US economy set to slow from here on, damaged by trade war

BENGALURU: US economic growth will slow steadily over the coming quarters after touching a four-year high in April-June, according to a Reuters poll of economists who expect President Donald Trump’s trade war to inflict damage.
Boosted in part by a $1.5 trillion tax cut package passed late last year, the US economy expanded at an annualised rate of 4.1 per cent in the April-June quarter, its strongest performance in nearly four years.
But the latest poll of over 100 economists taken August 13-21 showed the US economy will lose momentum over the coming quarters to grow at less than half that rate by the end of next year. In the current quarter, the US economy was forecast to grow 3 per cent and then 2.7 per cent in the next, a slight upgrade from the previous poll.
But the short-term boost to growth from those enormous tax cuts was expected to wane. Economists trimmed their growth projections across most quarters next year leaving the outlook broadly unchanged and vulnerable to the trade spat with China.
“The trade measures taken by the US so far and the retaliation by foreign governments will probably slow down the economy only marginally,” noted Philip Marey, senior US strategist at Rabobank.
“However, that could change in the case of a global trade war in which a range of foreign countries take protectionist measures aimed at the US, which is after all the party that is trying to change the status quo.”
Nearly two-thirds of 56 economists who answered an extra question said they have considered a damaging impact from Trump’s expanding trade war in their US growth predictions. This was in nearly identical proportion to a poll of economists covering the euro zone published on Wednesday.
The remaining 20 said the trade spat has had no influence on their forecasts, underscoring the downside risk to the outlook if trade tensions deepen.
“At this time, with what we know and believe will occur, we acknowledge that risk to the outlook is to the downside with the trade disputes. That said, we have not substantially lowered our US GDP growth outlook. Further deterioration and eventual performance could certainly change our outlook, however,” noted Sam Bullard, senior economist at Wells Fargo.
While Trump has said these trade tariffs will benefit the US economy, no economist polled by Reuters shared that view.
All the tariffs imposed and the retaliatory measures until now have been largely confined to Chinese industrial machinery, electronic components and other intermediate goods and has had only a limited impact on the US economy. — Reuters