• Is strong jobs growth and moderate wages a good balance for Trump?
  • Japan becomes the latest trade target as negotiations with Canada continue.

US futures are trading a little lower ahead of the open on Friday, as we await the latest jobs report from the world’s largest economy and President Donald Trump hints at a fresh trade conflict with Japan.

The US jobs report will naturally attract plenty of attention today, with the economy now strong and the Federal Reserve raising interest rates at a steady and consistent pace. The only thing that’s lacked from what would otherwise be a booming economy is better wage growth and that is expected to continue to elude the data for August, with earnings seen growing only 2.7% again, a level it’s struggled to break sustainably above since the start of last year.

I don’t think that’s going to cause Trump too many sleepless night though, in fact he may see it as being helpful in stopping the central bank raising rates at an even faster pace and undermining his growth plans. He’s already openly criticized the Fed for its tightening policy – which in itself was highly controversial, albeit unsurprising – and the jobs report gives himself plenty of other things to brag about, most notably job growth and multi-decade low levels of unemployment. From his perspective, this may be a perfect balance.

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The data also allows him to pursue his aggressive trade agenda with the rest of the world as not only is the economy performing at a level that provides him some slack, he’s claiming to be fighting for well-paid and skilled labour that has moved to cheaper regions that don’t play fair. It really is a win win situation for him.

The latest target for Trump appears to be Japan after he acknowledged that relations may sour with them when he tells them how much they need to pay. Months of discussions with the US’ NAFTA partners, the European Union and China have yet to deliver any results, although they may be close with Mexico and Canada having agreed new terms with the former. Should Trump manage to get this over the line prior to the mid-term, it may be enough to convince voters that his globally unpopular approach to renegotiations is working and the Republicans could reap the benefits.

Of course, while NAFTA talks are progressing well, relations with China are not and with the consultation period having now passed, Trump may announce an additional $200 billion of tariffs at any time. With China promising to return with tariffs of their own, one trade conflict may soon end but the trade war appears to have plenty of time to run and will likely weigh on investor sentiment in the meantime.


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