As the US-China trade war intensifies, economists warn that the economic consequences are becoming increasingly dire, with recession fears mounting and global markets experiencing a rollercoaster week.
The trade war between the US and China is intensifying, with Beijing raising its tariffs on US products to 125% and accusing President Trump of ‘unilateral bullying and coercion‘. As the world watches, economists warn that the economic consequences are becoming increasingly dire.
The US-China trade war began in 2018, with the Trump administration imposing tariffs on Chinese goods worth $50 billion.
China retaliated with its own tariffs on US goods.
The conflict escalated, with both countries imposing additional tariffs and restrictions.
The US accused China of unfair trade practices, including intellectual property theft and forced technology transfer.
China denied these allegations, claiming the US was seeking to contain its economic rise.
The trade war has had significant impacts on global markets, leading to increased uncertainty and volatility.
The Impact on Global Markets
Global markets have experienced a rollercoaster week, with the S&P 500 rising sharply after an extraordinarily volatile period. However, despite this surge, many experts remain unconvinced, warning of continued turbulence and even recession. The Dow Jones industrial average gained 1.6% in New York, while the FTSE 100 rose 0.6%.
Consumer Expectations on the Rise
A closely watched economic survey revealed that US consumer expectations for price growth had soared to a four-decade high. Respondents indicated they were bracing for prices to rise by 6.7% over the coming year – the survey’s highest year-ahead inflation expectation reading since 1981.
The White House Response
The White House maintains that the US economy is on the verge of a ‘golden age‘, with dozens of countries scrambling to make deals. Press Secretary Karoline Leavitt claimed, ‘There is great optimism in this economy… Trust in President Trump. He knows what he’s doing‘. However, many economists remain skeptical, warning that consumer confidence has dropped 11% and that the world’s largest economy is facing considerable turbulence.
The Recession Fears
Despite the White House‘s assurances, recession fears are mounting. Larry Fink, CEO of BlackRock, warned that ‘we’re very close, if not in, a recession now‘. Jamie Dimon, CEO of JPMorgan Chase, echoed this sentiment, stating that the world is facing ‘considerable turbulence‘.
A recession is a period of economic decline, typically defined as a decline in GDP for two or more consecutive quarters.
Rising debt levels, inflation, and stagnant wages are common indicators of impending 'recession fears'.
Global events, such as trade wars and natural disasters, can also contribute to economic uncertainty.
According to the National Bureau of Economic Research, the US experienced 11 recessions between 1945 and 2020.
The US Consumer Sentiment
US consumer sentiment has dropped to its lowest level since the Covid-19 pandemic – and the second-lowest on record. Expectations for inflation have surged, with respondents bracing for prices to rise by 6.7% over the coming year.
US consumer sentiment refers to the overall attitude and feelings of American consumers towards the economy, their personal financial situations, and purchasing decisions.
The University of Michigan's Survey Research Center conducts a monthly survey to gauge consumer sentiment, which is considered a leading indicator of economic activity.
A reading above 100 indicates optimism, while below 100 suggests pessimism.
In recent years, US consumer sentiment has been influenced by factors such as low unemployment rates, rising wages, and the COVID-19 pandemic.
Tesla’s Response to Tariffs
Tesla, a manufacturer run by Trump‘s close ally Elon Musk, has stopped taking orders in China for two models previously imported from the US. The rapid escalation of the trade war between the US and China has made goods trade between the two countries prohibitively expensive, making cars imported from the US much less attractive in China.
UK Economists’ Warning
Economists in the UK have warned that stronger-than-expected growth in February is likely to prove short-lived as the impact of Trump‘s trade war is felt throughout the global economy.
- theguardian.com | Trump insists tariff war is ‘doing really well’ as recession fears mount
