Fears that the President’s Trump’s trade war with China will lead to a recession may have faded from the headlines, but economists say it cannot be discounted.
“We’re not expecting a recession anytime soon, but, that said, there are a number of headwinds, ranging from slower growth, trade tensions, a gradual erosion of confidence in the private sector, and gradually slowing employment gains, among other policy risks, that could push us towards an environment that could potentially be recessionary,” said Gregory Daco, chairman of the National Association for Business Economics’ Outlook Survey. . .
. . .Employment, however, is a lagging indicator, said Wayne Winegarden, a senior economist with the free-market Pacific Research Institute. A better metric is business investment, which he argues has been “terrible.”
Gross private domestic investment declined 1.5% in the third quarter, according to Commerce Department data, after dropping 6.3% in the second quarter.
That is partly a consequence of the trade war because its creates uncertainty that makes businesses reluctant to invest, Winegarden said. The risk of a broader trade war with China still exists, and other trade war fronts could open as well. “How many times have we gone back and forth on whether we will go ahead on European automobiles?” he said, pointing to Trump’s threat to slap levies on autos and auto parts. . .
