President Donald Trump's unresolved trade war with China is seriously damaging the American economy and, unless a deal is made soon between Washington and Beijing, the risks of recession will substantially increase, a top economist said.
Trump has said a "phase one" agreement with China on the various trade issues is nearly complete.
But until anything is signed by Trump or his Chinese counterpart, President Xi Jinping, tariffs on hundreds of billions of dollars in goods traded between the two will remain.
Mark Zandi, chief economist at financial consultancy Moody's Analytics, warned about the trade war's damaging economic impact during his appearance on MSNBC's All In With Chris Hayes show Wednesday night.
"If you roll this back to a year ago, we were on track to seeing a very strong economy, lower unemployment, wage growth was picking up, particularly at the low end—of course, minimum wage hikes really did help there," Zandi said.
"But then we had the trade war. The trade war has done very serious damage to the economy and, in fact, if the president decides to continue to pursue the trade war, recession risks will rise.
"I think [Trump] is connecting the dots between the trade war, the economy, and his re-election. He'll probably figure out some way to come to some kind of face-saving arrangement with the Chinese.
"But if he doesn't, then the economy is really going to struggle and recession risks are going to be very high. We were nearly there. We just got side-tracked by really bad economic policy."
Zandi also warned that the headline economic data showing the likes of low unemployment, robust GDP growth, and stable inflation were masking a different reality for ordinary Americans who are struggling to get by.
He pointed to a recent survey by the Federal Reserve, which found that four in ten Americans could not find $400 to cover an emergency expense and that many would need to borrow money to do so. Others simply would not be able to cover the expense at all.
"I think that makes the point very strongly that despite the headline good economic news, it really has not filtered down yet to many, many working-class Americans," Zandi said.
On Tuesday, Trump suggested to reporters in the White House that a deal with China is imminent, although the current Hong Kong issue could be a blockade to any agreement.
"I have a very good relationship with President Xi. We're in the final throes of a very important deal, I guess you could say one of the most important deals in trade ever. It's going very well," Trump said.
The following chart was provided by Statista.
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