Morgan Stanley: Escalating trade war could bring recession in 6 to 9 months

If the US President Trump delivers on his most recent promise to raise tariffs on Chinese goods and China responds, the global economy will be in recession in the next 6 to 9 months, Morgan Stanley economists wrote in a research note sent to investors Sunday evening, according to Newsweek.

On Friday, President Trump tweeted that the US will raise tariffs on $250 billion worth of China’s goods from 25% to 30% starting and impose a 15 % levy on the remaining $300 billion of goods.

Morgan Stanley economists fear the latest escalation could finally push the global economy off the edge and into recession.

Key quotes

“Friday’s escalation of tariffs between the U.S. and China suggests they’ve not moved any closer on the key negotiation points that have separated them since May 5.”

“Neither side sees the benefit to cooperating as better than hanging tough… We expect that tensions will continue to escalate at least until the costs of doing so are too big to ignore.”

“Continued trade tensions, combined with reactive monetary and fiscal policy, mean that the risk of non-linear tightening in financial conditions, triggering a global recession, is high and rising,”