Economists and other such experts have expressed their worries with the continuous trade war between two of the biggest economies – the United States and China, with the US President seemingly to back down of his decision.
According to a survey conducted by The Wall Street Journal, 85% of the economists questioned said there are downside risks for the US economy due to the trade, with the risks being the most in the last couple of years. Of all the interviewed economists, one agreed with the suggestion of the US president that the Federal Reserve was the biggest threat to the economy.
All in all, over 47% of the economists surveyed cited the back-and-forth tariff war between the two countries as the major threat to the economy in 2019, the highest percentage of any single threat.
The fears of the economists concerning the trade war as expressed in the survey are briefly highlighted as follows:
- 20% cited financial-market disruptions as the largest threat.
- 12.7% pointed to a slowdown in business investment.
Experts have also attributed the sell-off in US stock markets and businesses’ slowing of capital expenditures to the trade conflict.
While the US President has continuously claimed that the recent interest-rate hikes by the Fed Reserve are the biggest threat to the economy, only a few economists have agreed with this view, with just over 7% of the economists surveyed agreeing with the president. However, it is worth noting that rate hikes by the Fed appeared as number 5 on the list of risks, with 9% of those surveyed citing slowing global growth as their top concern.
The Journal survey seems to be in alignment with the forecast of major economists on Wall Street for the New Year. Economists at popular financial institutions such as JPMorgan, Bank of America Merrill Lynch, and Goldman Sachs agree that the US GDP would slow in the second half of 2019, with the possibility of the slowdown getting even worse due to the trade war.
The trade war has led to China and the US imposing tariffs goods worth over $360 billion, with the US slapping tariffs on $250 billion of Chinese goods, while the Chinese government has retaliated with duties on $110 billion worth of goods from the US.
The major fear is that the trade war which involves keeping the tariffs, increasing those tariff rates, and even imposing new tariffs will increase the prices of imported goods for consumers and businesses in the United States, consequently slowing investment and consumer spending.
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