US-China Trade War Could Lead To A Recession By 2020

US-China Trade War Could Lead To A Recession By 2020

Take a trade war with China, mix in frosty economic relations with Canada and Europe, as already is the case, add in Federal Reserve rate hikes and here’s what you get: A recession by 2020.

That’s what Ronald Temple, Head of US equity for Lazard Asset Management, believes.

And we have equal reasons to believe he is correct.

Temple said, “A recession in the near-term is not inevitable, but the risk of one by 2020 has increased substantially in the past few months. Take trade wars off the table and that significantly reduces the risk of recession.”

But it’s likely that the United States is overestimating how much China needs to import from America, Temple also said.

The one thing Trump isn’t factoring into this situation is that China has more options than it once did. His administration’s hardline stance makes a prolonged stalemate more likely. And then, recession.

Temple went on, “The days where we could have a trade agreement where China just buys more US stuff are probably behind us. It’s difficult to find how China and the United States come to a common middle ground on trade.”

Temple said that the United States — as well as the rest of the world for that matter — do have legitimate grievances with China, particularly when it comes to China’s intellectual property theft and stringent restrictions on foreign companies doing business there.

To have a positive outcome from the trade war, to avoid backlashes like recession, something has to give.

Temple believes the best and most logical move is to foment a unified stance.

The United States can deal most effectively with China by working with Europe, Canada, Australia, Japan and the rest of the developed world on a unified stance, Temple said.

“If it’s China versus everyone then China has to figure out ways to be more accommodative. But we’ve fragmented a potential coalition instead of building one.”

 

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