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Trump tariffs on China likely hurt US economy; Fed set two teams: Nomura



A shipping container is offloaded at the Port of Oakland in Oakland, California.

Justin Sullivan | Getty Images

Raising tariffs on all Chinese goods that enter American borders will probably hurt U.S. economic growth, which has already shown signs of slowing in recent months, according to Japanese financial firm Nomura.

President Donald Trump has claimed on several occasions that the U.S. has collected billions of dollars in tariffs paid by the Chinese, which partly contributed to the strong American economy. But Nomura's chief U.S. economist, Lewis Alexander, said on Tuesday that the net impact of the tariff fight is probably negative for the America.

Tensions between the U.S. and China escalated earlier this month, when Trump announced an increase in tariffs of $ 200 billion of Chinese goods from 1

0% to 25%. Beijing retaliated at $ 60 billion worth of American products.

Alexander said there's evidence that was collected by U.S.A. Government is paid by American firms and consumers, rather than the Chinese. "And frankly, not at all, it's likely to be a growth rather than neutral," he told CNBC at the Nomura Investment Forum Asia in Singapore.

and China – the world's two largest economies – come at a time when the American economy is "clearly slowing," the economist said. He added that "the biggest thing" that will affect U.S. Economic growth and decisions by the Federal Reserve are the trade trends affecting business confidence and investments in the coming months.

Fed to stay on hold

Still, the potential hits to the US economy doesn't justify a rate cut by the Fed, according to Alexander. He explained that Moves ahead to impose 25% tariffs on all Chinese goods, core inflation in America could tick up at 0.5 percentage points over the next 12 months.

Central banks globally typically cut interest rates to stimulate economic activity and stoke inflation. Lowering rates while inflation is inching up puts into an economy at risk of overheating, which is often a precursor to a painful downturn.

Alexander is not the only one expecting the Fed to keep interest rates steady. Carmen Reinhart, a professor at the Harvard Kennedy School, said the U.S. central bank is right to stay patient in making any interest rate movements.

"We have the lowest unemployment rate since the 60s, the economy – by any metric – is still operating close to full employment," Reinhart told CNBC on Tuesday at the Nomura forum.

"The Fed's wait-and-see attitude is really on the market," she added.


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