President Trump is gearing up for a significant week concerning the economy.
Trade discussions at the White House are intensifying as they approach the decision due on August 1 regarding tariffs and the Federal Reserve’s interest rates.
Additionally, pricing data from the second quarter, employment reports for July, and the impacts of tariffs are all on the agenda.
Tensions between Trump and Federal Reserve Chairman Jerome Powell appear to be easing after a recent tense appearance together. However, upcoming decisions from the Fed could disrupt this fragile peace.
The outcomes of employment statistics and economic growth may have a noticeable effect on Trump, who’s riding high after his tax cuts moved through Congress quicker than many anticipated. If the results fall short, it could either put the White House on the defensive or trigger a drop in the market.
This week certainly sets the stage for a busy time for the President.
Trade Consultation
US-China discussions have kicked off in Stockholm, where Trump is also engaging with British Prime Minister Kiel Stage regarding a previously announced trade deal with the UK.
As the August 12 deadline nears, mutual tariffs between the US and China, set earlier this year, could complicate things further. Trump is rapidly approaching a crucial deadline for re-evaluating tariffs.
The White House recently outlined a trade deal with the European Union, which includes importing US fossil fuels, but European leaders have voiced criticism regarding the arrangement.
“It’s a dark day for our alliance when we compromise our values and interests,” remarked French Prime Minister François Bailouot.
Trump has signaled intentions to impose tariffs on countries that haven’t reached trade agreements by the August 1 deadline, estimating rates around 15-20%.
“We’re essentially going to implement tariffs worldwide. That’s the cost of doing business in the US, since managing numerous deals is impractical,” he stated.
He suggested rates would likely fall within that 15-20% range.
Additionally, the White House intends to adhere to the August 1 deadline, even though earlier deadlines have shifted timeframes.
In the meantime, Treasury Secretary Scott Bescent is scheduled to meet with his Chinese counterpart this week.
“Relations with China are good, but they can be tough,” Trump commented this Monday.
Fed Decision
The Federal Reserve may decide to stabilize interest rates at its July meeting. This situation has been a source of frustration for Trump, as there have been calls for cuts.
Market expectations indicate that the Fed will likely maintain the overnight lending rate in the 4.25-4.5% range. An analysis tool currently reflects a 97.4% chance of a pause in rate adjustments this week.
Trump has urged the Fed to make cuts for months, yet the central bank is cautious given anticipated inflation effects stemming from Trump’s tariffs.
Last week, an aired disagreement between Trump and Powell arose over costs related to renovations at the Fed’s headquarters in Washington.
Trump had previously suggested Powell should resign ahead of the conclusion of his term in 2026.
When asked about the potential effect of his recent visit to the Fed on this week’s interest rate decisions, he opted not to criticize the chair, stating, “I think he should proceed with the cuts.” He added, “We’re managing without cuts, but they would have a positive effect on our housing market.”
Trump also mentioned that Powell would be in office for another year.
“I’ll really miss him,” he said, hinting ironically at a potential replacement.
While a rate cut this week seems unlikely, the decision may not achieve unanimous agreement. Some members, like Michelle Bowman and Christopher Waller, advocate for reductions but perhaps not at the scale Trump desires.
Job Report
Economists are forecasting an uptick in unemployment and a slower rate of job creation in July.
In June, employers added 147,000 jobs, resulting in an unemployment rate drop to 4.1%, though approximately 7 million individuals remain jobless. Estimates for July predict job additions anywhere from 110,000 to around 40,000 more.
Companies have cited trade challenges that dampen investment prospects, cost pressures from tariffs, and uncertainty due to restricted immigration as key factors affecting job creation.
The private sector is expected to contribute roughly 88,000 new jobs, while public employment may decline by around 48,000, according to Gregory Daco, chief economist at Ey-Parthenon.
Daco predicts the unemployment rate will rise to 4.2%, attributing it to a tighter labor supply, with the labor participation rate holding steady at 62.3%.
Earlier this month, the Fed noted that employment conditions were “generally prudent” but also pointed to “ongoing economic and policy uncertainty.”
Price Data
The Commerce Department’s Personal Consumption Expense (PCE) Price Index will release new pricing data on Thursday. This is the Fed’s preferred measure of inflation.
Economists are prepared for price increases largely driven by tariffs, which could elicit a defensive reaction from the President.
PCE prices are projected to rise from 2.3% in May to an annual rise of 2.5% in June, according to the Cleveland Fed’s inflation forecasts. Removing volatile food and energy prices, estimates indicate a rise to 2.7%.
Deutsche Bank analysts have adjusted their core count to 2.8%.
June also marked a rise in another critical inflation measure: the Consumer Price Index (CPI), which increased by 2.7% year-over-year compared to a 2.4% rise in May, as reported by the Labor Department.
Deutsche Bank analysts highlighted that recent data points clearly indicate that tariffs are contributing to rising costs on essential consumer goods like furniture and toys.
Gross Domestic Production
This Wednesday, second-quarter GDP figures will be released, with the Atlanta Fed projecting a strong annual growth rate of 2.4% as of Friday.
The first quarter’s annual GDP estimate was significantly lowered due to a surge in imports ahead of tariff implementations, which negatively impacts GDP figures.
Analysts assert that Trump’s easing trade stance has created optimism for the second quarter.
“Thanks to trade policy shifts, the second quarter GDP consensus has not only rebounded but is peaking at its highest point this year,” noted a Deutsche Bank analyst.
They also observed that forecasts for the third and fourth quarters might reflect when tariffs start to impact the economy more significantly, mirroring recovery periods following the pandemic.
