A prolonged global trade war will add fuel to a nasty global recession.
But look at the bright side. It's a surefire way to reduce imports more than exports.
The bigger the recession, the bigger Trump's alleged "win".
Mike "Mish" Shedlock
The 4% GDP growth is just driving the Trump-haters insane.
Consumer goods are mostly produced overseas. It's a fact that if the economy grows, the deficit will grow, and if the economy shrinks, the deficit will shrink. The trade deficit is also being hurt by misguided tariffs targeting manufacturing inputs, rather than manufactured goods. The result is to put domestic manufacturers who use steel, aluminum, or chips in their products at a disadvantage to foreign manufacturers.
Mish, you know better than almost anyone else that there will be a recession some day. We all know that the elapsed time since the last recession has been abnormally long. We all should know that excessive debt -- especially governmental debt which was not used to build productive assets to generate the income to repay the debt -- will eventually cause a day of reckoning.
And everyone with a brain knows that excessive trade deficits are ultimately unsustainable. If anyone other than President Trump has a credible plan for reducing the trade deficit, he surely has done a great job of keeping it secret.
Parabolic government spending is holding many economic sectors up. It's not a trump economy, it's a consumer economy, very service based as we see more and more people going into business for themselves. Low interest rates allow easy borrowing, which leverages spending, same for equities, when you can borrow at lower price than you can earn in equities well then equities will continue to go up as the easy or should I say free money train ride continues (mostly for the rich of course). Trade war may serve to isolate America, possibly even damage it's world reserve currency status.
How much imported is bought on borrowed money, often impoverishing the borrow, putting the lender at risk and leading to nationwide systemic problems?
Increase interest rates to stem the building problems = recession.
To solve the problem choose your poison. Tariffs into Government tax coffers or raise rates, or both.