Investor Steve Eisman has expressed concerns that the current tariff environment could lead the global economy into a recession if a trade war occurs. Eisman, known for his accurate prediction of the 2008 financial crisis, has highlighted that the ongoing tariff negotiations, particularly between the United States and the European Union, are a significant risk to the markets. He pointed out that the situation is precarious, likening it to the buildup to World War I, where unintended consequences of international agreements led to conflict.
Eisman emphasized that the tariffs imposed by President Donald Trump could put the global economy in jeopardy if they escalate into a trade war. He noted that while agreements with countries like China and the UK have eased some tensions, unresolved issues with the EU remain a potential flashpoint. The investor explained that negotiating with the EU is particularly complex due to its many member states with differing agendas, which complicates reaching a trade agreement.
The potential for a trade war has also affected consumer spending and investor confidence. A survey by Bank of America revealed that nearly half of fund managers see a trade war-induced recession as the biggest threat to markets. Although recent reductions in tensions, such as decreased tariffs with China, have lowered the probability of a recession according to JPMorgan Research, the unresolved negotiations with the EU keep the risk significant.
Eisman also mentioned that the negotiations with Europe involve sensitive issues like regulations and value-added tax (VAT), which President Trump has criticized as obstacles to U.S. businesses. Trump's push for a fairer deal continues as he seeks to address these barriers. However, his former commerce secretary, Wilbur Ross, cautioned against overconfidence in these negotiations, stressing the importance of strengthening alliances with European nations.
The looming deadline for a trade deal with the EU, along with President Trump's assertive tariff policies, underscores the fragile state of international trade relations and their potential impact on the global economy.
