The first trade report after the standoff between Washington and Beijing escalated amidst President Trump’s aggressive stance showed the trade gap with China dipped nearly 12%. However, the decline in Chinese imports is nowhere near the target set by the government while imposing tariffs on steel and aluminum imports to punish China for ‘breaching intellectual property rights.’
While a healthy trade balance would strengthen the economy, the impact of the tariffs on business confidence has started unveiling. Industries across the board are turning increasingly concerned about the long-term effects of the protectionist policies.
Elsewhere, data released by the Labor Department on Friday showed unemployment dropped to an 18-year low of 3.9% in April. Meanwhile, employees’ salaries remained broadly flat, contrary to expectations for a modest increase.
The data underscores an earlier report showing that jobless claims increased at a slower pace during the week ended April 28, and stayed close to the four-decade low registered a week earlier. The positive trend, together with the historically low jobless rate, indicates the economy is more close to ‘full employment’ than ever before.
Going forward, the steady uptrend in hiring would eventually push up wages. The consequent uptick in inflationary pressure will set the stage for the Federal Reserve to hike the policy rate at its June meeting, after keeping it unchanged in the last week’s session.