Trump blames Fed for manufacturing slump driven by trade war

President Trump on Tuesday blamed the Federal Reserve for a sharp decline in U.S. manufacturing activity that experts say is driven largely by his trade battles with China and Europe.

In a Tuesday tweet, Trump accused the Fed and its chairman, Jerome Powell, of harming U.S. exporters by keeping the value of the U.S. dollar too high. 

The president repeated his call for the Fed to slash interest rates to the near-zero levels seen across Europe, where the economy is considerably weaker than in the U.S.

As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!

— Donald J. Trump (@realDonaldTrump) October 1, 2019

Trump appeared to be responding to a steep drop in the Institute for Supply Management’s (ISM) manufacturing index, a closely watched gauge of U.S. industrial health. 

{mosads}The ISM index for manufacturing dropped 1.3 percent in September to 47.8 percent, according to data released by the group Tuesday. An index level below 50 percent indicates a retraction in the manufacturing sector. 

Trump has long bashed the Fed for keeping interest rates above the near-zero levels seen in other major world economies. The president has urged the Fed to slash rates to weaken a strong U.S. dollar, which would make U.S. exports relatively cheaper in foreign markets.

But while Trump blamed the Fed for the manufacturing slump, firms surveyed by ISM pinned the industrial retraction on the fallout of the president’s trade battles.

“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019,” said Timothy R. Fiore, who is chairman of the ISM survey committee. 

“Overall, sentiment this month remains cautious regarding near-term growth,” he said.

Several businesses that responded to the ISM survey directly blamed Trump’s tariffs on Chinese goods and a decline in global growth for their September losses.

“Chinese tariffs going up are hurting our business. Most of the materials are not made in the U.S. and made only in China,” said a respondent from the food, beverage and tobacco industry, according to ISM.

A firm in the plastics and rubber products industry also said it was forced to cut its workforce by 10 percent due to slowing sales, according to ISM.

“We have seen a reduction in sales orders and, therefore, a lower demand for products we order,” the firm said.