On Thursday, IFR Markets’ Duncan Balsbaugh hypothesized that President Donald Trump could be setting a trap for the Federal Reserve, leading on Mexican negotiators only to terminate negotiations at the last minute, thereby forcing the Fed’s hand to cut rates in the June 19 meeting to avoid a 10% tariff at the end of June.

Trump has pushed for a rate cut for some time, and may view the current trade impasse as a winnable game of chicken with Chairman Powell and hawkish Fed governors.

The conspiracy theory goes: following a rate cut, Trump could easily reverse position and agree to a Mexico deal, which the President could pivot to positive momentum ahead of negotiations with China at the G-20 summit in June 28-29 in Osaka.

The Associate Press reported earlier today that U.S. and Mexican officials were negotiating furiously to avert the initial 5% import tariff set to trigger on Monday, but President Trump said a “lot of progress” must still be made to stem the flood of Central American migrants at America’s southern border.

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Contact Kyle Skinner at KS@BuyMuni.com.