I do think there will be a recession yes. But within 6 to 18 months, the recession could be over with and growth will come back as the US rebuilds some of its industrial base. US imports and exports will decrease over time.
Note: it is my prediction at 70% (e.g. I think there is 70% that it will happen).
It could be over, but it won't be over, because he can't be trusted, changes position on important issues every night, and this does not create environment welcoming to investors. Nobody sane will commit to longterm investment. No investment, no growth.
> US imports and exports will decrease over time.
So prices will rise and and government expenditures will fall. Where exactly will that growth come from?
I think companies who want to access the large U.S. internal market will have an incentive to have factories in the U.S. That will likely fuel growth. The growth will be coupled with less imports and exports given nationalism and tariffs.
And if it is what the Americans want why not. But as the U.S. take this new direction, let's make sure former allies are treated with respect and given proper notice of the changes so that they can adapt their economies and defense postures.
It usually takes five to ten years to move a factory from one country to another, and it costs an enormous amount of money that mostly will not drive new profit. Costs in the US will be higher also. There is more to consider in moving a factory to the US than market access.
Could work. Or they could just decide to invest elsewhere.
I guess if the economy is in a recession and people spending less it is not the best place to invest. Unless it is for cheap labor but then you'll have problems with export tariffs.
If they invest elsewhere, they will have limited access to the U.S. market—that is Trump’s policy it seems.
If the U.S. has one thing going for it, it’s the strength of its market, characterized by high consumer spending and strong potential for growth. Contrast this with the Japanese consumer market, for instance: in real terms, salaries have not increased over the past 10 years, and consumer spending is below what it was a decade ago. (Note: I love Japan, but this is the reality.) European market is between these extremes I believe. The U.S. market may be significantly more attractive to most companies.
If the high tarriff environment sticks around, including reciprocal tarriffs, the issue is either you produce in the US and have good access to the US and poor access everywhere else, or you produce outside the US and have poor access to the US, and good access to much of everywhere else (depending on things).
The US is a big and important market, and for some things, it would be better to forgo competitiveness in the rest of world market; but for others, rest of world adds up to be more important.
Same line of thinking was used during the Great Depression of 1929, protectionist measures only made everything worse, deepening and extending the recession.
There isnt the slack in the US labor force to rebuild the manufacturing base. Not without significant inflationary pressure. Especially with the hostility towards migaration.
Who will be building, and manning all that newly developed industrial base? You cannot create enough labour in 18 months, it's a very hard fact of reality.
Your labour market has been running at full employment for a while, 4-5% unemployment, there's no leftover hands to help with building up multiple industrial bases. Unless you want massive inflation when all these openings for the rebuilding of USA's industrial base, and need to pay a lot to absorb as much labour as possible to actually happen.
Not even considering in how much risk the investors of this new industrial base will be having to hedge against, who knows when Trump will increase tariffs on their inputs until everything rebuilds internally, financial hedging, oversupplying their warehouses to prepare for shocks, etc. are all quite expensive. Who will pay for it?
Note: it is my prediction at 70% (e.g. I think there is 70% that it will happen).