The ongoing trade tensions between the US and Canada, highlighted by new reciprocal tariffs from Canada, are contributing to economic uncertainty.
Bloomberg Economics chief US economist Anna Wong joins Catalysts host Madison Mills to discuss how these trade disruptions could weaken US economic activity and slow down discretionary spending. However, Wong notes that the conditions for a recession are not yet fully met.
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
So, we have headlines coming in here that Canada's new reciprocal tariffs are going to begin at 12:01 a.m. on Thursday. Again, this continuation of the tit for tat between the U.S. and Canada. You're looking at a live shot there of a Canadian official speaking about Canada's retaliatory efforts off the back of those increased steel and aluminum tariffs and going back to you on this. I think this is indicative of part of what the market is struggling with right now, that this tit for tat for tariffs. It's unclear where and if it ends. How do you think that that impacts the economy? Do you think that that continues to lead to any slowness that could result in a recession?
Oh, so so, yeah, definitely retaliation by our foreign trade partner will show up as weaker economic activity in the U.S.. For example, um, you know, Canada's retaliation will disproportionately hurt uh U.S. manufacturers. And later in the months, the EU also is about to uh reinstate uh very large tariffs on U.S. bourbon, which will disproportionately hit Kentucky and the district under Mitch McConnell. So I I think that all that will mean softer economic activities. And this is why I expect more pullback in discretionary service spending, which ultimately will be disinflationary. So, in terms of recession, this R word, um one important preconditions for recession is uh we have to see a widening of credit spreads of around 200 basis point. And so far, we are maybe a quarter we've seen maybe less than a quarter of that. And in order for credit spreads to really widen, you need to see more panic in the stock market, bigger sell off in the stock market. Um and I think we are not there yet. So a lot of this recession talk is based on vibes. And in terms of hard data, it's not really there yet.