In addition to the Fed, Trump can blame his tariffs for the latest market slump

While President Donald Trump has directed his ire at the Federal Reserve for the recent stock market decline, he also has himself to blame.

The president’s escalating trade battle with China has added another layer of uncertainty to the nervousness caused by rising interest rates.

While the tariffs’ impacts have yet to be felt as they have just been implemented, there’s fear spreading that when company executives deliver their outlooks soon, the news won’t be good. That’s compounding fear that already has rippled through the financial world that after years of being dormant, inflation is finally on the prowl.

“The earnings are going to come in pretty much in line,” said Michael Cohn, chief investment strategist at Atlantis Asset Management. “The forward guidance is going to be much worse than it’s been over the last three or four quarters. It’s going to be horrific. That’s going to flatline the market for the most part.”

Trump has gradually ramped up the rhetoric against the U.S. central bank.

Back in July, when stocks were on a run higher, Trump said he was “not thrilled” with the Fed’s rate hikes and was worried they would derail the economic momentum built up during his time in office. This week, with stocks on a losing streak and the Dow struggling to stay positive for the year, the president called the Fed “loco” and Thursday blamed it for the stock market tanking.

That’s not completely fair, though, market watchers say.

“It’s probably the combination” of tariffs and rising rates, said Zachary Karabell, a longtime market pro and former head of global strategy at Envestnet. “Either in and of itself wouldn’t necessarily derail what’s going on. But the two together, along with midterms, are probably enough to make people somewhat skittish.”

Indeed, the two items feed into the same inflation narrative.

The Fed is raising rates in part simply to normalize after seven years of near-zero rates following the financial crisis, and to stave off inflation even though central bank officials acknowledge that it remains in check for now.

Tariffs factor in because they are inherently inflationary, raising the costs of goods and impacting corporate bottom lines. Corporate earnings reports have been trickling in so far, and companies have been largely getting punished badly for misses. Those that have reported have seen an average 3.8 percent share price decline on reporting day, according to Bespoke Investment Group.

Earnings season kicks into full gear Friday with reporting from the big Wall Street banks.

“What the market is really fretting about and is going to fret about for a while is inflation,” Cohn said. “The Fed will get to the point where they squash inflation, but it’s going to take time and the market’s going to do another flatline in 2019.”

The tariff situation, in the meantime, will be a significant obstacle for companies in a variety of sectors.

Moody’s Investors Service is warning that the back-and-forth between the U.S. and China will impact investments and raise tensions. The ratings firm predicts that “significant sector and regional impacts are likely, including unintended consequences on domestic supply chains.”

“Industries that will use more expensive imported or domestically produced inputs will be hurt,” Elena Duggar, chair of Moody’s Macroeconomic Board, said in a statement. “Moving production chains will be costly and rising uncertainty will affect investment.”

Tariffs will negatively impact credit for U.S. retail and wholesale distributors of furniture, home goods, electronics, hardware and appliances that take goods from China, the ratings agency said. In addition, the impact of tariffs in intermediate goods will hit the construction, transportation, telecommunications and machinery manufacturing industries.

Finally, limits on exports and investments with Chinese companies could impact the tech industry, particularly semiconductors, Moody’s added.

“That’s significant but it hasn’t happened yet. So whatever’s happening right now is anticipatory,” Karabell said. “The specter of it is enough for people to go ‘wait a minute.'”

Markets took another beating Thursday, with the Dow industrials off more than 500 points in late-afternoon trading as investors continued to worry that more damage could be ahead.

“”While tensions over widespread protectionism have faded as talks have been scheduled and some deals have been struck, U.S.-China tensions have escalated,” Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said in a statement. “A deal is still possible, but so is escalation.”