DAX Records Modest Loss Amid Trump Rhetoric; US-China Trade Tensions Unfazed

The DAX index in Frankfurt closed down 0.50% at 24,152.87 points, despite US President Donald Trump's rhetoric on the Federal Reserve and tariffs. The MDAX closed 0.81% lower at 30,822.93 points. Experts at Deutsche Bank's DWS unit believe the risk of political intervention in the central bank's independence is low, and Trump's actions could harm US servicing of its high national debt. The warning of punitive tariffs on Chinese imports and additional tariffs on US technology products targeting digital taxes also failed to move investors.

The DAX index in Frankfurt closed down 0.50% at 24,152.87 points, despite US President Donald Trump's rhetoric on the Federal Reserve and tariffs. The MDAX closed 0.81% lower at 30,822.93 points. Experts at Deutsche Bank's DWS unit believe the risk of political intervention in the central bank's independence is low, and Trump's actions could harm US servicing of its high national debt. The warning of punitive tariffs on Chinese imports and additional tariffs on US technology products targeting digital taxes also failed to move investors.

In a significant development, President Donald Trump has called for the resignation of Federal Reserve Governor Lisa Cook, citing allegations of mortgage fraud. Cook, appointed by former President Joe Biden in 2022, has refused to resign, stating that Trump lacks the legal authority to remove her from office. Trump's letter to Cook, posted on Truth Social, cited the Federal Reserve Act of 1913 as justification for his decision, claiming that there was "sufficient reason" to think Cook made false statements on mortgage agreements [1].

The allegations stem from Bill Pulte, a Trump appointee to an agency that regulates Fannie Mae and Freddie Mac, who accused Cook of claiming two primary residences in Ann Arbor and Atlanta in 2021 to secure better mortgage terms. Pulte sent a criminal referral to the Justice Department regarding Cook, alleging falsification of bank documents and property records [1].

Cook's attorney, Abbe Lowell, has stated that Trump's actions are a "phony projection and slander" and lack any proper process or legal authority. Cook has vowed to continue carrying out her duties despite Trump's demands [1].

The political tension comes amidst broader economic concerns. The International Institute of Finance (IIF) has warned that under Trump's leadership, the US national debt is set to increase significantly, potentially reaching over 150% of GDP due to tax cuts without spending cuts [2]. The IIF also notes that Trump's tariff policies could exacerbate inflation, potentially compelling the Federal Reserve to abandon interest rate cuts.

Investors remain cautious, with the yield on 30-year US treasuries rising from below 4% to over 4.5% due to concerns about the sustainability of the expanding debt burden and inflation risks [2]. Despite these economic uncertainties, the markets have largely shrugged off Trump's rhetoric on the Federal Reserve and tariffs, indicating a degree of resilience in the face of political turmoil.

References:
[1] https://www.foxbusiness.com/politics/federal-reserve-governor-digs-trump-moves-fire-her-i-not-resign
[2] https://www.moomoo.com/news/post/86994001/record-tr4cking-news-semiconductor-tariff-watch-under-trump-winners-risks-unknowns