Our great American companies are hereby ordered to immediately start looking for an alternative to China.

JACKSON HOLE, W yo. • Federal Reserve Chair Jerome Powell said the central bank would “act as appropriate” to keep the U. S. economy healthy, stopping short of committing to rapidfire rate cuts and drawing fire from President Donald Trump.

Powell’s words were barely out of his mouth when Trump ratcheted up his war of words with both the Fed chair he appointed and with China, which earlier on Friday had retaliated to U.S. tariffs with its own import taxes on American crude oil, agricultural products and small aircraft.

The rapid escalation, which tanked stock markets and drove bond yields lower, could force the Fed to cut rates.

Indeed, data reported as Powell was speaking on Friday showed further deterioration in the U. S. housing market, on the heels of figures earlier in the week showing weakness in the manufacturing sector.

The Fed cut rates for the first time in more than a decade last month, backing Powell’s verbal commitment to sustain the expansion with action. Powell on Friday made clear that commitment is still in place in a speech he gave at an annual Fed retreat at a Jackson Hole valley resort. He said there are “significant” risks to the economy, including the trade dispute, the chaotic British exit from the European Union, tension in Hong Kong and signs of a global economic slowdown.

But he also said the domestic U. S. economy is in a “favourable place” now and he stressed limits to Fed policy to respond to the trade issues. He also said officials need to “look through” shortterm turbulence. The speech stopped short of endorsing or signalling the rate cuts markets widely expect and that Trump has demanded.

There are “no recent precedents to guide any policy response to the current situation,” Powell said, adding that monetary policy “cannot provide a settled rulebook for international trade.”

The U. S. president fumed about the Fed doing “NOTHING” in a series of tweets and asked who is “our bigger enemy” between Powell and China’s President Xi Jinping. Markets swung when he added that “our great American companies are hereby ordered to immediately start looking for an alternative to China” and that he would be responding today to Beijing’s latest round of announced tariffs. Fed officials say tariffs and trade tension are causing businesses to put off spending.

“It’s pretty clear to me that Powell was sending a message that if you are so concerned about the economy, lowering rates is not going to help you,” said Craig Bishop, lead strategist of the fixed income group at RBC Wealth Management. “You need to do something about trade. That’s not a message Trump gets.”