The Federal Reserve warned that the trade war between the U.S. and China threatens the growth of the American economy, just as President Donald Trump headed to Argentina, where he will meet Chinese President Xi Jinping for a crucial discussion on trade.
The trade tension between the U.S. and China poses risks for the economy and has already led to higher costs for business, some of which have been passed on to consumers, Federal Reserve officials warned, according to minutes released Thursday from the Nov. 7-8 meeting of the Federal Open Market Committee.
"The potential for an escalation in tariffs or trade tensions was also cited as a factor that could slow economic growth more than expected," the Fed minutes said. The Fed's concerns echo criticism from broad segments of the business community.
Cracking down on China's allegedly unfair trade practices was a signature element of Trump's campaign for president, but it could pose problems for him if the economy cools down as the 2020 presidential race heats up. Yet Trump has offered only a little wiggle room ahead of his scheduled dinner with the Chinese leader. Trump said Thursday that he is "very close to doing something with China," but that he is debating whether it is a good idea.
"I don't know that I want to do it," Trump told reporters shortly before his departure Thursday. "Because what we have right now is billions and billions of dollars coming into the United States in the form of tariffs or taxes, so I really don't know."
"Frankly," he said, "I like the deal we have right now."
The U.S. and China, the world's largest economies, have been locked in a tit-for-tat tariff battle this year.
Fed officials cited the trade war "as a factor that could slow economic growth more than expected," and reported that conditions in the agricultural sector "remain depressed, in part, due to the effects of trade policy actions on exports and farm incomes."
Alongside tighter immigration enforcement, the trade war is central to Trump's "America First!" platform.
But the trade fight has earned opposition from economists and at times spooked the stock market. The Dow Jones Industrial Average hit its low of the day on Thursday following a report that White House trade policy advisor Peter Navarro, a China hawk, would attend the president's dinner with Xi next week.
The Federal Reserve, likewise, has been warning about the impact of a trade war for months.
In its "Beige Book," a separate report on the economic conditions of the United States that is released eight times per year, references to tariffs have played a major role during the Trump presidency. That's a stark contrast to the reports issued over at least the previous two decades that barely mentioned the topic.