more meaningful.

There are also a few wildcards in the game, the first of which will almost certainly play in the calculations of the Fed and the second one that might not have to be.

Firstly, Trump has trusted the International Economic Powers Act for a large part of his trade war, so that the US trade deficit is explained a national emergency situation. In May, the American Court of International Trade ruled that the rates were illegal. Although that case is on appeal, those rates remain in force. The case will almost certainly find its way to the Supreme Court. How long can the problem remain unsolved?

It leads to the second wildcard. The interim congress elections will determine whether Trump will continue with a majority in the House of Representatives. Well -groomed inflation associated with rates that were doing the Republican president, should it occur, would certainly make it harder to keep the slender majority more difficult.

In September the Federal Reserve will again decide whether the interest rates will be reduced. It is safe to assume that the FED will have a lot of data about the labor market and inflation, in particular about the impact of rates, no matter how incomplete.