Trade

Banks Warn of Recession Within Six Months of Trump’s Tariffs

JM Ashby
Written by JM Ashby

All things considered, the economy may appear to be relatively healthy right now, but Morgan Stanley is warning their clients that things could take a turn for the worse very quickly if everything we think is going to happen does happen.

A significant number of economist say a recession may occur within the next two years, but the investment bank is warning that a recession could arrive sooner rather than later.

If Trump imposes all of the tariffs he's threatening to impose, and if those tariffs remain on the books for at least six months, Morgan Stanley's chief economist says it could push the global economy into a recession within roughly the same amount of time.

“We view risks of further escalation as meaningful,” [chief economist Chetan Ahya] wrote in a note to clients published Sunday evening. “If the U.S. raises tariffs on all imports from China to 25% and China makes a matching response, with those measures staying in place for four to six months, we believe that the global economy will be in recession in six to nine months.”

On Friday, China announced new tariffs of 5% and 10% on $75 billion in U.S. imports and the Trump Administration responded with plans to raise existing tariffs of 25% on $250 billion in Chinese imports to 30% on Oct. 1, while raising planned tariffs on the remaining $200 billion in annual imports to 15% from 10%, planned to go into effect in two rounds, on Sept. 1 and Dec. 15. [...]

If these planned tariffs go into effect, the average U.S. tariff on Chinese imports will be nearly 22%. In that case, Ahya estimated that global growth would decline to an annual rate of 2.6% in the first quarter of 2020, just a hair above the 2.5% threshold that, by Morgan Stanley’s definition, marks a global recession. A further increase of barriers that raises tariffs to 25% would likely be enough to sink global growth below 2.5%, he wrote.

Ahya also told the bank's clients that the American economy is more vulnerable to Trump's trade war now than it was when he first launched it last summer, according to MarketWatch, because the GOP's tax cuts for the rich and corporations have faded from being relevant.

A global recession that begins in the first half of 2020 does not necessarily mean the American economy will be in recession at that point, but it will be only a matter of time before it catches up to us. The situation could deteriorate very quickly once the global economy is in recession and Trump could be coasting into the 2020 election with a economic crisis looming on the horizon.

I don't know who the Democratic nominee will be and, to be honest, I don't necessarily care because any of them would be better than Trump. All I know is I'll be voting for whoever the nominee is and we must all do the same.

As bad as Trump is at ushering us toward ruin -- as bad as the Trump regime is when things are relatively good -- I can hardly fathom how they would handle an economic crisis. Trump doesn't even know the meaning of words and his top economic adviser is a failed TV pundit.

  • muselet

    Alternative headline:

    Short-fingered Vulgarian Set to Destroy World Economy

    I wonder if Donald Trump will blame illegal aliens or The Squad for the downturn.

    –alopecia

  • mnpollio

    I believe we have some Russian bots joining the comments section now.

  • n6532l

    Are these the same economist who predicted a recession if Trump was elected?

  • Draxiar

    The U.S. goes into a deep recession, the 99% lose their shirts, the 1% remain unscathed and buy up the 99%’s losses thus further creating an echo of the Russian oligarchy. In the aftermath we struggle to make ends meet while paying for the consequences of the aforementioned process.