Moody’s Analytics Chief Economist Mark Zandi issued a dire warning about the effects of the trade war. Zandi says there will be a global recession if the United States and China cannot come to some kind of a deal in the ongoing trade war currently thrashing our economy.
The economist also said that the probability of a no-deal Brexit is “uncomfortably high” and that’s a risk that could send Europe into a recession. With all signs pointing to a recession, it looks like once it happens, it’ll be global. With debts worldwide at all-time highs and the trade war hitting Americans smack in their wallets, it isn’t a surprise a recession loom.
Zandi says his prediction was based on current “extraordinarily fragile” business sentiment that was a result of a protracted tariff fight between the two largest economies in the world that started last year. Although the U.S. and China are now negotiating a deal, with representatives from both countries expected to meet in Washington this week, that does not mean a deal will be reached and the tariffs will be lifted.
“Business sentiment across the globe is extraordinarily fragile,” the economist told CNBC’s “Squawk Box” on Tuesday. He added that a survey conducted by Moody’s recently showed that confidence among companies was at its weakest since the end of the financial crisis a decade ago. “Businesses are really on edge and I think it’s because of this trade war. And if it’s not settled in the next couple (to) three months, I think a global recession is highly likely,” said Zandi.
The trade war has already had a disastrous effect on America’s farmers, ushering in what could turn into a food crisis. Farmers are filing for bankruptcy at epic levels and the prices of other goods and services have spiked. Limiting trade is never positive for the economy and the political posturing has had an unnecessary negative impact on an already unstable economy.
Signs of slower growth in several major European economies are already threatening countries globally, noted Frederic Neumann, managing director and co-head of Asian economics research at HSBC.
It’s still important to note that the risk of recession is still there even if the U.S. and China can come to some kind of trade agreement. A deal may kick the proverbial can down the road, but it won’t solve the problem of Americans debt load, overspending, and the undercurrents many tend to overlook.