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Larry Edelman

Trump knows he’s vulnerable to a recession — and it could kill his 2020 chances

President Trump and Chinese President Xi Jinping (right), at the G-20 summit in Osaka, Japan, on June 29. Will Trump’s trade war with China end up triggering a recession?Erin Schaff/New York Times

We’ve got 15 months until the 2020 election, and Democrats are mired in a divisive debate over the best way to beat Donald Trump and pull the country back from the authoritarian abyss.

“Attack hard from the left.” “Appeal to the center.” “Nominate someone electable.”

You won’t hear it from the candidates or party officials, but the biggest threat to Trump isn’t Joe, Elizabeth, Bernie, or Kamala. And it’s not “Medicare for All” or a wealth tax.

It’s a recession. The lesser of two evils, delivered by deus ex machina.

I know, I know. It’s callous and unseemly to root for a downturn, even if the prospect of a second Trump term has you exploring options for exile.


But let’s face it: The election, once again, could come down to a couple hundred thousand votes in a few swing states. Like Hillary Clinton, the Democratic nominee could easily win the popular vote but lose in the Electoral College. Meanwhile, a recession is more likely to unseat Trump than impeachment: Something goes wrong, the economy sags, the jobless rate climbs, and — like George H.W. Bush in 1992 — DJT is out of a job.

Another case of Trump derangement syndrome? Not necessarily.

After winning the first Gulf War, Bush 41 seemed untouchable, but the “jobless” recovery from the oil-shock recession of 1990-1991 was his kryptonite. Even though the economy was on the mend before Election Day, the damage was done, and Bill Clinton moved into 1600 Pennsylvania Ave.

It’s impossible to say if and when a recession will hit. Only about 35 percent of economists expect one within the next 12 months, according to a survey by Bloomberg.

Yet Trump knows he’s vulnerable. Why do you think he’s hectoring the Fed to cut interests, even after last week’s unnecessary reduction? He knows his trade war against China could backfire and damage the US economy, and he wants all the downside insurance he can get.


The bond market is acting like a recession is around the corner. The benchmark 10-year Treasury was at about 1.725 percent on Thursday, while the yield on the three-month T-bill was 2.015 percent. It’s unusual for short-term rates to be higher than long-term rates, a situation known as an inverted yield curve that is considered a good recession predictor.

Stock market investors have been much more optimistic, pushing prices to new highs throughout the year. But cracks started to appear last week, when the president announced tariffs on an additional $300 billion worth of Chinese goods and Beijing retaliated by allowing its tightly controlled currency to fall to a post-2008 low against the US dollar — a move that hurts US exports.

US stocks rallied on Thursday after China signaled that it would not aggressively cut the value of the renminbi, a step that many investors fear would lead to a currency war.

We’ve gone a record 122 months without a recession, which is defined as two straight quarters of negative growth in the nation’s output of goods and services. But it can’t last. Republicans can cut taxes for the rich and fan the flames of racism and xenophobia, but they haven’t found a way to eliminate the business cycle.

The economy is healthy, having expanded 2.1 percent in the second quarter. The jobless rate, at 3.7 percent, hasn’t been this low since we bid farewell to 1969.


But US economic growth slowed from 3.1 percent in the first three months of the year, and there are other ominous signs: Global economies are struggling, US manufacturing has declined for two straight quarters, domestic business investment is waning as executives nervously eye an uncertain world, and the Fed has been unable to boost inflation to its 2 percent target.

What could trigger a recession between now and Election Day 2020?

The world’s a dangerous place. Tensions are heating up in the Persian Gulf as Iran seizes oil tankers. We’ve had more than one recession because of a spike in oil prices. Who knows what Kim Jong-un will do with his rockets. Is Boris Johnson really going to make Brexit work?

But the number one risk is the trade war with China. When and how does that end? China plays the long game; its leaders can hold on to see what happens in the election. Trump? It’s unlikely he will offer a deal the Chinese will accept, and vice versa.

That new round of tariffs, set to take effect Sept. 1, will hit consumers much harder than the earlier rounds, which mostly targeted goods that companies use to make their products.

And the consumer is what has been keeping the economy going.

I know what you’re thinking: The Fed will bail out Trump by continuing to cut rates. I have to believe that many Fed officials don’t care what happens to a complainer-in-chief who labels them the enemy, but they won’t stand by and watch the economy go down the toilet.


There is only so much the central bank can do, though. Interest rates are already pretty low by pre-financial crisis standards. Businesses aren’t finding it hard to borrow, but they are concerned about expanding as Trump plays chicken with China. For consumers, mortgage rates are at a three-year low, but the housing market is starting to cool in some places.

This is the existential dilemma of our dysfunctional times. We can’t in good conscience hope for a recession. Millions of people would lose their jobs. Millions of homes would be lost to foreclosure. And the pain would be felt the most by blue-collar and low-income workers.

But Trump isn’t really helping them now. Most of the economic gains are going to corporations and the wealthy. (And spare me the trickle-down BS.) He hasn’t delivered on his promise to revive manufacturing and coal mining. He’s trying to gut Obamacare, without offering a viable alternative.

And it will only get worse if Trump wins reelection.

It will be four more years of the rich gaming the tax code while the rest of us empty our loose-change jars. Four more years of inaction on the environment and climate change. Four more years of fractured politics and corrosive tweets. With the exception of the 2017 tax cut, the economy is growing despite Trump’s policies, not because of them.


With all that is at stake, a recession just may be the lesser evil — and, ironically, Trump’s trade war may be the match that starts the fire.

You can reach me at larry.edelman@globe.com and follow me on Twitter @GlobeNewsEd.