The chances of a recession in the next year have risen to about a third, in large part because of President Trump’s trade war, according to a Bank of America analysis.
“Our official model has the probability of a recession over the next 12 months only pegged at about 20 percent, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance,” Bank of America wrote in a Friday analysis.
{mosads}”Our model likely does not fully capture the threat of US-China trade tensions spiraling into a more severe trade war, which we view as the biggest downside risk for the US economy,” the note said.
Trump’s trade war with China ramped up in recent weeks, as Trump threatened to impose new 10 percent tariffs on $300 billion of Chinese imports, and China retaliated by weakening its currency and further cutting off purchases of U.S. agriculture.
The analysis said chances of a recession might be even worse if the trade war continues escalating.
A recession could have serious implications for the 2020 presidential election. A strong economy is one of the best predictors of a president’s reelection chances.
There were other signs of concern as well.
Unemployment is low, but other indicators such as auto sales, industrial production and aggregate hours worked, were “near levels consistent at the start of previous recessions.”