The US economy looks pretty good these days, doesn’t it? Nonfarm payrolls beat expectations, 223,000 new jobs were added overall and the unemployment rate in May stood at 3.8% an 18-year low.   Even average hourly wages rose slightly to 2.7%.

All this data fueled expectations that Q1 2018 economic growth of 2.2% would be a low-ball point for the year. The CNBC’s Rapid Update puts Q2 2018 at 3.6% and Atlanta’s Federal GDPNow Tracker sees Q2 2018 rising to a whooping +4.8%!

Gus Faucher with PNC Financial Services, a bank holding financial services corporation with offices in 19 states, is a bit more modest in his predictions. Faucher said, “The tight labor market is going to lead businesses to invest in capital that makes their workers more productive. Then you’ve got strong government spending with the increase in discretionary spending caps. I think we’ll see growth better than 3.0^ in the final three quarters of the year.”

The National Association of Business Economists (NABE), a group of the country’s top 45 economists, is even more modest in its predictions of the nation’s GDP growth rate. In its latest quarterly outlook, the NABE forecasts that the nation’s GDP will grow by 2.8% in 2018, a decrease from the group’s prediction in 3/18 that the nation’s GDP would grow by 2.9%, according to the Associated Press. Some members of the NABE forecast the nation’s GDP growth in 2019 at 2.7%

Sure, Trump’s tax cuts have been and will be a boon to the US economy in 2018 and 2019 BUT his other policies, i.e. Trump’s trade policies, could well lead to a new recession in 2020.

BUT

Two thirds of NABE members predict a recession starting by the end of 2020 at the latest and 18% of those members predict a recession starting as early as the end of 2019.

The major cause for such a forecast recession is Trump’s policy on trade. By imposing tariffs on steel and aluminum imports on America’s allies from Canada, Mexico and the European Union plus tariffs on imports from China, Trump is risking an all-out, global trade war. The G7 countries have already stated that they all would and will retaliate in kind with tariffs on US imports.

No matter the causes for trade wars, history informs us that there are no winners in trade wars, only losers. Additionally, trade wars, once begun, take a very long time to end and cause tremendous collateral damage among countries involved.

Certainly, economists worldwide including the NABE and companies that do business internationally would encourage the powers-that-be to reconsider policies that espouse tariffs and in-kind retaliatory actions. No one wants a recession, do they?

 

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