Trade war: Rising costs and possible recession?

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

Trade war to hurt corporate profits, growth and consumers

• New round of tariffs on Sept 1 will raise cost of trade war to $80 billion
• US, China likely to share cost equally; Chinese growth to slow by 0.33%-0.5%
• US corporate profits could fall by 2%-2.5%, consumer prices could rise slightly
• Sharper declines in business confidence, investments could worsen impact

Will the trade war cause a recession?

• July rate cut absolves Fed of a policy mistake causing a recession
• Escalating US trade war with China could instead become the target
• US business investments have slowed, companies diversifying supply chains
• US economic expansion likely to slow down but no recession in sight