ROI-How Trump's hand has weakened ahead of Xi summit in 8 charts: McGeever

By Jamie McGeever

ORLANDO, Florida, May 13 (Reuters) - U.S. President Donald Trump went into his summit with Chinese President Xi Jinping last October in a position of relative strength. The "Liberation Day" tariff turmoil had passed without causing any obvious damage to the economy, Wall Street was on a roll, a record-long government shutdown was about to be in the rear-view mirror, and the Fed was cutting interest rates.

The backdrop today is very different.

Trump is heading into this week's summit with Xi in Beijing with a weaker hand. Granted, sizzling artificial intelligence investment has uncorked a frenzy that has propelled equity markets to new highs. But other metrics are flashing amber, if not red.

U.S. courts have struck down some of Trump's signature tariffs, and gas and fuel prices have surged as a result of the Iran war, which is about to enter its 13th week. Inflation is nearing 4%, bond yields are notably higher, and the Fed now seems more likely to raise rates than cut them.

Trump's approval ratings have slumped. As Xi sits down with the U.S. president on Thursday, he will be well aware of Trump's domestic difficulties ahead of the November midterm elections, as they could deal a blow to the U.S. leader's agenda and weaken his grip on power.

Below is a selection of eight charts that show how the economic and market backdrop has changed for Trump since the last time the two leaders met in Busan, South Korea, last October.

Approval de-rating

Trump's approval ratings were low last October. They're even lower today - just 30% approval on his handling of the economy, against 35% in October - with voters unhappy about the rising prices the Iran war has unleashed and the mixed messaging about the justification for the conflict itself.

Inflation

Headline annual CPI inflation rose to 3.8% last month, the highest in three years and closing in on 4%, which is double the Fed's target. Core inflation, which strips out volatile food and energy prices, ticked up to 2.8%.

Real wage growth evaporates

Inflation's rise has wiped out real wage growth for the average worker. Inflation-adjusted annual earnings in April fell for the first time in three years. It was tracking around 1% positive last October.

It's a gas, gas, gas

The average price at the pump last October was just over $3.00 per gallon. It's now around $4.50, a squeeze on household finances that could potentially dent consumer spending and generate significant political blowback.

Long bond blues

Bond yields today are notably higher than they were in October, putting upward pressure on rates charged on credit cards, mortgages and other loans. The 30-year long bond yield is above 5%, and close to its highest level since 2007.

The Fed's next rate move - a hike?

Last October, the Fed was cutting interest rates to support the labor market, and the future rate path pointed to a terminal rate of around 3% by early 2027. The market is no longer pricing in any cuts this year. In fact, the fed funds rate is not expected to be lower than its current level for at least two years, and the probability of a hike next year has risen to 80%.

(The opinions expressed here are those of Jamie McGeever, a columnist for Reuters)

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