Trump is 'dead wrong' in claiming the trade war hasn't damaged the US economy, says Mark Zandi

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    President Donald Trump speaks to members of the press prior to his departure on Marine One from the South Lawn of the White House in Washington, DC., on Friday, August 9, 2019.

    Cheriss May | NurPhoto | Getty Images

    U.S. President Donald Trump recently claimed Washington’s trade war with China has had little impact on the American economy so far. A widely followed economist said Thursday that the president is “dead wrong.”

    Trump said in a Wednesday Twitter post that the U.S. is “winning, big, time against China,” adding that “prices to us have not gone up, and in some cases, have come down.”

    However, according to Mark Zandi, chief economist at Moody’s Analytics and a frequent critic of the Republican president, the “economic costs are mounting” in the U.S.

    “To argue that this isn’t doing economic damage is just wrong,” Zandi told CNBC’s “Squawk Box” on Thursday.

    If Trump were to follow through on his outstanding tariff threats, Zandi said, it would incur a cost of $100 billion for American businesses and consumers in the coming year.

    “That’s half a percent of (gross domestic product), that’s about half the tax cut that Americans got last year,” the economist said. “That’s very significant.”

    To argue that this isn’t doing economic damage is just wrong

    Mark Zandi

    chief economist at Moody’s Analytics

    At some point, Zandi said, Trump is likely to realize that the hard-line stance on China in the trade war “isn’t working” and so the president will desire a “face-saving way” out of the situation.

    “The question is, will (Chinese) President Xi (Jinping) give him the way out? ” Zandi asked.

    “If I were President Xi, I’d be sitting here thinking: ‘Well, you know, there’s some odds this president is not gonna be president … in a year and a half and I may be dealing with somebody else.””

    In a protracted trade fight that has lasted for more than a year, the U.S. and China have already slapped tariffs on billions of dollars worth of each other’s goods, rattling markets across the globe and raising concerns about the outlook for the global economy.

    ‘We’re almost there’

    The tariff battle has already taken a toll on business sentiment, Zandi said: “All over the globe … business investment, (capital expenditure), has flat lined since the trade war began about a year ago.”

    That negative hit is likely to be seen next in the jobs sector, he projected.

    “It’s starting to show up in places like manufacturing, transportation, distribution,” he said. “If it metastasizes, and other businesses and other sectors of the economy start to pull back on hiring and unemployment starts to rise, well that’s recession.”

    Drawing a comparison between 2018 jobs figures and those of 2019 so far, the economist said: “Last year, average monthly job growth in the United States was close to 225,000 … in the last three to six months, cutting through the volatility of the data, job growth is 140,000 per month.”

    If that figure slips below 100,000 per month, he added: “Unemployment will start to rise.”

    Zandi said the U.S. stood on the brink: “We’re almost there, we’re headed in that direction.”

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