NEW YORK: Last summer, my colleague Brunello Rosa and I identified ten potential downside risks that could trigger a US and global recession in 2020.HIGHER RISKS FROM THE US ECONOMY
One such disruption could come from US President Donald Trump, who may be tempted to create a foreign-policy crisis with a country like Iran. That might bolster his domestic poll numbers, but it could also trigger an oil shock.Beyond the US, the fragility of growth in debt-ridden China and some other emerging markets remains a concern, as do economic, policy, financial, and political risks in Europe.
Looking ahead, the US Fed and other major central banks are more likely to cut rates to manage various shocks to the global economy. In Europe and Japan, central banks are already in negative-rate territory, and will face limits on how much further below the zero bound they can go.And with bloated balance sheets from successive rounds of quantitative easing, central banks would face similar constraints if they were to return to large-scale asset purchases.
The Trump administration could decide to extend tariffs to the US$300 billion worth of Chinese exports not yet affected. Or prohibiting Huawei and other Chinese firms from using US components could trigger a full-scale process of de-globalisation, as companies scramble to secure their supply chains.
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