Economists warn of U.S. economic slowdown over tariffs

World
Europe

02:14

Washington's tariffs and trade protectionist policies could cost the American economy serious money. Applied economists among a raft of international banks and other advisory bodies are warning of a slowdown in the U.S. economy.

A report issued by National Association for Business Economics said it is expecting the U.S. economy to lose steam in 2019. The report estimated a 15 percent chance of recession this year with the probability of contraction rising to a staggering 60 percent by the end of 2020.

The escalating trade disputes raised concerns in terms of the trade tariffs applied on Chinese consumer goods. Gregory Daco, economist from Oxford Economics said once the tariffs are applied to all Chinese imports, we will see much larger effects on the U.S. economy.

Economists said ultimately it's the American consumer, and especially low-income households, who will bear the burden of U.S. tariffs on Chinese goods. With consumption accounting for two-thirds of the American economy, levies at the border are particularly worrisome.

Tariffs may not be the only storm clouds looming over the United States. The fading stimulative effects of tax cuts and weakening investment are also casting their shadows over the world's largest economy. That's prompting investors to race into safe-haven assets such as U.S. Treasuries.

If the business is pulling back on investments, deciding to delay the investment plans, then it leads to a reduction in activity and a reduction in GDP growth, said Daco.

A slew of global banks and advisory bodies have cut their forecasts for U.S. economic growth. J.P. Morgan Chase slashed its second quarter forecast for U.S. economic growth by 1.25 percentage points to one percent. Meanwhile, Morgan Stanley said a global recession could occur in three quarters if Washington escalates its trade war.