Trump Threatens to Start a Recession

Written by SK Ashby

Trump has increased his tariffs on $200 billion in Chinese goods from 10 to 25 percent, but the White House is also preparing to impose tariffs on another $300 billion in Chinese goods.

The office of Trump's unhinged trade representative, Robert Lighthizer, is expected to outline the plans today which would impose tariffs on virtually everything we import for China.

WASHINGTON (Reuters) - President Donald Trump on Friday ordered the U.S. trade representative to start the process of raising tariffs on all remaining imports from China, the USTR said in a statement.

The statement by USTR Robert Lighthizer said the value of products subject to new round of tariffs is approximately $300 billion.

It said details on the process for a public notice and comment period for the tariffs will be published shortly in the Federal Register, and more details will be available on the USTR’s website on Monday.

Trump reportedly told Chinese officials that he'll impose tariffs on $300 billion in additional goods at the end of this month if they don't give in to his demands and cut a deal.

Trump's increase in tariffs on $200 billion in goods is going to have serious consequences for the economy, but imposing tariffs on all goods from China would obviously be much worse.

Morgan Stanley's chief investment officer reportedly informed the bank's clients this morning that Trump's new threat would "likely" lead to a recession according to the Wall Street Journal.

If a fresh round of duties are put in place, “the potential cost” of these duties could represent a decline of 1% to 1.5% of companies’ net income. Even worse, “the demand destruction and ailing confidence increase the potential impact well beyond just higher costs, and would likely lead to an economic recession in our view,” wrote Mike Wilson, Morgan Stanley’s chief investment officer, in a Monday note to clients. [...]

“In the case of 25% tariffs on all of China’s exports to the U.S., we are inclined to think this has the potential to tip the U.S. economy into recession given the costs issues companies are dealing with,” he argued. “Surely they would attack labor costs aggressively in such a scenario and unemployment would rise materially—the essence of an economic recession.”

In other words, Trump may finally wreck the healthy economy he inherited from President Obama and he'll do so for no substantiated reason at all. We're gaining nothing from his trade war, only losing.