Pressure on horizon for US economy

There is a lot of talk about the strength of the US economy, but there are always pressures on the horizon. Paul Traub, senior business economist for the Federal Reserve Bank of Chicago – Detroit Branch, provided some insight into the story behind the headlines and took a look into the future.

“Overall the US economy is moving along fairly well, but consumer confidence has declined,” he told delegates at MERA’s Sustainable Manufacturing Conference Fall 2019. He explained that consumers are getting worried about why their income is not growing and what tariffs are going to do to the economy.

“The government is spending more and more, but the tax cuts mean there is less money to spend,” he said. “If this spending level keeps up, by 2029 the budget deficit, as a percentage of GDP will be comparable to what it was during World War Two.”

Commenting on tariffs, Traub said: “I do not care what anybody is saying regarding tariffs: China is not paying for them and Mexico is not going to pay for them. We are going to pay for them.” This means prices of goods will rise especially for certain product segments like furniture, appliances, auto parts, bedding and floor coverings. “This will trickle into other areas. We are going to have the most tariffs of any developed country in the world.”

One of the unintended consequences of a trade war is the slowing of the global economy. “No one is predicting a recession, but they are predicting a slowdown,” Traub concluded.