The U.S. economy is heading into 2020 at a pace of steady, sustained growth after a series of interest rate cuts and the apparent resolution of two trade-related threats mostly eliminated the risk of a recession.
This marks a dramatic turnaround in momentum since August, when some forecasters predicted a 50 percent chance of a downturn starting by the end of next year.
Many economists credit the Federal Reserve’s recent interest rate reductions and the slightly improved trade picture for propelling the stock market to fresh record highs and causing forecasters to bump up their predictions for how long the economy can keep growing and adding jobs without stumbling.
President Trump secured Democrats’ sign-off last week on a trade deal with Mexico and Canada that will keep most goods traded between the three nations tariff-free. He also reached a limited trade agreement with China that scrapped hefty tariffs set to take effect over the weekend in exchange for China agreeing to buy about $200 billion more in U.S. goods over the next two years.
Trump promised, have lessened one of the biggest drags on the U.S. economy: uncertainty. While some industries still face significant tariffs and final details remain in flux, business leaders say at least they know what the situation is likely to be in 2020, offering more clarity than they have had since Trump’s trade war commenced nearly two years ago.
“Tariffs will be much more stable for quite a while,” Larry Kudlow, Trump’s top economic adviser, told The Washington Post. “Some of the obstacles to growth, including the Fed and trade uncertainties, are being removed, and that will have a powerful positive impact on the economy.”
U.S. Trade Representative Robert E. Lighthizer said Sunday that some of the larger-scale structural changes the White House wants China to make could take “years” to accomplish, reinforcing the belief that the White House could scale back some of its adversarial tactics next year as Trump nears his reelection bid.
“The risk of a trade-war-induced recession — which we never thought was high — has been materially reduced,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said Sunday, in a note to clients.
Kudlow predicts 3 percent economic growth next year, a pace that Trump promised voters but that has not been reached since 2005 and almost no forecasters outside the White House say is feasible.
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The U.S. economy is heading into 2020 at a pace of steady, sustained growth after a series of interest rate cuts and the apparent resolution of two trade-related threats mostly eliminated the risk of a recession. This marks a dramatic turnaround.
According to the latest CNBC Invest in You survey, two-thirds of respondents think one is coming. Especially if they’re Democrats or younger people. More than two-thirds of respondents said they believe the economy is going to weaken in 2020.
The underlying cause of the summer surge in recession fears was a trade war between the U.S. and China that seemed locked in a hopeless cycle of escalation; a major slump in the European economy; and manufacturing indexes in free fall.