Morgan Stanley Is Predicting U.S. Recession In 3 Quarters. Here’s Why

Kevin Mwanza
Written by Kevin Mwanza
Morgan Stanley
U.S. investment bank Morgan Stanley is predicting a global recession by the end of the year. By Autumn Keiko

Morgan Stanley predicts a global recession by the end of 2019, with the global economy expected to be dragged down by trade tension between the U.S. and China, according to a research report released on Aug. 5.

The report cited the lack of progress on the U.S.-China trade talks and Washington, D.C. threatening to impose new tariff barriers for Chinese imports for the next four to six months.

President Donald Trump unexpectedly announced that the U.S would add a 10 percent levy on more than $300 billion worth of Chinese imports which were not previously taxed.

“Trade tensions have escalated again, with the U.S. announcing on Aug. 1 that it would impose 10 percent tariffs on the remaining $300bn imports from China, effective Sep. 1. China has also indicated that it would take countermeasures in response to this latest escalation,” Morgan Stanley chief economist Chetan Ahya wrote in the note.

Trump has since backed away from this new aggression, delaying some new tariffs on consumer goods that were set to take effect on Sept. 1. This is seen as a temporary reprieve and suggests some anxiety in the White House about political fallout heading into Trump’s re-election campaign, Financial Times reported.

“The previous rounds of escalation in trade tensions have already had a pronounced impact on global growth,” according to Morgan Stanley.

The new round of tariffs, if implemented, could drag the global economy to a seven-year low of 2.8 percent growth rate by the end of this year and keep it there in the coming year.

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China devalued the yuan against the dollar to the weakest it has been since December, Reuters reported. The Chinese central bank, however, said the move was not made in retaliation to Trump’s additional levies.