BCA's Peter Berezin Predicts Recession Due to Trump Tariffs

Tariff Impact on US Economy

• 📈 The current US tariff rate stands at approximately 20%, comparable to levels seen in the 1930s, significantly impacting the US economy.
• ⚠️ There is no guarantee that ongoing trade negotiations will result in major deals, and tariff rates could increase, further pressuring the economy.

Economic Fundamentals and Consumer Stress

• 📉 The economy's fundamentals were not strong entering the trade war, with real personal consumption expenditures showing a 0.5% decrease in February compared to December.
• 💳 Increasing stresses are evident in the consumer sector, including rising delinquency rates on credit cards and auto loans, and 10 million Americans currently delinquent on student loans.
• 💸 The pandemic savings, which once exceeded two trillion dollars, are depleted, and income growth has slowed, with real wage salary income up only 1% over the prior year in February.

Inflationary Pressures and Fed's Role

• 📊 CPI swap markets indicate inflation is expected to rise to 3.5%, over a percentage point higher than current levels, potentially leading to negative real income growth and consumer spending decline.
• 🏦 The Federal Reserve controls short-term rates but not long-term bond yields, which influence mortgage rates and economic activity.
• 📈 Long-term bond yields are rising to restrictive levels, impacting interest-rate-sensitive sectors of the economy.

Housing Market as Recession Indicator

• 🏠 The inventory of newly built, unsold homes has returned to its highest level since 2009.
• ⚠️ This indicates a slowdown in the housing market, which is considered the economy's only true leading indicator, signaling an impending recession.