The trade war, the US equity market and the Federal Reserve

Although the macroeconomic size of the tariffs introduced by the United States and China is small, each new tariff announcement leads the equity market to fall. In the United States, there is a significant equity wealth effect on consumption and corporate investment: this will force the Federal Reserve to react to fall s in the equity market. The worse the trade war between the United States and China gets, the lower US interest rates will go .