Trump’s Trade War Could Force Economy Into Recession, Analysts Warn

Economic analysts are growing increasingly worried that the President's trade war could push the world economy into recession, and take the American economy along with it.

Economic analysts are beginning to fear that the trade war that President Trump seems intent on pushing forward with will push the world economy and, in turn, the United States into recession:

Goldman Sachs Group Inc said on Sunday that fears of the U.S.-China trade war leading to a recession are increasing and that Goldman no longer expects a trade deal between the world’s two largest economies before the 2020 U.S. presidential election.

“We expect tariffs targeting the remaining $300bn of US imports from China to go into effect,” the bank said in a note sent to clients.

U.S. President Donald Trump announced on Aug. 1 that he would impose a 10% tariff on a final $300 billion worth of Chinese imports on Sept. 1, prompting China to halt purchases of U.S. agricultural products.

The United States also declared China a currency manipulator. China denies that it has manipulated the yuan for competitive gain.

The year-long trade dispute has revolved around issues such as tariffs, subsidies, technology, intellectual property and cyber security, among others.

Goldman Sachs said it lowered its fourth-quarter U.S. growth forecast by 20 basis points to 1.8% on a larger than expected impact from the developments in the trade tensions.

“Overall, we have increased our estimate of the growth impact of the trade war,” the bank said in the note authored by three of its economists, Jan Hatzius, Alec Phillips and David Mericle.

Along the same line Yahoo Finance reported yesterday that Trump’s tariffs cost American businesses $3.4 billion in June alone:

As President Donald Trump doubles down on tariff threats against China, the price tag of the year-long trade war is climbing for U.S. businesses.

U.S. importers have paid $6 billion in tariffs in June, a 74% jump compared to a year ago, despite a slight decline in the value of imports. And $3.4 billion of that total came from tariffs imposed by President Trump. This is according to research released on Wednesday by the business coalition “Tariffs Hurt the Heartland” in conjunction with The Trade Partnership, a Washington-based trade and economic consulting firm.

The June data highlights the first full month’s impact of Trump raising tariffs on $250 million worth of Chinese goods to 25% from 10% on May 10.

“June was our biggest month yet there in terms of punitive tariffs made,” said Dan Anthony, vice president at The Trade Partnership.

Despite the removal of steel and aluminum tariffs from the 232 Investigation in May, American companies paid about $3.1 billion in tariffs on products subject to Section 301 remedies on China in June, compared to just $411 million in June 2018. Meanwhile, the value of imports from China declined sharply by 36%, as importers look for alternatives in Southeast Asia

Perhaps more significantly, we’re at the point where consumers will start to feel the impact of increased tariffs far more directly:

U.S. importers are legally responsible for paying the tariffs as the goods reach American ports. Some importers say they are able to mitigate the previous 10% tariffs due to the devaluation of the Chinese currency yuan. But with a 25% tariff, they have to pass along some costs, eventually to the consumers. In some cases, Chinese suppliers offer a lower price to stay competitive.

Since the beginning of the trade war in 2018, American taxpayers have paid over $27 billion in extra import tariffs, according to The Trade Partnership’s analysis of U.S. Census Bureau data. And the cost will only pile up from here, as Trump threats to impose 10% tariffs on the rest of $300 billion worth of Chinese products starting September 1. China has hit back by stopping the purchase of U.S. agricultural products.

While the next round of trade talks is scheduled next month, some Wall Street analysts are already predicting no trade deal before the U.S. election in 2020. Should this be the case, businesses and consumers will need to brace for greater costs.

“Each subsequent list has shifted more towards products that everyday Americans might buy, And that’ll really kick in with the tariffs that have been announced for September 1,” said Anthony. “Those are predominantly products that certain individuals buy for themselves at retail as opposed to chemicals or industrial machinery.”

This isn’t the first time that we’ve heard about the negative consequences of the President’s trade policies, of course, and it’s unlikely to be the last. For example, after President Trump raised tariffs on aluminum and steel last year, the price for those products, including from domestic sources unaffected by the tariffs, increased, causing problems for industries that rely on those raw materials to make their products such as the makers of automobiles and large appliances. When China retaliated by imposing tariffs on American goods their retaliation was primarily focused on the agricultural industry, something that made American pork farmers increasingly nervous about their overseas business. In Iowa, it was reported that Chinese retaliation for the tariffs cost soybean farmers $624 million this year alone, with the prospect of larger losses if the retaliation continues or if Chinese companies that buy American soybeans start entering into contracts with growers in places such as Australia and India, which compete with American farmers for the lucrative Chinese market. Additionally, we have also seen that the tariffs have had a negative impact on other American businesses, and has even led an iconic American brand like Harley-Davidson to announce that they are moving some production overseas in response to the retaliatory tariffs imposed by the European Union.  Finally, there is increasing evidence that the trade war has actually opened economic doors for China because it has forced them to look in places other than the United States for things like agricultural imports. If that continues to happen, then the impact on the American economy from the President’s trade war could become more permanent than many realize.

As I’ve noted in the past, the arguments that these tariffs help either American industry or the American economy are nonsense. In the end, higher tariffs end up being paid by American consumers, by American businesses that depend on international trade such as the agriculture industry, and by the businesses that rely on the products that are subject to the tariffs. President Trump’s arguments to the contrary notwithstanding, there is no economic benefit at all to tariffs and a heck of a lot of negative. Despite that, the Trump Administration appears committed to this ill-advised, self-destructive policy.


FILED UNDER: Donald Trump, Economics and Business, International Trade, Politicians, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook


  1. michael reynolds says:

    Trump is apparently caving on some tariffs.

    The Trump administration abruptly offered China—and U.S. consumers—a reprieve from sweeping tariffs that were poised to hit on Sept. 1, sending stocks sharply higher and raising hopes for reviving stalled-out talks on a trade deal.

    The trade talks appeared in jeopardy after the Trump administration threatened Aug. 1 to extend tariffs of 10% to $300 billion in Chinese imports not currently taxed, including many consumer goods for the first time. They would come on top of 25% tariffs already imposed on $250 billion in imports from China.

    The office of the U.S. Trade Representative said Tuesday that it will instead delay the new tariffs on many major categories of items, including smartphones, laptop computers, toys and some other items, until Dec. 15.

    And in exchange China gave us. . .? Right. But by December 15 all the Chinese-made Xmas goodies will have shipped, so Trump just saved Xmas while signaling weakness and rendering any post-Xmas tariff less effective.

    Because he’s a genius, dontcha know?

  2. EddieInCA says:

    Once again Trump has sent markets on a Rollercoaster by, AGAIN, retreating on what he said about tariffs. The tariffs are now being delayed. I wonder how many people are making money shorting the market on any of Trump’s initial tariff comments, then going long the moment he reverses himself. Somebody could’ve made a lot of money the last several months just doing that.

  3. EddieInCA says:

    Lucy (Trump) keeps pulling the football (profits from trade) from Charlie Brown (his base) over and over again, but they’re convinced that next time they’ll really be able to kick the ball.

  4. Daryl and his brother Darryl says:

    @michael reynolds:
    In caving, ibn order to save Christmas shopping, Trump has admitted Americans are paying for the tariffs.
    Too bad his sycophants…Guarneri, Paul, 95 South…aren’t smart enough to figure that out.

  5. Daryl and his brother Darryl says:


    Somebody could’ve made a lot of money the last several months just doing that.

    i’ll bet his greaseball kids are.

  6. Teve says:

    @EddieInCA: yeah the DJIA is up 400 points on Trump’s caving. Good. He needs to cave on the whole stupid thing.

  7. Kit says:


    Lucy (Trump) keeps pulling the football (profits from trade) from Charlie Brown (his base) over and over again, but they’re convinced that next time they’ll really be able to kick the ball.

    Charlie Brown is dancing in the end zone. Lucy’s giving the thumbs up! The score board is fake news.

  8. michael reynolds says:

    FYI Trump is on Twitter warning that Chinese troops are massing on the Hong Kong border. An announcement he follows by telling everyone to ‘stay calm.’

    Who exactly is supposed to stay calm? The demonstrators he’s done nothing to support and may be arrested or shot? Or his trailer trash supporters who could not possibly care less?

  9. SenyorDave says:

    trump will cave piecemeal on the tariffs for the next year. No way that China will give him a deal. Trump always says that any deal has to have a winner and a loser, and China will not lose face, plus now they know that they can hold out longer than Trump. Although they can beat Trump if they want to, I don’t think China wants him for a second term. Their economy will be better off if he is gone. With the exception of Russia and North Korea, I can’t see any country wanting Trump around. He’s a liar, and nobody wants to make a deal with someone whose word means nothing. Kim Jung Un’s word is better than Trump’s.

  10. Teve says:

    @SenyorDave: maybe Chinese hackers can counter Russian hackers and influence the clueless Trumpers toward a smarter choice.

  11. wr says:

    @EddieInCA: “Somebody could’ve made a lot of money the last several months just doing that.”

    Could have made a lot more with a little advance notice of what Trump was going to be doing.

    Love to see Jared and Ivanka’s trade ledger one of these days…

  12. Moosebreath says:


    “With the exception of Russia and North Korea, I can’t see any country wanting Trump around.”

    I’d put all of the states where democracy is in decline in that category. The list would include Hungary, Poland, Turkey and Philippines. I also think Saudi Arabia and Israel would prefer Trump to any possible Democratic successor.

  13. Just nutha ignint cracker says:

    @SenyorDave: Sure. But with Kim Jong un, everyone not named Trump starts from “what he says isn’t what he actually means” to begin with. You can’t discount that kind of an advantage and how it helps make his word more reliable.

  14. An Interested Party says:

    The list would include Hungary, Poland, Turkey and Philippines. I also think Saudi Arabia and Israel would prefer Trump to any possible Democratic successor.

    We know Russian hackers interfered with the 2016 elections…I wonder how hackers from how many other countries will try to interfere with the 2020 elections…

  15. inhumans99 says:

    @Daryl and his brother Darryl:

    I have my suspicions that they are smart enough to figure it out but would rather eat ground up glass before admitting that to anyone of us on this site.

    Also, as Michael has pointed out if President Trump believes, and I mean really believes that we should accept some short term pain for some long-term gain (i.e., the tariffs will lead to some countries finally deciding to play ball with his administration not too much further down the road) than he really needs to stick to his guns and apply the tariffs, ignoring that there will be consumer pain at the cash register this holiday season.

    I would respect our President just a wee bit more (maybe even a lot more, if I am being honest) if he set out to do something and actually followed-through with it.

    Again, the usual suspects will not admit it but I bet it drives folks like Guarneri, and James P bonkers when our President caves without getting anything in return for his backing down.