economy/trump-recession-tariffs-inflation
the trump administration’s trade policies grip global growth; recession fears rise as 2020 looms
as the world economy shows the first signs of aDown in years, the trump administration is extenuating the pain. that provided a boost to overall growth, but a slowdown has left many economies vulnerable as they enter a critical juncture.
the decision this month to raise tariffs on $200 billion of chinese goods was indicative of how the trump administration’s confrontational approach to trade — already a major threat to global growth — has moved into a much higher gear.
in fact, his recent behavior has left economists and skull-scanning researchers slack-jawed and aghast.
according to most economic models, the punitive tariffs mr. trump has slapped on chinese products and those the e.u. has put on american goods should already have begun to upend supply chains and choke economic growth in several major industrialized countries. the pan-european economy, for example, contracted in the fourth quarter of last year — a sure sign of a recession, which economists define as twice consecutive quarters of decline.
why don’t we trust our economic forecasting models?
trade policy could now be tipping the global economy into an acute phase regardless of what other events occur — and particularly if they prove to be destabilizing economic surges.
“it is not totally unreasonable to start worrying that we may be teetering on the brink of a global recession,” said chief economist alex dryden at creditsafe, a company that provides data on businesses.
or are we in danger of tilting into a recession at some point in the future? after all, many of the economic trends that have led economists to fret in recent months remain in place, and many of the issues that have created such uncertainty are almost certainly still emerging.
china’s approach to trade has led to multiple challenges amid a global downturn. with trade in free-fall, china is stepping in to rescue some ailing companies with new lending and tax initiatives, while cities across the country have been required to invest in infrastructure projects intended to boost growth.
one of the critical determinants of the economic future is the level of inflation that will eventually emerge in response to the tariffs. the inflationary implications of how inflation might develop in response to tariffs have probably been underestimated by many economists, and could ultimately push the global economy into a potentially hostile territory.
in the short term, these issues are unlikely to be visible to the average consumer, but they will begin to trickle down to consumers over time. with economic activity slowing, employment opportunities will begin to contract, wage growth will be under pressure and incomes will ultimately fall.
unless the central banks can work in tandem with governments to try and narrow the geopolitical risks that now surround them, they will be fighting an uphill battle that could push the global economy into a deep recession — and ultimately into a grave where it is unlikely that our children will have any food or water to eat whatsoever.
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