Trump ‘Dead Wrong’ In Claim US Isn’t Suffering From Trade War Vs. China

G20 leaders summit in Osaka
US president Donald Trump meets with Chinese president Xi Jinping at the G20 Leaders' Summit. The US and China are still at it with Washington threatening a new round of tariffs. (Photo: REUTERS/Kevin Lamarque)

President Donald Trump's patently false claim his trade war against China isn't damaging the U.S. economy -- and that China is the only one being hurt -- is untrue, according to a respected American economist.

Mark Zandi, the chief economist at Moody's Analytics and a vocal critic of Trump and his trade war, asserts Trump is "dead wrong" when he claims his trade war with China is having little impact on the American economy.

Zandi, whose economic analyses have influenced legislation by the U.S. Congress, emphasized the negative effects of Trump's trade war are "starting to show up in places like manufacturing, transportation, distribution."

Zandi pointed out the "economic costs (of Trump's trade war) are mounting" in the U.S.

"To argue that this isn't doing economic damage is just wrong," said Zandi on CNBC's "Squawk Box" Thursday.

If Trump were to follow through on his two tariff threats against China now in abeyance, Zandi said these new Trump tariffs will trigger $100 billion in losses for American businesses and consumers in 2020.

"That's half a percent of (gross domestic product), that's about half the tax cut that Americans got last year," said Zandi. "That's very significant."

Zandi said that somewhere along the line, Trump might realize his anti-China trade war "isn't working." This will mean Trump will have to find a "face-saving way" out of the mess he created in the first place.

"The question is, will (Chinese) President Xi (Jinping) give him the way out?" asked Zandi.

"If I were President Xi, I'd be sitting here thinking: 'Well, you know, there's some odds this president is not gonna be president ... in a year and a half and I may be dealing with somebody else."?

Trump's year-long tariff war against China and the world is taking a toll on U.S. business sentiment.

"All over the globe ... business investment, (capital expenditure), has flat lined since the trade war began about a year ago," he noted.

The drop in CAPEX will then result in job losses as firms cut back on hiring, Zandi projected. A recession then becomes a real possibility.

"If it metastasizes, and other businesses and other sectors of the economy start to pull back on hiring and unemployment starts to rise, well that's recession."

Comparing the 2018 jobs figures and those of 2019 thus far, Zandi said the average monthly job growth in the United States in 2018 was close to 225,000. In the last three to six months, however, job growth stands at 140,000 per month.

If this figure slips below 100,000 per month, "Unemployment will start to rise."

Zandi said the U.S. stands on the brink of this unwanted event.

"We're almost there. We're headed in that direction," he said.

In early July, Zandi said Trump's trade war against China was starting to inflict real damage on the U.S. economy. He said investors can ignore the dire economic warning signals for now, but they'll pay a price for refusing to heed the signs.

"Growth is slowing because of the trade war and the uncertainty created by that," Zandi told Yahoo Finance's "The First Trade."

"I think it will become more evident going forward."

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