The majority of business economists in the United States expect a recession to begin by the end of 2020, around the time of the next presidential election, according to a recent poll of 51 forecasters by the National Association for Business Economics. A plurality of economists said the recession will be triggered by trade policy.
About 10 percent of the economists surveyed believe a recession will begin next year in 2019, while 56 percent believe it will start in 2020. Another 36 percent said they don't expect a serious economic decline until at least 2021.
"Trade issues are clearly influencing panelists' views," David Altig, Federal Reserve Bank of Atlanta research director and NABE's survey chair, said in a statement.
President Donald Trump has taken on the task of rewriting major trade policy with Europe, Asia, Mexico and Canada. The changes have led to a series of escalating trade wars with countries like China.
On Monday, the president announced that he would replace NAFTA with a new trade agreement between Canada, the U.S. and Mexico, known as the USMCA. That agreement could clear the way to up the ante in his ongoing fight with China.
"Several months ago the U.S. had a multi-pronged attack on its trading partners," Dec Mullarkey, managing director for Sun Life Investment Management which oversees $47 billion in assets, told Bloomberg. "Now the U.S. can zero in on China."
The U.S. has imposed three rounds of tariffs on China so far, totaling $250 billion worth of goods. China retaliated recently with tariffs on $60 billion of U.S. goods. President Trump indicated Monday that another round may be coming soon.
Trump also said on Monday that he wasn't willing to discuss negotiations with China yet. "It's too early to talk with China," he said from the White House Rose Garden. "[We] Can't talk now, because they're not ready, because they've been ripping us for so many years. It doesn't happen that quickly."
But David Wessel, director of The Hutchins Center on Fiscal and Monetary Policy and senior fellow at the Brookings Institute, has argued that the Trump administration's policy towards China could lead to devastating economic impacts and even physical war. "We know from history that when a rising economic power challenges a hegemon like the United States, economic, political, diplomatic, even military conflicts are likely and can escalate rapidly, sometimes by miscalculation," he wrote in an August analysis for Brookings.
The effects of trade wars are felt beyond imports and exports, said Wessel. Eventually they hurt the stock market. "Say stock market investors decide one day that all this is going badly. Sentiment shifts abruptly; stocks plunge," he wrote.
Trump has long listed the thriving economy as his crowning presidential achievement. "Our economy is booming like never before. Jobless claims are at a 50-year low. The stock market is at an all-time high. Think of that—over 50 percent since my election," he said Monday. A recession before the election in 2020 would serve as a big blow to the president's reelection campaign.
The U.S. is currently in its second longest economic expansion, and economists are positive that the growth will extend to at least next year. With no signs of an imminent downturn, the Federal Reserve just upgraded its growth outlook for the next two years.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Nicole Goodkind is a political reporter with a focus on Congress. She previously worked as a reporter for Yahoo Finance, ... Read more
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