The anatomy of the coming recession

The anatomy of the coming recession
Donald Trump with Chinese president Xi Jinping in Beijing. Pic: Getty

The next recession is likely to be caused by permanent negative supply shocks from the Sino-American trade and technology war. And trying to undo the damage through never-ending monetary and fiscal stimulus will not be an option

There are three negative supply shocks that could trigger a global recession by 2020. All of them reflect political factors affecting international relations, two involve China, and the United States is at the centre of each. Moreover, none of them is amenable to the traditional tools of countercyclical macroeconomic policy.

The first potential shock stems from the Sino-American trade and currency war, which escalated earlier this month when US president Donald Trump’s administration threatened additional...

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