020 7898 0500On Friday, the trade war between the US and China finally began as Trump’s trade tariffs finally came into effect. China retaliated almost immediately to essentially nullify the effects of the tariffs – at least theoretically. In actual fact, many sectors on both sides will suffer as a result of the tariffs and, while China said it didn’t want a trade war, it is easy to understand why they can hardly sit back and do nothing.
Non-farm payrolls in June showed that 213,000 jobs were created against a forecast of 195,000. The US jobs market has shown repeated strength and although unemployment surprisingly went up from 3.8% to 4%, this was because the labour market increased so more people were always going to be looking for employment.
However, average hourly earnings only rose by 0.2% which keeps annual earnings growth at 2.7%. This is below expectations of 2.8% and suggests there is not much wage inflation in America. Obviously, this is bad news for workers, but it might stop the Federal Reserve from increasing interest rates as aggressively as previously thought. Perhaps this explained why the dollar fell back a little on Friday.
Like the UK, it is quiet for economic data in the US today, but fallout from the trade war will likely dominate the headlines for some time to come yet. The hope is that Trump will not go ahead with his proposed $500 billion of extra tariffs because then we would certainly be in a full blown trade war.
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