The forecasters are unanimous: the trade war between the United States and China is bad for the economy – according to a Reuters poll

BENGALURU (Reuters) – The US economy is expected to experience sustained growth in the coming quarters, but to slow to 2 percent by the end of 2019, according to observers polled by Reuters.

In a sign that the trade war is not expected to end soon, President Donald Trump on Monday imposed a 10% tariff on Chinese imports of about $ 200 billion and additional tariffs of about $ 267 billion. of dollars.

Meanwhile, the US economy is expected to grow at an annualized pace of 3.1% this quarter, up slightly from the 3.0% forecast last month, followed by 2.8% in the fourth quarter, according to the latest survey.

The 70 economists who responded to another survey question from September 12 to 19 said that the trade conflict between the world's two largest economies is detrimental to US growth, which risks jeopardizing optimistic prospects in the near term.

"Absolutely – it's a bad policy and certainly a negative one. But it's not enough to throw us into a recession unless it translates into a big negative impact on trust and sentiment, "said Jim O'Sullivan, chief economist at High Frequency Economics.

"It's a bit like – we have nothing to fear, but we should," O'Sullivan said, trying to describe the delicate situation.

A decade after the collapse of the US investment bank Lehman Brothers, triggering a devastating financial crisis, the economic recovery in the United States has been unusually long.

Growth is based on solid foundations, at least in the short term, fueled by aggressive tax cuts passed at the end of last year. A strong labor market underpins the Federal Reserve's plans to raise interest rates this year and next.

The dollar has also surged this year and Wall Street is trading at record levels as many emerging market assets have fallen and fallen.

"The trigger point for pain is really hard to predict – the stock market has a lot of momentum and optimism, but if we continue to raise rates, it will lead to a correction," said Ethan Harris, head of savings at BofAML.

"We feel that we are in a period of transition where the trade war becomes a minor irritant to a concern and eventually it will begin to have an impact on the investment plans."

The latest Reuters consensus on US growth has edged up for several quarters in the coming year, but still expects a slowdown to 2.0% in the last quarter of 2019, less than half of the last announced rate of 4 , 2%.

The median probability of a recession in the following year was only 15%. But it is increasing to 35% over the next two years, with the most pessimistic call to 75%.

"Despite tariffs, emerging market fluctuations and the political drama in Washington, the US economy does not seem to be able to be halted in the short term. Boosted by fiscal stimulus, economic growth is expected to be stronger than the G7 in 2018, "said James Orlando, Senior Economist at TD Securities.

"(But) as the rush for fiscal sugar fades, economic growth is expected to moderate … risks related to trade tensions and uncertainty surrounding fiscal policy darken prospects for longer term."

The Trump administration's aggressive tax cuts have already pushed the government's budget deficit by one-third so far this year compared to the same period last year.

Inflation expectations and the Fed's interest rate path have hardly changed since last month.

The 113 economists surveyed predict that the Fed will raise its rates when it meets from 25 to 26 September. It is expected that it will be the same with another before the end of this year, bringing the federal funds rate to 2.25-2.50%.

But the medians showed only two increases next year, against three increases based on the Fed's own intrigues.

When asked what could bring the next recession closer, about three-fifths of the 68 respondents said the Fed's rate hike was more worrying than expected.

More than 20 percent of those polled said the trade war was the main reason why the next US economic slowdown could be bridged. The remaining responses were varied, including a significant stock market correction and a further rise in the dollar.

(Other poll articles on Reuters' long-term economic outlook 🙂