Wall Street is betting Trump announced new China tariffs to make sure the Fed keeps cutting rates

Wall Street thinks President Donald Trump's threat to slap tariffs on more Chinese goods will force the Federal Reserve to cut rates further.

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President Donald Trump on Thursday announced the US will put a 10% tariff on $300 billion worth of Chinese goods beginning September 1. The tarrifs are in addition to the previously announced 25 percent tax on $250 billion worth of Chinese goods.

"Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal," the president tweeted on Thursday.

"We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing."

President Trump added: "Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10 percent on the remaining 300 Billion Dollars of goods and products coming from China into our Country."

On Friday, federal funds futures traded at CME Group show traders see a 95.8 percent chance the Fed will cut its benchmark interest rate by 25 basis points to a range between 1.75 percent and 2 percent at its September meeting. Ahead of Thursday's announcement, the market was pricing in a 51 percent chance, the data showed.

The market also shows a 61.9 percent chance the Fed lowers rates by an additional 25 basis points in October, according to CME Group data.

“I think Trump was sending a message to Powell, not to China,” Euro Pacific Capital CEO Peter Schiff on Thursday told FOX Business’ Liz Claman on “The Claman Countdown.” “This was basically Trump’s insurance policy to make sure the Fed keeps cutting.”

A rate cut would be the second in consecutive meetings as the U.S. central bank on Wednesday slashed its key interest rate by 25 basis points to a range between 2 percent and 2.25 percent. The decision drew the ire of President Trump, who was calling for a "large" rate cut.

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"What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world," President Trump tweeted following Wednesday's announcement.

"As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place - no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve!"